August 27, 2012 – Is ANI true to its name-“to harvest”? Harvesting Profits on this Agricultural Firm (A study on Agrinurture Inc.)

Full Disclosure: The author is long the said shares, but this post is merely for informational purposes only.  This is not a recommendation to buy or sell the said stock.  Everything written here is only the author’s opinion.   If I inadvertently become accused of hyping a stock, this is because you didn’t even do your damn homework.  For one, I do not hype.  This is just information.  I can just simply cut loss. period.   Basically, I sometimes just buy and study later.  Hence this post will reek of my “scribbles”  Hehehe.    Also, I’m not affiliated with any of the companies I’m talking about here.  All sources are properly linked, and can be seen from the websites.    A good company doesn’t need hype nor a jockey to manipulate its stock price to better reflect what it should be worth.  It just simply needs transparency.  Well-informed public participants have a head to decide the risks and rewards for every investment.  

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The stock ANI has caught my eye, because of the impending listing of its unit “Big Chill” in the Philippine Stock Exchange, as well as news articles surrounding its investors (Cargill fund’s Black River Capital to name a few).  Also, to be fair, the stock’s price chart is in the doldrums, and is near the 52 week lows, so I figured, I’ll try to study what this company does, buy a few shares, sell at a loss if I have to, and just see whether this is just another mental exercise or a stock to watch in the future.  🙂

Brief Company Background:

Farm to Plate business model – ANI shifted from being just a buyer of the agricultural products it deals in, into becoming a grower/producer as well. 

Founded 25 years ago to engage in the trading of farm equipment, the former Mabuhay 2000 Enterprises, Inc. is now into wide-ranging enterprises from  wholesale trading and distribution of commercial crops and fresh farm produce, to the manufacture and distribution of processed foods including fruit beverages here and abroad, and and farming of certain crops other than bananas, among others.

Below are the brands and the affiliates that the company utilizes as can be seen from its website (www.ani.com.ph)

ANI’s tagline is simple – We nurture your freshest dreams.

The Owner is a Hard Working Innovator- Get to know Mr. Anthony Tiu 

Even before the capital infusion from Black River, AgriNurture had been aggressively pursuing a dizzying program of acquisitions and expansions under the leadership of Tiu.  The reason, perhaps, for the progressive-minded ANI CEO’s being chosen as one of  2011’s Top Outstanding Young Men (TOYM) of the Philippines,  for entrepreneurship.

Read these snippets about the owner Anthony “tony” Tiu:

1.)

(Beginner’s Bad Luck by Mr. Mario Ocampo  – A True Story about Tony Tiu)

So after working for a Philippine-based Taiwanese firm for about a year, he was sent by his
folks to Australia to get a master’s degree. They wanted him to become an immigrant there with
a promising corporate career. But his love for farming brought him back to the Philippines.

When he introduced coco juice to prospective buyers, they called
him a liar. “They said coco juice should look like milk [and that] what I’m selling was actually
water with sugar.”

It was a frustrating time for Tiu. “I gave up a permanent residence status and a high-paying job
in Australia for this?” Then there were complaints from his family. “They said, ‘We educated
you! We gave you everything and you end up being a farmer! We told you ‘you’re not a
businessman,’” he recalls.

Big mango exporters incurred huge losses because of the SARS outbreak and couldn’t sustain
their operations anymore. Just as they began to shut down one by one, Tiu was aggressively
consolidating most of the buying stations and the key personnel of the other suppliers. “When
SARS was over, I ended up being the top exporter.”

Their produce are on the shelves of leading supermarkets and even end up on the fillings of pies sold by a major Philippine fast-food chain.

 

ANI does lots of research and development and puts plenty of effort into value adding. He said
a kilo of mangoes could be sold for 100 pesos (US$2.28 or 15.83 yuan). “But if you scoop the
mango and have it frozen, you can actually sell it for US$5 (roughly 218 pesos or 34.76 yuan)
per kilo.” (Comment by FT: Higher Margin Focus is good and profitable)

Tiu boldly steers ANI where others fear to tread. They have been exporting bananas,pineapples, and papayas for years. Now, the company is developing a new market for sampaloc [Philippine tamarind]. “I asked a lot of consultants and they all told me ‘No, that’s impossible.’ But I believe nothing is impossible so I exported seven containers.” Tamarind is often associated with Thailand, but according to him, a pound of sampaloc sells for US$2 (87.57 pesos or 13.91 yuan). His gamble paid off as American consumers “don’t want tamarind from Thailand; they only like the ones from the Philipines.”

(comment by FT: This is a serial entrepreneur who will introduce new products and export as much fruits possible.  He will find new products such as the Philippine tamarind.  I’ll check the sales volume growth for the past 5 years to see this guy’s financial business performance.)

