Cobus Loots, CEO of Pan African Resources, on delivering sector-leading returns for shareholders. Watch the video here.
Not sure that anyone should say with confidence that the S.P. should be at strong premium to NAV. Moderately interesting and kind of balanced article at the following link:
https://www.thegrocer.co.uk/future-of-meat/is-cultured-meat-pure-science-or-a-billion-dollar-con/665494.article
A couple of takeaways from this:
1 - The industry as a whole is making lots of predictions re. what they will achieve and how long it will take to achieve it and they are consistently missing these targets. That doesn't bode well for cost / programme control and this over-confidence combined with underachievement is a significant factor in why most start-ups fail. The supporting information behind the articles comments re. missing targets is from the following report (you can follow a link on this page to a spreadsheet of what predictions have been made - these include many of the top names in this field): https://rethinkpriorities.org/publications/cultured-meat-predictions-were-overly-optimistic
2 - Many of the companies do not have the right balance of academics vrs. industrialists. This rings true from my own experience. I have been involved in 2 major industrial engineering projects (multi-million pound) with university spin-offs and both have been absolute car crashes. The academic guys were indeed very clever and would make things work, but they had no concept of design for manufacture, cost control or programme. Not hitting milestones was not important to them as long as it was technically correct. But that doesn't make a viable business.
3 - Overarching takeaway is that you shouldn't have a fear of missing out. This technology is years from competitiveness. You comfortably have at least a year or 2 to sit back and watch developments without overcommitting to investing. I'd invest a small amount now and accept that perhaps in 2 years time you walk away completely or add more accepting you may have missed out on a modest gain in the intervening period but knowing there is still plenty of time for big gains in years 3 - 10.
None of this supports SP trading at NAV right now as the stated NAV's of investee companies has a lot of optimism built in (some/many/most will fail and be worth zero).
Jim Mellon says the current conflict and restriction in supplies from Ukraine and Russia is good news for precision fermentation. As of 5 minutes ago, I have just received the following comment from one of our suppliers in relation to stainless steel (all the precision fermentation tanks will be stainless, as will associated product piping):
"The Nickel market was closed this week as the price was rising so fast and the world has gone into panic mode, deliveries of material are being pushed out and prices have risen significantly"
Do not believe everything that Jim says!!
Part of my point was it is difficult to divorce yourself from the global supply chain and only limit yourself to friendly countries. Doing so may be double the time and 10x the cost and even then you may not be fully divorced e.g. stainless steel from European foundry doesn't have all the iron, chromium, nickel and manganese etc. mined in Europe. With regards to timescale, it all depends on nature and scale of project. Take Upside Foods new facility which is currently capable of 50,000 lb per year but could scale up to 400,000 lb per year in future (and that is really not much). Construction phase started in September 2020 (but design and planning would have been months and years before that) and it was opened in November 2021 which was apparently on schedule in spite of Covid. I am not sure if that is a fully commissioned status - that might take another several weeks or couple of months again depending on scale.
Admiral70 - Your comment re. much less issues on supply chain and logistic going forward is not correct. I work for an industrial engineering company who supply, install and maintain processing equipment used in the food, pharmaceutical and petrochemical industries. We operate almost exclusively in the UK but supply chain is global. The UK has no meaningful manufacturing base and the overwhelming majority of our suppliers are European headquartered and their subcomponents come from all over the place with a large percentage from China. On a recent job the end user applied a requirement for all pressure retaining materials to be European sourced - this was a nightmare on a variety of levels. Lead times could double (and I don't mean from 1 to 2 days, more like 10 weeks to 2o weeks) and some prices went up by a factor of 10. Not only that but because our suppliers supply chains were not set up to deal with European component manufacturers and foundries etc. several of them made a complete mess of this and ended up with sub-standard materials. Go watch an episode of BBC's Inside The Factory for a typical food processor or manufacturer to give you a bit of an idea of what a large scale precision fermentation facility might look like. Look at all the equipment and look at all the raw material inputs coming in to make their product. Global supply chain is absolutely critical to that. There are almost no vertically integrated large scale manufacturers out there. This is also why I have a beef (pun intended) with Jim Mellon's comments re. supply chain issues from Russia and Ukraine being good for ANIC. It might be, but I think each individual company would need to drill down into their supply chain costs to establish this and there is no way Jim Mellon has done this. Costs will be going up - that is 100% guaranteed. Supply chain issues will be more problematic - also 100% guaranteed.
So now for my typical counter argument...
