Hidden jewel, page-22

In the short to medium term, the objective of this company is to generate sustainable profits and, following on from this, to pay out a sustainable dividend.

I get the impression that the management of this company are fairly canny and business-like, and I suspect the shift by the company into aquaculture in 2012 was largely designed to attract new shareholders when it was becoming clear that the current ideological government was poised to take over, with obvious implications for the traditional business.

If so, it seems the tactic has worked, and so I salute their diabolical genius.

Anyway, the point is that the prawn-farming operations are primarily about generating a reliable cash flow for the company so that they are able to pay out a regular dividend.

The carbon forestry and environmental services business was highly profitable for many years, however always looming over their shoulder was the spectre of regulatory uncertainty, hence the lack of dividend payments from this company in the past.

Once their current aquaculture operations are able to generate sustainable profits, with the two sides of the business firing, they will be in a good position to initiate dividend payments.

Why are dividends important?. Because when a company commences dividend payments, the share price generally gets a re-rating upwards (particularly considering where the interest rates are at the moment.)

A higher share price and higher market cap will make it easier for the company to raise capital, and thus implement the next stage of the Sea dragon project.

So the implementation of the stated lofty ambitions of the aquaculture project will largely depend on the future growth of the company, and as such, perhaps some of the more ambitious targets need to be taken with a grain of salt.

It is possible that in the long run, the traditional business may prove to be more profitable than the new aquaculture operations.