SML - Synlait

[Basil]

One of the best risk-adjusted fixed interest investments in the market has to be the SML 2024 bonds imo.

I have quietly picked up a parcel in recent times and believe that those who bought the bonds at 3.83% pa yield and sold out at up to 18% pa have not thought through the strategic nature of SML to Bright Foods and ATM.

Both would be very happy to take out the company completely at around current valuations (sp $1.43 vs NTA of $3.21) which could yet happen if SML makes a heavily discounted rights issue, underwritten by the principal shareholders.

Do the bondholders have any idea how long (& geopolitically difficult) it takes for a China company to build up a primary sector player like SML?

There will be a time to play SML shares - the major risk now being the NZX re-indexing in Decemeber.

Gutsy call mate...I am inclined to agree at 18%.  With very limited bonds now for sale (13,000 at 16.5%), that's not enough for me to even bother taking a micro position but if there's decent supply again at 18% I'll certainly think about it.  No question Bright Dairy took a very proactive approach towards helping Synlait get new Chinese banks involved in their banking syndicate and are taking a far more supportive approach generally and we all know they have deep pockets.  Good luck with it.

[Teitei]

Gutsy call mate...I am inclined to agree at 18%.  With very limited bonds now for sale (13,000 at 16.5%), that's not enough for me to even bother taking a micro position but if there's decent supply again at 18% I'll certainly think about it.  No question Bright Dairy took a very proactive approach towards helping Synlait get new Chinese banks involved in their banking syndicate and are taking a far more supportive approach generally and we all know they have deep pockets.  Good luck with it.

Got to be there (quietly) when panic stricken bondholders (and shareholders) unload - that's when the 17% to 18% yielding bonds become available.

I am aware that one major broking house added millions of dollars of the bonds to their clients' bond portfolio when they were issued. Clients had been ringing them up expressing concern and it is easier for the firms' advisors to sell them out for capital loss of around 12% than to explain to them.

Couple of my contacts work for the China banks - I actually think they wished that Bright Foods would use them to make a full takeover offer for SML. Unlikely to happen imo unless it gets to be a FAP situation and Bright Foods is seen as a white knight.

Anyway, all fun and game out there!

[Teitei]

Global dairy auction tonight .  The Futures market is suggesting rises across all the categories.  At the top end ANZ are tipping 5% plus, while at the bottom Westpac reckon on 1%.  Prices were up 4.6% in the previous auction a fortnight ago, with the key whole milk powder up over 4.6%   

The talk is of concern around milk supply as early season NZ milk production is down 2.1%,  with the  forecast El Nino weather pattern likely to restrict supply further.  It looks like August was bottom for prices. The longer term view is more positive with Chinese demand rebounding from 2024. That demand will allow Synlait to move inventory more quickly. Another duck, that while not yet lined up, is at least not floating upside down in the pond.

Good results from last night's global dairy auction :

https://www.stuff.co.nz/business/farming/agribusiness/133055361/farmers-will-be-happy-with-the-latest-gain-in-global-dairy-prices

The price of whole milk powder, which has the most impact on farmgate milk prices, gained for a third straight global auction, welcome news for dairy farmers as the industry heads into peak milk season.

The average price for whole milk powder rose 4.8% to US$2931 (NZ$4870) a tonne at the Global Dairy Trade auction overnight. The overall index gained 4.4% with five of the seven products increasing in price.

Global dairy prices fell sharply at the start of this season amid lacklustre demand from China, Fonterra's biggest market for whole milk powder. But Chinese buyers returned to the market last month, pushing up whole milk powder prices almost 10% following an 18% slump in August.

[Hectorplains]

Investor day at Pōkeno plant on October 30.  I assume that's when the public disclosure of the major multinational customer for advance nutrition products is made...Hello Abbott. 

[Minimoke]

Tatua final milk payout $12.30 a kg. Maybe Synlait should benchmark themselves against that company rather than B Corps.

(Synlait are looking at $7.00 a kilo)

[Hectorplains]

Tatua final milk payout $12.30 a kg. Maybe Synlait should benchmark themselves against that company rather than B Corps.

(Synlait are looking at $7.00 a kilo)

Maybe too they could nab some of Tatua's management instead of Fonterra recycles? 

[Auto Rower]

Maybe too they could nab some of Tatua's management instead of Fonterra recycles? 

Hope so then depink/dewoke

[Minimoke]

Synlait and A2 unable to resolve their differences over the 20 day negotiation period. So it is off to confidential and binding arbitration.

[Hectorplains]

This morning's Global Dairy Trade auction registered a big gain for the fourth time in a row.  Good momentum!

[Basil]

How does that help Synlait though mate ?

I am sure you haven't forgotten this is almost certain to face elimination from the NZX50.  Who is going to be brave enough to mop up that significant quantity of compulsory index-based selling and at what price ?  $1.00 on the cards ?

[Hectorplains]

How does that help Synlait though mate ?

I am sure you haven't forgotten this is almost certain to face elimination from the NZX50.  Who is going to be brave enough to mop up that significant quantity of compulsory index-based selling and at what price ?  $1.00 on the cards ?

Well, it helps Synlait make more money! But you're right it won't save their share price come December. 

However; if the milk prices stay up and they offload Dairyworks, that December dip you are forecasting might be a good buying opportunity. I thing it's worth watching...never say never, eh.

[Teitei]

How does that help Synlait though mate ?

I am sure you haven't forgotten this is almost certain to face elimination from the NZX50.  Who is going to be brave enough to mop up that significant quantity of compulsory index-based selling and at what price ?  $1.00 on the cards ?

Good reminder! 

Keep eyes on the big picture always!

[Basil]

Well, it helps Synlait make more money! But you're right it won't save their share price come December. 

However; if the milk prices stay up and they offload Dairyworks, that December dip you are forecasting might be a good buying opportunity. I thing it's worth watching...never say never, eh.

Unlike you I do have serious reservations about Chinese controlled companies (you see their arrogance in the disgustingly pathetic level of comms with shareholders in recent years, Pokeno fiasco one good example), so while I would never say never, unless they can execute a sale of Dairyworks very soon and reduce debt, then the shares deserve to be well and truly in the dog box.  To be honest, I just mainly follow this as a study of train wrecks and an interesting case study of what not to do in business.

[BlackPeter]

How does that help Synlait though mate ?

I am sure you haven't forgotten this is almost certain to face elimination from the NZX50.  Who is going to be brave enough to mop up that significant quantity of compulsory index-based selling and at what price ?  $1.00 on the cards ?

Could be an amazing opportunty for the Chinese (or a strawman?) to do a takeover on the cheap?

[Basil]

23 October 2023
Resignation of Synlait Chair
The Synlait Milk Limited (Synlait) Board advises that Simon Robertson has resigned as Chair and
Independent Director of the company.
Synlait's Nominations Sub-Committee will immediately commence a search for an Independent Director to
fill the vacancy. The Board expects the new Independent Director will be suitable to be appointed as
Chair.
Independent Director Paul McGilvary has been elected Acting Chair until the position is permanently filled.
Paul was elected with the full support of the Board.