98% Revenue Growth, Being Valued at LESS THAN ZERO, Could Rapidly Rise 44%-63%!
Agria (NYSE: GRO)'s wholly owned China seeds subsidiary grew its fiscal 2013 revenues by a huge 98% to $17 million, yet it's currently being valued at LESS THAN ZERO! This is because GRO has a huge cash position that is rapidly growing as it receives large cash dividends from PGG Wrightson (NZX: PGW), New Zealand's largest seeds company. GRO teamed up with New Hope Group - China's 12th largest private company with USD$12 billion in annual revenues - to purchase 50.22% of PGW.
If GRO sold its PGW shares at the current market price, GRO would receive cash proceeds of USD$100.5 million or $1.81 per share. In addition, GRO already has $69 million in cash - and recently reduced its debt to only $75 million. This fiscal year, PGW will likely pay a cash dividend of around NZ$0.04 per share, which will give GRO proceeds of $10 million and increase its cash position to $79 million. This will allow GRO to completely pay off its debt and still have $4 million in cash remaining. Afterwards, if GRO sells its PGW shares at the current market price - GRO will have a total cash position of $104.5 million or $1.89 per share - and be completely DEBT FREE!
When GRO hits $2 its China seeds business will finally be receiving $0.11 per share or $6.09 million in value. However, considering its huge revenue growth of 98%, it certainly deserves a valuation of at least 1-2X sales or $17-$34 million, which will make GRO a $2.20-$2.50 per share stock up 44%-63% from its current price of $1.53!
Read GRO's news from yesterday. GRO just introduced 2 new field corn seed varieties and 6 new edible corn seed varieties - and has just put together a panel of China's most experienced agricultural scientists who are currently developing a new field corn seed and 3 new edible corn seeds that GRO will begin selling in China next year. We see very little/no downside risk at these levels and have already accumulated 550,000 shares. We intend to sell our shares after GRO rises to much higher prices.