MRG 1.06% 9.5¢ murray river organics group limited

$200m mkt cap seems optimistic - when the value of the farms is...

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    $200m mkt cap seems optimistic - when the value of the farms is only $35m.. will that rise by 6x.. farmland value does not work like that..

    to get to $200m mkt cap you need big earninhs.. say 8x ebiitda (generous) and debt if say $40m, you need ebitda of $30m ? these assets willl never generate anything close to that....

    the market cap today $40-42m is similar to what it was before the raising (af 31cps) and the raising was done to avoid bankruptcy. Not to grow, just to pay ballooning debt.

    CEO doing what needs to get done but lots of variables are out of her control.

    value of farms incl ones for sale is only $35m
    what is debt? $35m post raising (pretty high) and will climb as the co needs to invest heavily to improve the farms - prospectus shows $10m going into farm development plus working cap etc

    sales rose last year but note that the company sold all it had (incl volumes they would carry into fy19 to supply customers and will now have to buy from 3rd parties) to generate cash - again, had to be done to stay alive but the 68% rise in rev reflected a lot of fire sales.

    then you have the overhang of the former founders and what thet will do with their holdings.

    gotta give the CEO time to fix stuff and will take a few years. if they were brought in earlier this would be a different story all together.

    raising $27m post fees was a great achievement and gives them breathing time.

    hope they succeed but as an investor looking for an entry point 9-10cps is just not low enough to account for all the risks imo.

    good luck to all investors and at least now you have a CEO that you can count on to do her best to get stuff done.
 
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