Post-NSK what's going on & valuation

From media statements, investor days, reports to the ASX and so on, this is what we know:

1. Phase 1 is 1020 hectares of ponds
2. The revenue from phase 1 is going to pay for the rest of the build
3. Full build-out is 10,000 hectares of ponds and is expected to cost a total of $2bln
4. Phase 1 is expected to cost about 15% of the entire project ($300mln)
5. The company intends to hold about 70% of the completed project
6. Full build-out will produce about $700mln EBITA each year (about $490mln attributable to SFG - Bell Potter claims that the complete EBITA of PSD will be more than $1bln per year)
7. Therefore the company will get about $490mln EBITA of the completed project
8. Today there is about 1,400 million shares outstanding, about 130 million options outstanding
9. The off-take partners/investors are expected to buy about 30% of the project itself - with the money being used to build the project
10. NSK (subject to Foreign Investment Review Board approval) has bought about 247 million shares and 30 million options for $25 million
11. The NSK deal requires PSD to sell off CO2A - meaning that the prawn business is all we have
12. The company intends for PSD phase 1 to complete by 2020/2021

So now it's time to do some scenario analysis and see how we go.

	Column 1	Column 2	Column 3	Column 4
1		Optimistic	Likely	Conservative
2	Completed PSD EBITA (projected)	$700mln	$600mln	$500mln
3	Optimistic PE 12:1	$8.4bln	$7.2bln	$6bln
4	Realistic PE 8:1	$5.6bln	$4.8bln	$4bln
5	Pessimistic PE 4:1	$2.8bln	$2.4bln	$2bln

For my purposes, I've assumed that the company's revenue projections for PSD are optimistic. I've found a range of PE for Australian agribusinesses.  This gives us an enterprise value of $2bln to $8.4bln for project sea dragon.

The company is intending to own 70% of PSD going forward.  But I'm not so sure, so let's assume that PSD is the company's only asset and what this would mean for SFG's value going forward:

	Column 1	Column 2	Column 3	Column 4
1		70% stake	60% stake	50% stake
2	Optimistic Optimistic	$5.88bln	$5bln	$4.2bln
3	Realistic Likely	$3.4bln	$2.9bln	$2.4bln
4	Pessimistic Conservative	$1.4bln	$1.2bln	$1bln

This would value SFG between $1bln and $6bln.  If this is accurate, then we have a long-term share value of 50 cents, and $2.94.  On account of my own financial circumstances, I'd need to start "risking off" in phases around $0.75

If completed, I believe we're likely to see SFG worth as a company around $4bln when PSD is completed - I have nothing to base that on, but a bunch of comparisons.  

Points of concern:

• FIRB approval for the NSK investment
• Divestment of CO2A
• "Construction" announcement still hasn't been made
• Building can only occur in dry season
• Dry Season runs from April to November

This is what I would expect to happen:

1. Within the next 60 days FIRB grants approval
2. 30 days after approval, SFG will get payment from NSK
3. "Construction" starts in September - but they will be basic site-works things - powerlines and such
4. A bunch of funding is found over the next year, construction proper happens in the dry season of 2019 and 2020 (April to November)
5. Prawns grow in 2020-2021
6. There is some kind of issue with yield in 2021 (guess - but something always goes wrong somewhere)
7. Phase 2 starts circa 2025.

Obviously the further along this list we get, the deeper into speculation we go.

Remember - this post is more about me getting my thoughts straight than giving anyone advice.  DYOR and good luck.