Halfway into the presentation, Tiu revealed how he has stayed ahead in the business. “Our focus is to be always one step ahead [of the competition]. We want to do what others can not.”

2.) The owner has his own blogsite! Whoopee! http://antoniotiu.blogspot.com/2011/10/think-green-by-go-negosyo.html

In the beginning, ANI operated by simply providing farmers the means to get their produce to the market. Pretty soon, however, it dawned on Antonio that it was not enough if he truly wanted to address concerns of food shortage.  So he decided it was time to take a more holistic approach. Instead of just getting the fresh produce to the market, how about getting it straight into people’s homes?

This meant, of course, that he and his company would have to be more involved in the process; from farming to packaging to distribution. Antonio lovingly called it “an effective tool for nation-building.”

Now, ANI has grown by leaps and bounds. It may have started out as simply one man’s desire to eat fresher produce, but a little over ten years down the road and it is now officially listed at the Philippine Stock Exchange and currently exporting locally grown fruits and vegetables to international markets.

3.) Tony Tiu, founder of AgriNurture, Inc. (ANI),  was nominated in the Ernst and Young Search for the Entrepreneur of the Year award.

4.)  http://en.wikipilipinas.org/index.php?title=Antonio_Tiu

I treat this endeavor as a mission rather than purely for profit. This is a long-term thing that fits me because when I do something, I finish it with a flourish.”

In 2009, ANI made was listed at the Philippine Stock Exchange; the first and only pure agricultural company listed in the market’s 40 years of existence.

Here are a few recent news articles about the company:

1.) August 21, 2012 – Cargill Fund boosts Agri Firm Expansion

http://www.malaya.com.ph/index.php/business/business-news/11139-cargill-fund-boosts-agri-firm-expansion

Powered by a $34.45-million (P1.3-billion) capital infusion only seven months ago from a Singapore-based hedge fund owned by U.S. agribusiness and trading giant Cargill Inc., the expansion and acquisition binge of local agricultural food products conglomerate AgriNurture Inc. (ANI) has accelerated into a buildup of farm hectarage that will see the company splurging from P560 million to P980 million in Mindanao to buy up some 1,400 hectares of producing banana plantations in the remaining five months of the year.

This will give the firm the capability to grow its own banana supply to support robust export shipments hobbled only by what company officials described last week as a chronic lack of supply.  

Other Highlights from the Malaya article:

1.) We used to ship 1,000 containers of bananas to markets worldwide, yet still supply was not enough,” Tiu confirmed..

2.) With each hectare ranging in price from P400,000 to P700,000 depending on it’s state of development, the 1,400 hectares being targeted will cost AgriNature between P560 million and P980 million.

3.) Financing for this latest phase of AgriNurture’s multi-billion-peso expansion will also come from Black River Capital Partners Food Fund Holdings (Singapore) Pte. Ltd., the same Cargill-affiliated fund that only last January put into ANI  $30.450 million in fresh capital – in the process acquiring a 28.11-percent stake.

4.) AgriNurture’s new 1/3 owner is a hedge fund managed by Black River Asset Management LLC, also based in Singapore, which is a unit of commodities giant Cargill Inc. with headquarters in Minneapolis, Minnesota.

5.)ANI seeks to expand overseas from the present 40 outlets in the Philippines to 1,000 stores particularlly in China and the U.S. in the next five years.

6.) Among ANI’s latest expansionary deals was an agreement to carry Tully’s coffee, a well-known brand of a leader in specialty coffee and coffee makers of the same name that is based in Seattle, Washington State.

7.) Establishing a larger presence in the food retail business, it bought 51-percent controlling interest in The Big Chill Inc. (TBC), whose flagship products are  fresh and preservative-free fruit juices and shakes under the brands Big Chill, Fresh Bar, C’Verde and Canefusion.

8.) Another coup was to supply Philippine coconut juice to U.S.-based Vita Water.  This has fired up production at the Cagayan de Oro facility of ANI’s production subsidiary Fruitilicious.

9.)  Locally a key core business of ANI is the regular supply of fresh farm produce to leading supermarket chains.  It also buys in bulk homegrown fruits such as banana, sweet pineapple and papaya which it exports to the Greater China region, Japan, Korea, and the Middle Eastern, European and North American regions.   Its additional capital from Black River only added more fuel to push this strategy.

10.) “We were not affected much with the halt of China accepting our bananas, since we were able to divert our bananas to other countries,” Tiu explained.    But, he added, he was hopeful of “tapping China again.” The bulk of ANI’s fresh fruit exports go to China.

