China Fishery Group

[mrEngineer]

I have to re-write my statement in case people misinterpret that I referring to stock valuation. "9.75% is somewhere decent in the middle of bond valuation range." On your point of ROE, when I have time I will try to do a study on the historical ROIC to see how have the company performed over the capital financing. On your point of competition, I think one of the articles have highlighted that competition has increased since year 2000 in fishing. Also, please do not forget that the industry is fairly protected with a moart via capital intensive (have to buy trawlers to reach good economics of scale), alot of local knowledge on where to fish and regulations with local governments.

Manage to dig up some material news. The website disallows me to copy the article but essentially Pac Andes is looking at a JV with Russian Sea Fishing. You can try to subscribe for a free trial at the website to read this article in detail. http://www.intrafish.com/global/news/article1357840.ece

[Nick]

I have to re-write my statement in case people misinterpret that I referring to stock valuation. "9.75% is somewhere decent in the middle of bond valuation range." On your point of ROE, when I have time I will try to do a study on the historical ROIC to see how have the company performed over the capital financing. On your point of competition, I think one of the articles have highlighted that competition has increased since year 2000 in fishing. Also, please do not forget that the industry is fairly protected with a moart via capital intensive (have to buy trawlers to reach good economics of scale), alot of local knowledge on where to fish and regulations with local governments.

Manage to dig up some material news. The website disallows me to copy the article but essentially Pac Andes is looking at a JV with Russian Sea Fishing. You can try to subscribe for a free trial at the website to read this article in detail. http://www.intrafish.com/global/news/article1357840.ece

Hi MrEngineer,

Thank you for posting your thoughts on CFG. May I clarify whether the above mentioned JV refers to the planned prepayment of the fourth VOA or is this a new corporate development ie a 5th VOA ?

This report may be useful for understanding fishery management better:

http://www.pacificandes.com/html/environment.php [Pac Andes & CFG Sustainability Report 2011]

(Not Vested)

[mrEngineer]

wow.. prepayment of 150m for 18 years. Looking at cost wise perspective based on the 12k charter rates in the same announcement, it means that the charter rates have doubled to reach that specific amount if you divide 150m by 18years X 360 days. This will definitely impact the cost structure when the contract becomes effective. However, I am not sure whether the original 12k includes the fishes or just chartered of the boat or other voyage expenses like fuel etc.

Another question, why does China Fishery prefers prepayment compared to getting hold the ship assets? Is there any legal structure issues where overseas companies need to fulfill in order to operate in Peru as well (same like Russia)? Or China Fishery is trying to avoid something in the balance sheet like operating/capital lease?

Look forward to all discussions!

[d.o.g.]

Another question, why does China Fishery prefers prepayment compared to getting hold the ship assets? Is there any legal structure issues where overseas companies need to fulfill in order to operate in Peru as well (same like Russia)?

Sometimes the vessels or their holding companies need to be owned by locals instead of foreigners. In such a case it may be necessary to rent the vessel(s) instead of buying. It is similar to how farming companies in China operate - all land belongs to the state, the most you can do is prepay several years of rent in advance.

For airlines the same situation applies - a country's air rights can only be given to an airline that is at least 51% held by a citizen. In practice the citizen is usually a nominee owner who has signed away all his economic rights.

[mrEngineer]

Thanks d.o.g for your insights. I guess this should be the case for agriculture / farming companies when the countries want to keep a tight rein on their resources and given its past records of VOAs. You made me realized that it may be possible the prepayment is for more than 1 vessel (as it given to one company) which in then makes a good bargain on fixing the current charter rates.

[Nick]

http://www.chinafisherygroup.com/attachm...917_en.pdf [China Fishery Announcement on VOAs]

On pg 2, the 4th VOA has 6 super-trawlers operating under the fee structure of US$12k / day / vessel. This will represent substantial cost savings though partially offset by the 9% interest bearing notes issued recently. There are precedents in the past - the previous VOAs were pre-paid as well. http://www.chinafisherygroup.com/attachm...117_en.pdf [Prepayment in 2006]

Current Base Cost: US$0.012 million x 365 days x 6 vessels = US$26.28 million

New Base Cost: (US$150 million / 18 years) + (US$150 million x 0.0975) = US$22.955 million

I am assuming the US$300 million notes proceeds will be used to finance the prepayment. The remaining US$150 million will accrue interest but I didn't want to include it to derive the base cost since it could be used for other accretive M&A.

Please correct me if I am wrong.

(Not Vested)

[mrEngineer]

Thanks Nick for making such clear calculations. However, I do not think we should include financing part in the operations comparision because the current base cost does not account for the current financing cost (which can be either through their ongoing bond or our forms of debt)

[Nick]

CHINA FISHERY ACHIEVES PROFIT OF US$78.1 MILLION IN FY2012

http://info.sgx.com/webcoranncatth.nsf/V...20031FA16/$file/CFGL_FY2012_Press_Release.pdf?openelement [Press Release]

http://info.sgx.com/webcoranncatth.nsf/V...20031CB8A/$file/CFGL_Results_Announcement_FY2012.pdf?openelement [SGX Announcement]

Revenue down 11.9%, gross profit down 26.1%, PATMI down 24.6% and dividends down to 1.9 SG cents (2011: 4.5 cents).

(Not Vested)

[mrEngineer]

Results are horrible imo..

[Musicwhiz]

Revenue down 11.9%, gross profit down 26.1%, PATMI down 24.6% and dividends down to 1.9 SG cents (2011: 4.5 cents).

(Not Vested)

That''s quite a big reaction from Mr. Market on the earnings miss; and it may be also due to the payout ratio dropping to 20% and a more cautious tone,