There is a very strong report in The Australian today, p21, the best possible publicity AHF could have wished for.
One of the world’s largest alternative asset managers emerged with a sizeable chunk of Australia’s only listed company owning dairy farms on its first day of trading on the ASX.
The US-based Och-Ziff Capital Management Group was yesterday revealed as the owner of five million shares in AHF, valued at $1 million, giving the global asset manager an 8.4 per cent stake in the fledgling agricultural company.
Paul Kehoe, wealthy Melbourne investor and former major shareholder and chief executive of graphite and vanadium miner Syrah Resources, also emerged as a 10 per cent owner of AHF.
AHF floated its 59 million shares at 20c each in a $9.3m capital raising early this month, completed before its public listing yesterday. Its shares opened on the ASX at 21c each, rising to a high of 23c during the day before closing at 22c, giving the new agricultural sector player a capitalisation of $13.08m.
The Och-Ziff Capital Management Group is one of the largest institutional alternative asset managers in the world, with $46.2 billion in assets under management. It established a special Oz-Asia Master Fund, with the acquisition of local agricultural assets listed as one of the company’s key alternative investment targets.
The Australian Dairy Farms Group owns and operates two dairy farms at Brucknell near Warrnambool in southwest Victoria and plans to buy 14 more.
It aims to produce 50 million litres of milk annually within the next two years, with a supply deal with Fonterra already locked in.
AHF founder and director Adrian Rowley said the focus of the Australian Dairy Farms group was clear: to buy and develop large corporate dairy farms with herds of 500 to 1000 cows, in Victoria’s Golden Triangle.
FROM graphite to grass munchers: Syrah Resources Paul Kehoe has emerged as a 10 per cent investor in this dairy farm consolidation play, along with a slew of Hong Kong institutions.
Let’s hope there’s similar upside to be milked from buying up dairy farms as there was in discovering tonnes of the flaky metal in Mozambique.
Last year’s takeover of Warrnambool Cheese & Butter* has left processor Bega Cheese as the only listed dairy play. Listed via the shell of APA Financial Services, ADFG fills the void with an ambitious plan to become a 50 millionlitre-a-year producer.
ADFG debuted yesterday after raising $9.3 million at 20c per share, with the proceeds used to buy two farms near Warrnambool producing a combined 7.5 million litres a year.
ADFG director Adrian Rowley says hitting the 50 million litre target would entail buying 14 to 16 similar-sized farms, at a cost of $80m-$100m.
This would make ADFG one of the country’s biggest producers in what’s a highly fragmented sector.
Rowley says the backers are exploiting a climate in which milk prices are firming, yet farm prices are subdued because of a dearth of buyers. Unlike producing iron ore — or indeed graphite — higher milk production means a higher average received price. That’s because the three producers have excess capacity so are keen to attract the bigger suppliers.
“If we did nothing more than aggregate 10 farms we would get 13 per cent over the (producers’) base price,’’ Rowley says. He says the backers of the company received a few calls from Chinese investors, asking how much they needed to invest to secure a board seat.
Rowley says the company should be immediately profitable, despite a dry spring. But investors are really punting on capital growth as the company hoovers up farms from ageing cow cockies.
Spec buy.