2.) August 26, 2012- ANI To Start Rice Production

http://www.philstar.com/Article.aspx?publicationSubCategoryId=66&articleId=841850

 Listed agribusiness firm AgriNurture Inc. (ANI) is allocating P1 billion for riceproduction in the next planting season to help augment rice output in the country.

In a briefing, ANI chief executive officer and president Antonio Tiu said the company is targeting a total of 10,000 hectares of rice farms by the end of 2013.

ANI, through a joint venture with Beidahuang Seed Group of China, is focused on developing hybrid riceseed varieties which yield more than the regular inbred varieties. The group sells these to farmers and buys the farmer’s produce for sale to the domestic market.

“The rice business will flourish given the shortage. We want to capitalize on this,” Tiu said.

The Philippines has become one of the world’s top rice importers as it continues to suffer from rice shortage. Last year, the government was forced to import 2.4 million tons of rice from other east Asian countries and the United States.

To achieve sufficiency in rice supply, the government aims to increase palay output to 19.2 million tons this year and 21.12 million tons by 2013.

The Department of Agriculture said earlier the Philippines could reduce its rice imports should the government succeed in persuading farmers to change their cropping schedule.

3.) August 10, 2012  – http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-5971_ANI.pdf

  • 1.)    Authority for ANI to undertake steps and file necessary documents to file on the First Board (from the current Second Board) of the exchange
  • 2.)    Authority to Subscribe 10% of the outstanding stock of The Big Chill
  • 3.)    Authority to Obtain longterm debt in the maximum amount of $ 150Mil
  • 4.)    Acceptance of Resignation of Mr. Richard Gammill and Election of John Aloysius Bernas as director who will serve the unexpired term of Mr. Gammill.

4.) August 22, 2012 – http://www.pse.com.ph/resource/disclosures/2012/pdf/dc2012-6241_ANI.pdf

ANI confirms PSE listing of Big Chill

http://manilastandardtoday.com/2012/08/21/big-chill-considers-pse-listing/

1.) AgriNurture acquired 51 percent of Big Chill for P20 million last year, as the company expanded into the retail business.  It also advanced P244 million to Big Chill to expand its network of stores from the current 40 branches.

2.) It said subject to the terms and conditions of the agreement and the result of the due diligence review, the P244-million advances could be converted into equity. Once converted, AgriNurture will have an 80-percent interest in Big Chill.

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Products (199)

According to the website, ANI currently sells and exports some of these 199 products:

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Some Affiliations to Reckon With:

Noteworthy to know that ANI actually has 2.5 Bil shares of GREEN at 1 centavo each. (You can see this on the July 2012 PSE disclosure).  And the owner, Mr. Tony Tiu has also been the chairman of GREEN (formerly MUSX) since 2004.

ANI’s Financial Performance

The company earned around Php50-70 mil per quarter for the past 4 quarters.  Based on 1H2012 numbers alone, the company earned net income of Php93 Mil from revenues of approximately Php 1.4 Bil.  I suppose net margins for other fruit and agricultural companies abroad should be the proper comparison.  In any case, at market cap of Php4.5 billion, the company is trading at roughly 20X P/E (assuming FY 2012 income of 225 mil ? )  However, with a slew of growth opportunities, I don’t think it’s as easy as cake in making this simple calculation.  Of course, one has to estimate how much ANI stands to earn from a successful listing of Big Chill (note that it only paid 20 mil pesos and 224 million financing for its 80% stake), from the new rice production plans, the Tully coffee brand, as well as the growth in acres of its banana plantations.  So this isn’t as simple as pie, my friends 😀  If Cargill fund’s Black River invested in this agri firm, you and I better research more about this company.

Please go here to see it yourself: http://www.bloomberg.com/quote/ANI:PM/income-statement

*****

Conclusions: I think this company is not just your ordinary company.  Its current market capitalization in the market is at Php4.5 Billion at last friday’s closing price of Php 8.40.

Note that there was an increase in its outstanding shares and a 20% stock dividend declared last few months only.

The current outstanding shares is at 535,693,037

It looks to me that ANI’s trying to grow its revenues and profits via a lot of financing, listing its Big Chill unit so that the market will price each of its subsidiaries in itself and tapping the markets to expand into rice production etc.  The fact that it’s trying to get listed in the first board (instead of the second board), looks to me that the company wants to fix its image from being seen by traders and investors as a small cap stock to something more.

A quick read at news articles tells me that this company doesn’t have a lot of free cash flows, thus it is seeking capital and raising debt (150 Mil ) plus the financial markets. Nevertheless, looks like a decent company to watch.

You can read further Mr. Anthony Tiu’s visions on harvesting for the future , last 2009 just to see how this entrepreneur has promised and delivered in the agricultural sector.http://www.philstar.com/Article.aspx?articleId=567707&publicationSubCategoryId=78

*****

– Faceless Trader

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