Opportunities Update - October 2014
Resounding Election Victory brings Renewed Confidence
You've gotta lotta nerve to say you are my friend
When I was down you just stood there grinnin'
You've gotta lotta nerve to say you have a helping hand to lend
You just want to be on the side that's winnin'
Bob Dylan, Positively 4th Street
In my last Opportunities Update I showed how continuing confidence in the New Zealand economy was encouraging businesses to expand. Then things stalled - largely due to the uncertainty around the elections and indecision around opposition policies.
But now the elections are over – and the incumbent National Government achieved such resounding victory - we can breathe a sigh of relief that the uncertainty around other parties policies have disappeared.
It seems the New Zealand public is learning about how to vote tactically with MMP. Two electorates stand out in this respect with Epsom - where the tactics have been in from the start of MMP, and with Te Tai Tokarau - where the dislike of the bond between the Mana Party and Kim Dotcom is reflected in the results. Let’s look at the provisional figures.
Of the total votes, in Epsom, Act got 45% for the candidate and 3% for the party vote while National got 31% for the candidate and 65% of the party. And in Te Tai Tokerau, Labour got 45% for the candidate and 35% for the party vote while Mana got 39% for the candidate and 18% for the party.
Messages: Get Act a seat to help National govern and get Labour in to get rid of Kim Dotcom.
All set to Go
In an article in Tuesday’s Herald Liam Dann looks at both sides of the future for the New Zealand economy. And in the meantime businesses are paying their bill faster. Now that’s a sure sign things are improving!
But in the week or so since the election at TBK capital we’ve never had more interest from businesses eager to take part in this growth - as can be seen by the offers we currently have now, or are in the pipeline. Projects that were on hold until the election results came through are now pouring in – as you will see from the length of this newsletter.
There’s now a rush to get finance organised before Christmas. Will we now see the infamous New Zealand shutdown between November and March finally over?
Raising Capital for SMEs
At TBK Capital it’s our mission to help businesses attract funds to allow them to start or expand their operations. Our specialty is arranging a suitable mixture of debt and equity funding to provide working capital for growth - and “expertise” through active investor participation.
See two of our recent newsletters on this subject Choosing the Best Loan and Lender and Money for Business
- The renewed confidence in the economy is also resulting in more interest from borrowers and lenders.
- Non-bank lenders abound, with many now advertising on TV.
- Banks are becoming more aggressive - and not just with housing loans.
- Bank and non-bank lenders are looking at more innovative ways of lending to businesses without seeking that familiar property security.
- Property buyers, sellers and developers are sighing with relief now that the uncertainty on Capital Gains tax is over.
So far this year we’ve arranged bank loans for a variety of clients from a $465,000 development loan facility to consecutively build and sell houses on a new Christchurch subdivision, to an $8 million property refinance in Auckland.
Now the FMA’s new “Crowd Funding” licences have been awarded, new ways of raising capital are available and TBK Capital has entered into an arrangement with one of these to provide smaller and/or early stage capital for SMEs.
For those looking for large expansion of their business early “private” capital raising will ultimately assist businesses to reach the level where they can attract an exit strategy such as a trade sale or “liquid” equity via the NZX, ASX or other listed exchanges. We’re not directly involved in the listed markets but have arrangements with people who are.
So here’s an update on some of the projects we are currently promoting, or where an IM is about to be released. TBK Capital has been mandated to raise capital for all of these.
New Projects
As the well documented decline in "traditional media" advertising revenues continues, the effectiveness of the “Out of Home”’ advertising market is gaining year on year popularity with both clients and media agencies. But New Zealand as an international market for Out of Home advertising, has been overlooked due to the small size of our population.
iSEE Digital has taken the lead here and is now New Zealand’s fasted growing “Out of Home” advertising network. Over $2.5 billion per annum is already spent on advertising within this country and iSEE Digital needs only to own a small percentage of that spend to produce spectacular results for the company.
It has been placing media agency campaigns for the last 2 years and now has contracts in place to install screens into hundreds of locations throughout the country – and briefs from major media companies to advertise on these networks. These campaigns vary from one to twelve months – the latter being unusually long for the industry.
