KAIANGAROA LTD PARTNERSHIP
The Investment:
This investment features quality property in the best ‘value for money’ sheep country in the world, flexibility in land use derived by a mix of 65% finishing and 35% breeding area and a simple management policy of finishing lambs to weight specifications and grazing dairy heifers. The resulting business creates a net income of more than $550/ha off a low asset base, therefore generating projected cash returns of 7% growing to more than 8% p.a.
The properties:
Kaiangaroa: This farm will be the ‘hub’ of the business. It is widely acknowledged as a magnificent farm, easily performing within the top 10% of farms in its class. The 1278 Ha is ideally suited to a large-scale managed finishing operation; is located at Pukeokahu, 24 km North East from Taihape; has a good balance of easy contour and free draining soils ideally suited to finishing; a summer safe environment which delivers high quality feed year-round, a high standard of improvements and a purchase price on the effective area at $9,390/ha ($3,800/acre).
Kowhainui: The supporting lease block is a 987 Ha farm 26 km North West of Taihape and is a quality breeding block which is well developed and maintained and will supply Kaiangaroa with replacement breeding stock and more than 6000 lambs for finishing.
Business tenets:
There are some clear objectives associated with this business:
-
Deliver regular and reliable cash returns by finishing all stock with a particular focus of supplying lamb in off peak months, thereby earning procurement / market premiums
-
Contract a minimum of 50% of all revenue through forward supply contracts. One processor is providing a realistic and attractive forward supply contract with known prices twelve months in advance
-
To operate a simple system that enables a focus on productivity and costs of production.
-
To operate with a very robust capital structure (equity of 80% +) to reduce risk and as a platform for future success-driven growth.
The business plan includes the following key tenets:
-
Adopting a very simple system with few stock classes. It is proposed to breed and finish lambs and graze dairy heifers and calves, with some beef finishing.
-
Running capital stock at only 2/3 of capacity to maximise the returns available from finishing stock. 24,000 lambs are to be fattened including approximately 12,500 home bred lambs and 12,000 bought in lambs.
-
Finished lambs will be sold off-peak for superior margins in the late autumn and early spring.
-
Ewes at Kowhainui will be mated to maternal rams to breed replacements, and all ewe hogget replacements will also be run on Kowhainui. This allows older ewes to be transferred from Kowhainui to Kaiangaroa, with these ewes mated to a terminal sire.
-
Cash-based cattle grazing policy focused on dairy heifer and trade heifer grazing. At the present time there are 189 dairy heifers and 560 trade heifers being grazed.
-
Careful attention to pasture quality and feed crop performance.
Key on-farm targets will be achieving 140 – 145% lambing on MA ewes, producing ewe and male lambs that can be finished at 20 – 23 kilogram carcass weights and at carcass weight to liveweight yields that increase over time from 43% – 47%. It is believed that these targets are readily achieved with the range of genetic options available.
Investment returns:
An investment in Kaiangaroa Pastoral Limited is forecast to result in annual yields increasing from 6% to more than 8%. Of this potential return 3% increasing to 4.5% is budgeted to be paid to shareholders with the remaining returns being applied to debt servicing – however it is noted that the directors of the business will set the distribution policy.
At present a monthly return of approximately $36,000 is being paid to investors, a return of 4% p.a. Taking account of annual cash returns, debt reduction and limited asset appreciation, the calculated Internal Rate
of Return is 11.2% per annum over seven years.
Offer
EQUITY CAPITAL OF $4 MILLION IS SOUGHT FROM A MINIMUM NUMBER OF ELIGIBLE PERSONS AND PERSONS EXCEPTED
OR EXEMPTED AS BEING MEMBERS OF THE PUBLIC IN TERMS OF S 5(2CBA) OF THE SECURITIES ACT 1978.
|
