Friday, November 21, 2008

An Unprecedented Investment in Food Security



Yesterday, the Financial Times reported that South Korea's Daewoo Logistics had leased half the arable land on Madagascar ("Daewoo to cultivate Madagascar land for free"). From the article:

Daewoo Logistics of South Korea said it expected to pay nothing to farm maize and palm oil in an area of Madagascar half the size of Belgium, increasing concerns about the largest farmland investment of this kind.

The Indian Ocean island will simply gain employment opportunities from Daewoo’s 99-year lease of 1.3m hectares, officials at the company said. They emphasised that the aim of the investment was to boost Seoul’s food security.

“We want to plant corn there to ensure our food security. Food can be a weapon in this world,” said Hong Jong-wan, a manager at Daewoo. “We can either export the harvests to other countries or ship them back to Korea in case of a food crisis.”


The editors of the paper criticized the terms of the deal as "neocolonial" in a related editorial, "Food security deal should not stand".

Hopefully, someone from the precision agriculture company Hemisphere GPS (TSX: HEM.TO) has arranged a sales call with Daewoo.

The graphic above is from the FT article.

12 comments:

Jeb Bush said...

HEM lost money in its latest 3-month and 9-month periods during the biggest agricultural boom in history.

How will they make money now that things look much less favorable?

HEM is an ultra-high risk stock.

Albert said...

Not to nitpick, but how do you figure it lost money in the latest 9 month period?

dentist.gone.broke said...

Jeb Bush is just making it up Albert. Only if he knew how to read financial statements.

He better stick to filling cavities.

Anonymous said...

HEMISPHERE GPS INC. Consolidated Statements of Operations and Deficit (unaudited - expressed in U.S. dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ------------------------------------------------------- 2008 2007 2008 2007 ------------------------------------------------------------------------- Sales $ 13,200,562 $ 9,069,425 $ 62,146,093 $ 40,190,470 Cost of sales 6,385,168 4,870,961 30,168,245 20,992,624 ------------------------------------------------------------------------- 6,815,394 4,198,464 31,977,848 19,197,846 Expenses: Research and development 1,942,851 1,239,537 5,773,259 3,501,127 Sales and marketing 2,728,792 1,854,614 9,326,253 6,500,002 General and administrative 1,657,301 1,291,037 5,790,951 3,867,272 Stock-based compensation 190,056 125,875 538,847 481,742 Amortization 860,883 558,597 2,699,949 1,584,886 ------------------------------------------------------------------------- 7,379,883 5,069,660 24,129,259 15,935,029 ------------------------------------------------------------------------- Earnings (loss) before undernoted items (564,489) (871,196) 7,848,589 3,262,817 Foreign exchange loss (gain) (242,180) 403,737 (513,973) 612,660 Net interest income (88,978) (99,971) (296,252) (296,343) Legal fees on the settlement of lawsuit - 1,346,678 - 2,853,802 Loss on sale of marketable securities - - - 35,342 Other income - - (263,036) - ------------------------------------------------------------------------- Earnings (loss) before income taxes (233,331) (2,521,640) 8,921,850 57,356 Current income taxes - - 175,903 - ------------------------------------------------------------------------- Earnings (loss) from continuing operations (233,331) (2,521,640) 8,745,947 57,356 Loss from discontinued operations - 102,352 - 303,121 ------------------------------------------------------------------------- Net earnings (loss) (233,331) (2,623,992) 8,745,947 (245,765) Deficit, beginning of period (31,340,301) (37,203,566) (40,469,714) (39,581,793) Adjustment due to adoption of new accounting policy - - 150,135 - Adjustment due to Normal Course Issuer Bid (8,623) - (8,623) - ------------------------------------------------------------------------- Deficit, end of period $(31,582,255) $(39,827,558) $(31,582,255) $(39,827,558) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings (loss) per common share from continuing operations: Basic and diluted $ - $ (0.05) $ 0.16 $ - ------------------------------------------------------------------------- ------------------------------------------------------------------------- Earnings (loss) per common share: Basic and diluted $ - $ (0.06) $ 0.16 $ (0.01) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Weighted average shares outstanding: Basic 56,223,363 46,345,867 54,482,290 46,225,372 Diluted 56,484,373 46,566,090 54,898,548 46,317,060 ------------------------------------------------------------------------- ------------------------------------------------------------------------- HEMISPHERE GPS INC. Consolidated Statements of Comprehensive Income (unaudited - expressed in U.S. dollars) ------------------------------------------------------------------------- Three months ended Nine months ended September 30, September 30, ------------------------------------------------------- 2008 2007 2008 2007 ------------------------------------------------------------------------- Net earnings (loss) $ (233,331) $ (2,623,992) $ 8,745,947 $ (245,765) Translation of assets and liabilities into U.S. dollar reporting currency (3,703,837) 3,596,469 (6,388,675) 8,703,150 ------------------------------------------------------------------------- $ (3,937,168) $ 972,477 $ 2,357,272 $ 8,457,385 -------------------------------------------------------------------------

Albert said...

By george! It's as clear as day now! How could I have missed that?

Jeb, I don't own HEM myself, but despite the fact that you think it's an ultra high risk stock, you have to admit that since the stock price has gone up 14 fold in the last 18 months, it's been a good investment, right? I mean, just look at the proof:

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dentist.gone.broke said...

lol Albert!!

30 years of experience in the markets, tells you something (This guy is definitely better than Ken Heebner who also started around the same time...Ken is just getting by while this dude rocks!)

Albert, visit Gurufocus once in a while, this guy is a star there.