The interest in Out of Home advertising is increasing rapidly and iSEE Digital is now receiving orders it needs to fulfil, like;
- the “Let’s Understand Dementia” campaign launched by Alzheimers New Zealand in libraries throughout the country, and
- the latest repeat order from FCB to roll out more than 100 screens this month.
The company is seeking working capital to fund these and other expansion plans it has over the next 48 months to dominate the New Zealand market. The investment will allow the business to;
- expand its networks,
- engage with more media companies, and
- participate directly with clients who want to utilise the iSEE networks to connect with their target markets.
It is ideally seeking cornerstone shareholder/s to take up 30% of the company by the issue of new shares. The investment required is $1.5 million with 2 seats on the board available.
This is a unique opportunity to participate in a business with proven results and existing clients in relatively virgin territory. An IM will be available soon. Expressions of interest are being taken now.
Hydra Beverages
Hydra Beverages develops science backed niche functional drinks and nutritional supplements. The team behind the business includes well know sports nutritionists and food technologists, bringing credibility to a sector where many so-called “functional beverages” are little more than marketing plays.
Their first offering, Flyhidrate, won ‘Best Industry Innovation’ at the New Zealand Juice and Beverage Awards (2013) and was developed with the University of Otago with co-funding from the New Zealand Ministry of Science and Innovation. Flyhidrate is now successfully sold at airports across Australasia and is purchased by the New Zealand Rugby Union for national rugby teams.
New beverages are in the development pipeline and the infrastructure has been put in place for immediate international expansion, with confirmed expression of interest from international distributors. A global manufacture partner has been sourced to provide international production facilities
The US$ 90 billion global functional beverage market is growing by 9% per annum. The nutritional supplement market is expanding rapidly, especially in Asia. The global airline industry is forecast to grow past 3.3 billion flyers annually by the end of 2014 - with a 5% growth - providing Flyhidate huge expansion potential in that sector.
Flyhidrate generates income from a margin on FOB sales using a B2B model using centralised distributors; currently the Relay and Newslink stores. Clients will include airlines, duty free chains, airline caterers, pharmacy chains, travel agencies and corporates, the sports sector and the military.
A newly developed powdered format of Flyhidrate brings the following advantages over the bottled form:
- Lower shipping, production and packaging costs.
- Multi use packs become available.
- Longer shelf life and higher functionality.
- A wider range of convenient packaging formats.
- New sales points become possible.
New beverage development will follow a similar B2B business model utilising the sales and marketing budgets of influential distribution partners with establish market traction.
The founders, shareholders and consultants have an impressive line up including; a pilot who supplies airlines with specialist foodstuffs; an around the world yachtsman holding a number of product patents; a PhD scholar and dietician who works with the NZ Rugby Union ABS 7s and super 15s teams; and a well know nutritionist and TV personality.
With new packaging formats assisting expansion, turnover is forecast to rise to $2 million in 2015 and $5.5 million in 2016, with 2016 and 2017 EBIDAs of $1 million and $2.5 million respectively.
The business is seeking a total of $2 million expansion capital in two rounds of funding. The first round is raising $1 million in return for 25% equity in the business. Funds raised will be used to upscale production and bring new beverages to market.
An IM will be available soon. Expressions of interest are being taken now.
Hawke’s Bay Accommodation and Winery
It started as a family business – and still is – but this incredible property in the Tuki Tuki Hills in Hawke’s Bay overlooking the Pacific Ocean has grown beyond that, and the owners are now looking for an equity partner to help take it to the next levels.
The accommodation part of the business is well established and consistently profitable. It offers luxury self-catering accommodation to the independent traveller market and has established an excellent reputation domestically and internationally with independent travellers, on social media and with luxury travel agents.
The wine business produces premium organic wine from 8.9 hectares of planted vines. Strong sales channels have been achieved in New Zealand, Australia, USA, Canada, Scandinavia, Benelux and the UK. Further markets are being established. Three aromatic wines are produced from the vineyard - a Sauvignon Blanc and two small volume, premium-priced skin-fermented wines - a Sauvignon Blanc and a Pinot Gris.