Nickel prices up about 90%. Nickel goes into stainless steel (albeit tiny quantities) and stainless steel prices I believe up about 25% this month. All the fermentation tanks and piping etc. will be stainless steel (have a look at the videos of Upside Foods new production facility - it's all stainless). I've not checked other commodity prices but given my best performing investment over the past month is TB Amati Strategic Metals Fund (up about 20% in a month) I suspect the cost for building any new facility that contains various industrial metals for equipment and wiring will be rocketing. Bear in mind it cost Upside Foods about $50M dollars for their facility capable of an equivalent output of a few dozen chickens per day. Also bear in mind that the production process is temperature controlled i.e. requires energy (cost going up) for heating and cooling. Availability and lead time of previously off the shelf items has also been pushed out due to Covid and now restriction in major shipping routes due to closed airspaces and ports in the Black Sea. The nutrients going into the fermentation mush are also presumably grown somewhere so I assume are also affected by rising conventional farming costs. All in all, I am not at all clear why a general rise in commodities and restriction in supply from Russia and Ukraine is in any way good for ANIC. The cost of doing business for pretty much all of the companies we are invested in is going up - someone needs to explain to me why this is good.
Admiral70 - I fully intend to hold (as this only forms a small part of my portfolio), but I think people do need to reassess whether the narrative is changing. Governments around the world will begin to look at how self sufficient they are in crisis scenarios. Food security will be one of the issues. Is a highly technological solution to food security the right answer, or is it back to basics and promoting high quality locally grown locally sourced food combined with better land management. It doesn't mean the fundamentals of animal cruelty, emissions, land/water use, antibiotics etc. has changed but these may become secondary to ensuring security of supply.
Oogleflugal - I have to confess I'd forgotten a chunk of the current NA is still cash, but the general comments on share price are only odd if you believe the world will be the same place this time next year and I think that is by no means certain. Will it be a "day after tomorrow" scenario? Probably not, but it's not at all unusual for funds to operate at big discount to NAV and if current events escalate further then for speculative "jam tomorrow" stocks, people may begin to fear they won't get any jam at all hence the potential for share price to be at significant discount to NAV. Inflation could also have a lot further to go, having an adverse impact on that cash pile.
I don't realistically believe it will drop to 0p, hence the qualification that it depends on how bad the current situation gets, but a business startup failure rate of 75% is about the norm. In troubled times it could easily be worse and those that remain may be priced at a heavy discount to NAV (50%+?) because they are speculative and unproven and require lots of financing to get to completion in an environment where financing may be hard to come by. Can't be ars*d doing the arithmetic but I guess that will be well below 10p. Even I might top up some more (if I'm still here hahahaha) if it gets to that level. Best wishes to y'all.
Perhaps when the dust has settled, it may be time for ANIC board to reflect on the wisdom of agreeing a fee to Jim Mellon of 15% of any immediate increase in NAV which was more or less effected the following week by announcing a cash fund raise. That's not long term thinking and this is a very long term project.
In the meantime we in the west need to wake up and grow a backbone firstly by supporting Ukraine whatever the cost and I do mean whatever the cost. We need to take food, energy, manufacturing, technology security etc... far more seriously and be much more self sufficient when the proverbial hits the fan. Will that be beneficial for ANIC? Who knows. Short to medium term I'd rather have a cow and some chickens in my back garden than a complicated and expensive precision fermentation plant, but that may change in the future.
Don't get me wrong. I'm invested in this hopefully to achieve many many multiples of return on my investment, but it's only 1% ish of my portfolio and would need to rise by at least say 50x to have an impact on my retirement plan. When I here various people imply that this is a large % of their portfolio, I do wonder if they have considered the odds are stacked against them. But it's these outlandish investments that have a sliver of a chance of being game changers - just don't have all your fake eggs in one basket, or count your fake chickens etc. etc.......
For some more context, according to the US department of agriculture economic research service, in 2019 there were around 36000 food and drink manufacturing and processing facilities in the US alone (from about 31,000 different companies). Of those 36,000 facilities / 31,000 companies in the US only a handful will have a significant market capitalisation. ANIC are invested in about 15-20 startups. The likelihood that any of them will make a significant market impact in this vast ocean of competitors is tiny. Alright, they are bringing something different to the table (literally) but there is no obvious reason (to me) which would lead to the conclusion that a start-up novel food manufacturer has any better chance of making a significant dent in the market than the myriad of conventional competitors who have failed to achieve this. So 6p or 8p may well be a fantastic entry point, but it's significantly more likely to drop to 0p than it will accelerate to ££££'s. I keep saying, you've got to be in it to win it, but I would also encourage everyone to remove their blinkers - just because you are heavily invested and want this to do well and the fact there is a plausible narrative, does not mean that it is remotely likely to work out well. Looking at the existing food/drink market should be a pointer that whilst the overall market size is huge and there are a few huge players in this market they are in the tiny minority. Globally there are 100,000's of food processors bumbling along doing not a lot for investors (I have no doubt many of them started with high hopes). It is hugely more likely that our motley crew of investments will end up in this latter category (or fail altogether in common with most startups).
