Sino Agro Food Inc (OTCBB:SIAF) has had a year Investors would love to forget falling from highs over $16 a share. Recently the stock reversed off $3.35 lows on a surge of volume.
The Company recently announced second quarter results; Project Development1 at Capital Award (“CA”) had a weak quarter as the business came to an almost complete standstill due to heavy rain in Zhongshan. The business recorded sales of $8.8M in the second quarter compared to $26.1m in the first quarter. Weather conditions have now returned to normal. Also, once completed, ongoing roof build out will allow construction to continue even during any future periods of heavy rain. Had the Project Development business delivered at the same pace as in the first quarter, overall revenue for Sino Agro Food would have increased 11.9% year over year (“YoY”).
2015 is proving to be a weak year for the supply of eel fingerlings from Madagascar and the southern districts of China. Consequently, revenue within the Aquaculture Division2 from the sale of eels decreased by $11.6M in Q2 2015 versus the previous quarter, from $17.6M to $6.0M.
The weakness in project development and decrease in the sale of eels together account for more than 100% of the gross profit shortfall compared to Q2 2014.
Sino Agro Food Inc(OTCBB:SIAF) is an agriculture technology and natural food holding company with principal operations in the People’s Republic of China. The Company acquires and maintains equity stakes in a cohesive portfolio of companies that SIAF forms according to its core mission to produce, distribute, market and sell natural, sustainable protein food and produce, primarily seafood and cattle, to the rapidly growing middle class in China.
SIAF provides financial oversight and strategic direction for each company, and for the interoperation between companies. The Company owns or licenses patents, proprietary methods, and other intellectual properties in its areas of expertise. SIAF provides consulting and services to joint venture partners to construct and operate food businesses, primarily producing wholesale fish and cattle. Further joint ventures market and distribute the wholesale products as part of an overall “farm to table” concept and business strategy.
SIAF largest and most scalable businesses are indoor and semi-enclosed open dam aquaculture production. This includes a variety of seafood, prawns, and eel, and also a production of over 60 cuts of beef and lamb.
Recently SIAF entered into two contracts with Tesco Plc (OTCPK:TSCDF) to become both a supplier and an in-store butcher shop concessionaire of beef and lamb. Sino Agro will provide its own brand of product lines, as well as design for its in-store butcher shops. Supply of beef and lamb will start in major Shanghai Tesco stores, and branded outlets will expand in phases. This will provide for a most cost effective and cash flow effective manner to integrate the distribution and retail levels of SIAF business models.
In the past investors were wary of SIAF as the Company has a history of massive dilution and this is one of the primary reasons SIAF stock never went much over $0.40. The recent $25 million convertible note funding brings significant investor confidence that SIAF has turned the corner and will no longer need to issue equity.
As well the stock has been spurred on by a recent partnership with Tesco that will help it to expand sales and consolidate business.
Tesco is one of the largest grocery and merchandise retail chains in the world, operating almost 7,000 stores with revenue of US$120 billion. On May 29, 2014, Tesco formed a joint venture with China Resources Enterprise, Ltd. (“CRE”), operators of the “Vanguard” retail chain, to create the largest multi-format retailer in China.
In December SIAF announced on behalf of its wholly owned subsidiary Tri-way Industries Ltd. (Tri-way), confirms that its operating company, Jiangmen City A Power Fishery Development Co. Ltd. (JFD), has received an official letter of commitment from one of Southeast Asia’s preeminent international banking firms regarding its loan approval. The loan facility, which is subject to customary closing conditions, is an unsecured revolving 2-year term loan of CNY 250 Million (USD 36.3M) for purposes of financing JFD’s aquaculture business unit’s working capital. The interest rate will be in line with conventional rates currently afforded revolving loans in China, which are currently hovering around 4.5% to 6.5%.
Solomon Lee, the Chairman and CEO of Sino Agro Food, stated, “We would like to extend our appreciation to the lending institution for its commitment to us and our aquaculture business portfolio. Their sector expertise, business foresight and strong understanding of the significant opportunities within the China market were invaluable to us when securing this loan. The loan will enable us to develop the farm projects in the Guangdong region within an accelerated time frame.
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Currently trading at a $87.75 million market valuation SIAF has come to life in recent months transforming into a top traded stock on the bb’s. It is easy to get excited about Sino Agro at current levels; the Company has a number of significant events on the horizon and a fast growing and loyal shareholder base (especially in Europe) that believes this one goes way higher. We will be updating on SIAF when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with SIAF.
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Disclosure: we hold no position in SIAF either long or short and we have not been compensated for this article.