Daniel said...

That guy is famous for talking about anything and everything--whether he knows something about it or not.

HEM earned 17 cents per share over the past 9 months, growing earnings at around 50%.

As far as the business environment (or risk!) for the Company is concerned, that guy is similarly clueless.

There've been some analysts doing worthwhile dealer surveys to try and figure this out--rather than just talking out of their ass. I have mentioned a few of those on my blog already.

The other day, Cory Dias pointed to the 2009 Farm Equipment Dealer Business Trends Survey, which noted that "98.2% of US dealers believe that 2009 sales of precision agriculture GPS equipment will be as good as or better than in 2008, a higher rate than any other product."

It's noteworthy that this guy often hides behind the names of politicians. On some level, even he must know that the idiocy or hate he spews forth on message boards is shameful--and wants to disassociate himself from...himself.

I'd recommend a psychologist but those cost money. And I don't think the social security check is going to cut it.

Daniel said...

Just to make it clear: I'm aware that dentist.gone.broke is being sarcastic when he refers to Paul Price as a star at GuruFocus...

Daniel W. said...

Thursday, May 8, 2008
Portfolio Action

Recently took a loss on most of my BAM LEAPS and nearly doubled my position in SRZ. Have around 2% of the portfolio in cash, and on the bid, but the shares are heading higher and it's not a sure thing that I'll get that money invested. We'll see...

Daniel said...

Lol. Sometimes I feel sad for you, how much money you've lost and the pitiful, hate-filled life you live.

But when you spend a ton of time at my blog digging up an old blog post of mine with zero relevance, it's so childlike that it's funny.

Ben Franklin said...

Daniel's highly touted picks from May 2, 2008:

BAM, EPM, HEM.TO, POT, SRZ.TO

.....May 2: Nov. 24: % Drop
BAM..$33.97 ....$13.00 .....-61.73%
EPM..$5.00 .....$1.19 ..... -76.2%
HEM .$4.02 .....$1.60 ..... -60.2%
POT .$186.61 ..$59.64 .... - 68.04%
SRZ .$1.90 ....$0.005 .... -99.73%

wHO WAS IT THAT "JUST DID NOT UNDERSTAND RISK?"



Friday, May 2, 2008
So Much To Talk About
It's been a long time,
since I left you...


012: Henderson Land was recently sold, like BAM if I sell it soon, not because I didn't like the prospects for the company (and its stock) going forward, but because I saw better uses for that money. The cash remains in my account but I expect it will be put to good use very soon.

EPM: Evolution Petroleum hasn't done badly since I left but the fundamentals remain extremely compelling. This one trades at a fraction of its value, assuming oil prices collapse to 60 and trade that way for the next decade. That's a very good investment to be in--especially if you think oil is heading not lower but higher.

HEM: Don Coxe said recently that given the rise of the fertilizer stocks the best bargains currently on offer are the farm machinery companies. I doubt that he had Hemisphere GPS in mind when saying that but it certainly fits the bill of a late-cycle ag investment with plenty of upside.

With Q1 earnings up 170%, it's nice to own this one--and still be able to say that the future looks even better. Fertilizer and fuel and crop prices continue to bode well for the company--as payback on their units remains (and is getting more) attractive.

For those who read their latest earnings release one of the key things to hone in on, in my view, is that their S3 product just started shipping at the end of March. Q2 is going to be great, and earnings estimates of roughly 20 cents a share at a lot of places for this year and 30 cents next year will probably be bumped up.

I'm looking for a exceptionately good Q2, new products later on in the year (such as for yield mapping), and think that the surprise will be international sales. The penetration rates remain low in N. America but are almost non-existent in places like China and the Ukraine and so on. This will change as the key thing here is that the units aren't just saving labor costs, they're primarily saving fuel and fertilizer costs while helping to increase yield.

Finally, HEM is in a sector fast consolidating--with cash being built up on the consolidator's balance sheets along with the motivation to use it. HEM remains an easily digestible target. And it remains outside the portfolios of many money managers who own their competitors--due to its size. This will change if it remains publicly traded, and sooner or later it will find its way into the ag ETF's MOO and COW. It has had a nice run from roughly 3 bucks to 4 lately but I remain bullish on the Company. And I haven't sold any.

BAM: The primary case on BAM was restated not too long ago, and the latest earnings results (like those before it) backed up those points. Not too much to say about this one, apart from I told you so, but there's no point in saying that. The market is finally starting to price BAM more appropriately though I don't have high expectations for it to trade up to 45 any time soon. This has always been one of my smaller positions and may be sold at any point--in whole or in part--in order to invest more elsewhere.

POT: Ah, so much to say about this one. Potash has hit record prices, the Company has reported great earnings, forward estimates have been raised, and target prices remain well above the current share price. I continue to think that the fundamentals of the company will continue strong, and that the assumptions underlying analysts targets are too conservative, but at the same time I wouldn't want to pay a fair price for POT (which is somewhere in the 250 to 350 range). As POT moves closer to fair value I'll probably take a 20-bagger on the remaining '09 contract, and start selling the '10 contracts when and if they pass the 10-bagger mark.

SRZ: This one deserves a post of its own. But I don't plan to make it until I get some good buys in. You know, just on the offchance that someone is actually listening to me here. When I do finally make it, don't be surprised if you find me pointing to the fences Babe Ruth style...

Yogi Berra said...

SRZ is now delisted and likely is worthless.

Daniel may have to rethink his Babe Ruth pointing at the bleachers stand on this great investment idea.