For a bit of context re. fees and fundraising.
Future Meat raised $347million in December - all without Jim Mellon.
Investors are balking at Tim Cook (CEO of Apple) pay aware of something like $99million. Market Cap of Apple is about 16,000+ times that of ANIC, but pay is about 10x and investors are disgruntled......
Gonsan - I disagree that Mellon has philanthropic motives on this one. Why the 15% fee on any increase in NAV? He got paid something like £9million last year on the basis of taking a 15% cut of the fund raise money which accounted for the overwhelming majority of the increase in NAV. This would have put him round about the top 10 best paid CEO's of a FTSE 100 company, and we ain't there yet!! The market potential is indeed huge and that being the case then a) I would expect the money would have been raised almost as easily without Mellon taking a 15% cut (no one else seems to have had a problem raising funds) and b) I would rather save the 15% and invest it in these exciting startups. Creaming off 15% to stifle that investment is not my definition of philanthropy.
Does anyone know who these shares have been purchased from? I am a slightly suspicious and sceptical person by nature and it would not necessarily surprise me if the existing shareholder whom these shares have been purchased from is none other than Jim Mellon. I just thought the wording of the RNS was evasive in that respect.
Not sure if this link will work, but may be worth signing up for the following event:
https://meatthefuture.com/flagship-series/
If the link doesn't work, just Google "meatthefuture flagship series". Event on 23rd Feb discussing progress on getting a product on the market (focussed on the US)
Having tried a McPlant burger for the 1st time over the weekend, I would hope ANIC don't top up on plant based products - they're just not that good. They may have their foot in the door right now, but for all the claims that this is "just like the real thing", it absolutely is not. The taste and texture of the McPlant burger is nothing like a beef patty and that is what they have to aim for to convert meat eaters. I'm not sure if they are trying to offer something different - I didn't think so, I thought the point was that it was supposed to look like, feel like and taste like meat. It doesn't and Beyond Meat / McDonalds is probably about as good as it gets just now. Extrapolating across that all plant based meat substitutes will have similar issues (though doubtless they will improve), I would have thought they will be easily displaced by a cultured meat product if and when it becomes cost competitive. This assumes of course that the cultured meat industry is telling the truth that their product is indistinguishable from the real thing. So I would vote to keep the money for the 100% cultured meat products and forget about plant alternatives.
I suspect the share price is not moving (or moving in the wrong direction) for a multitude of reasons in addition to your suggestion - a few thoughts:
1 - With rising interest rates, the vast majority of growth stocks are being hit. Future profits are just not worth as much as profits now. Given this is an especially speculative growth stock, it is reasonable to expect that this should be hurt more than most.
2 - Investee companies costs of doing business are going up, either with rising staff costs or increased material costs to build their spoffy new facilities. All the money Mellon raised is now buying less.
3 - Almost certainly their facilities will require microchips of which there is a well heralded global shortage. All their controllers, variable speed pumps, fans and stirrers will be affected (lead time for what was previously off the shelf variable speed EC fan may now be up to 12 months). So the money Mellon raised is buying less and buying you slower progress.
4 - Mellon is taking a 15% cut - that's just not good.
5 - People are wising up to the fact that this won't be plain sailing - look at the share prices of Oatly and Beyond Meat in recent months - not pretty reading and these guys are miles ahead of where the cultured products industry is right now.
In the end though, if you are a long term investor rather than a day trader, just don't look for the next few years and then maybe you'll get a nice surprise when you open your eyes again.
Shellbay fees are simply not justified. Assuming more or less 100% of that goes into Jim Mellon's pocket, then that would have just put him outside the top 10 of best paid FTSE 100 CEO's last year. ANIC are a speculative punt of a company, not a FTSE 100 giant. I suspect if you look at other novel startup industries, by and large the top tier of management will not be taking exorbitant fees - they'll be paid in stock with the hope of more jam tomorrow, but accepting if they don't deliver then they make not a lot e.g. Elon Musk takes pretty much no cash out of the company but has high stockholding and stoick awards so he lives or dies by how well the company does, not on how much he can raise from investors in order to skim off his 15%.