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New Zealand DAIRY INVESTMENT – NZ$500,000 – Budgeted returns approx 9.0% (pre-tax on Capital)

19 September, 2011

Expressions of interest are invited, from suitably qualified investors,  for investment parcels of $500,000 (with $50,000 increments) in this established, fully managed, Murchison (West Coast, New Zealand) dairy farmProjected average pre-tax returns on capital invested of 9.0%  (for first 3 yrs, based upon a Fonterra payout of $6.50).

This a large, established dairy farm of approximately 1400 hectares situated at the South Branch of the Tutaki Valley, Murchison, New Zealand. It has a proven production track record and an ability to increase production levels further.The company that currently leases and manages the farm has already entered into a conditional Sale and Purchase Agreement to purchase the farm for $17,800,000. This price is equal to $29.67 per kg milk solids, based on an annual production of 600,000 kg milk solids as forecast for the 2011/12 year. The total assets are estimated to be worth $26.4m, comprising of the farm property, cows, plant and Fonterra shares, providing the Company with a strong security base. It is intended to have Bank debt at $8.0M which will equal approximately 28.6% of total assets.

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The primary aim of this Offer is to create an opportunity for investors to access returns from dairy farming as well as the potential capital appreciation of dairy real estate by purchasing new ordinary shares in company.Returns to investors will comprise six monthly dividends plus capital growth potential from the increasing value of the underlying farm property and its Fonterra shares. The managers, who will also own shares in the property, will be seeking opportunities to further improve the production of the Farm with productivity gains enhancing the potential capital value of the property asset.  The Board is budgeting on achieving pre-tax returns in excess of 7% per annum based on conservative, historically weighted budgets at $6.50 per kg/ms.
The Financial Forecasting Budget indicates that projected Pre-tax returns will be 7.9% for the year ending 30/6/2012, 9.2% for the year ending 30/6/2013 and rising to 9.9% for the year ending 30/6/2014. These returns are based upon a milk solids payout price of $6.50 per kg of milk solids which is below present Fonterra projected per kilogram prices. Sensitivity forecasts showing production in the range of 550,000 to 650,000 kg/ms and from $5.50 to $8.00 payout indicate average pre-tax returns may vary from 3.1% low to 15.1% high.
Shareholders in this property will also share in the capital appreciation of the farm, which has historically been above the average dairy farms capital appreciation of 10.19% p.a.

Average Returns 

(projected first 3 years at $6.50/kgMs)

On Total Assets  7.6%

On Capital Invested

(before-tax)   9.0%

(after-tax)    6.5%

Debt/Total Assets 27.4%


Key Offer Details

Issuer: Melco Investments Limited

New Ordinary Shares: 16,000,000

Issue Price: $1.00

Offer Closing Date:  14 November 2011

Shares Already Comitted: 3,000,000


Dividend Payment Frequency:6 Monthly

Key Investment Features

  • Melco, a private unlisted New Zealand Company.
  • Indirect investment in the $10 Bn Food Production & Dairy Industry.
  • Mt Ella Station, a 1,398 ha dairy farm inNew Zealand’sSouth Island.
  • Operating over 10 years, Mt Ella is a well managed farm with a proven production track record.
  • Lower than average cost structure in an area of reliable rainfall.
  • Conservative bank debt at less than 30% of total assets.
  • The offer is to purchase 16,000,000 new shares in Melco.

“The Directors believe this is an excellent opportunity to be involved in an industry that is performing well off the back of strong global commodity prices that are expected to be maintained because of the world-wide protein shortage.  An investment in *Melco will provide investors with the prospect of cash returns and capital growth potential in the shares.” 

Chris Dawkins – Chairman (Melco Investments Limited

We are seeking expressions of interest from suitably qualified professional investors able to meet the application criteria as defined by the New Zealand Securities Act 1978 and described in more detail in the Information Memorandum.

NOTE: Overseas investors are required to comply with New Zealand Securities Laws as well as any applicable laws relating to securities or investments in your own country. You should obtain your own legal advice in this respect.




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