The vineyard is close to target full production of 64,000 bottles per annum. Full organic certification for the vineyard and wine will be achieved in March 2015 with BioGro
The owners' vision is to create a world-class, organic, sustainable accommodation and vineyard estate that generates revenue streams from multiple sources.
Resource consent has been obtained to modify the existing accommodation and increase the number of bedrooms from the existing 7 up to 9. The existing zoning also allows for a function centre and a winery to be built.
The property is over 19.4 hectares and has the potential for further accommodation development for sale or subdivision.
The major shareholder has divided his time between New Zealand and overseas over the last five years while the wine business has been establishing. A qualified accountant he also has a background in investment banking. Currently working as a project manager in the financial services sector in the City of London, he intends to return to Hawkes Bay to take over full time management of the businesses in Q2 next year.
He is looking for a cornerstone shareholder to provide the capital to:
- Capitalise the business appropriately for the next phase of expansion and reduce existing debt.
- Provide capital to modify the accommodation in line with the resource consent and add a function centre.
- Provide working capital to achieve full production from the vineyard.
- Provide working capital to upgrade the marketing of the accommodation and wine businesses.
Once this first stage is achieved, it is expected the uplift in the value of the property will be significant. Beyond that there is potential for further growth and value from developing further accommodation for sale or subdivision, expanding the wine business, and building a winery onsite.
Greg will be in New Zealand this month - from the 20th to the 29th of October - to meet potential partners and investors. For further information, call me on +649 307 3257 or reply to this email.
The Northerner International Hotel
The Far North is one of the least discovered parts of New Zealand. Apart from Cape Reinga, most other parts of the Far North are seldom visited by foreign tourists. Even New Zealand holiday makers mostly follow the beaten track to the more well-known holidaying locations that are well provided with services.
Our client has a contract to purchase The Northerner Hotel - a large complex with 79 rooms of 3 star standard, wide hall ways, gymnasium, health spa and tastefully decorated with period furnishings. It has a front row seat to some of the very best natural assets in New Zealand. No other hotel is so close to the mighty Ninety Mile Beach or Cape Reinga, or any of the other natural assets in the Far North.
His mission statement is to refurbish the Hotel and package these natural assets with new, exciting and life-changing experiences that combine to make a compelling reason for travellers to come and stay. With so many natural assets to explore and enjoy, The Northerner Hotel will seek to attract visitors for 2 - 3 days.
10 locations for guests to visit have been identified.
- Ninety Mile Beach
- Te Paki Stream and Sand Hills
- Cape Reinga
- Tapotupotu
- Spirits Bay
- Parengarenga Harbour
- Karikari Beach
- Matai Bay
- Monganui and Cable Bay
- Matauri Bay and the Cavalli Islands
The locations and activities listed above are just a few of the many available in the close vicinity to The Northerner Hotel. In the area between Spirits Bay and North Cape there are known to be about 1,000 ancient Maori pa sites, some of which are thought to pre-date 1400 AD, the once commonly accepted date when Maori first arrived in New Zealand.
The next closest hotel is the Waitangi Hotel and other hotels at Paihia from which guests have easy access to the east coast and the Bay of Islands but the day trip from Paihia to Cape Reinga is too long to be enjoyable (10 hours return trip) with too much travelling and too little time for fun activities.
But guests staying at The Northerner Hotel have easy access to all the most famous tourist locations and activities, as well as access to the never visited remote locations which hold the key to some of the greatest New Zealand legends and mythology. Less time spent travelling means more time for adventure. And that is the focus of the Hotel; to provide non-stop action adventures for all ages.
New Marketing Techniques will be used to promote the Hotel and the adventures. The very latest Viral Marketing technologies will be employed to market directly to millions of personal computers in the target markets around the world.
Our Client has had years of experience in education, new technologies, global communications, sales and marketing and global distribution - and pioneered tourism in the North of New Zealand. He is seeking an investor to join him in this exciting venture.
He has prepared a detailed and professional Business Plan and an IM will be available soon on signing a Confidentiality Agreement. Expressions of interest are being taken now.
ASE Woodflow
ASE Woodflow is a new company formed to harvest timber in steep or difficult locations throughout New Zealand. It has customers requiring timber for flooring and wall products in the United Arab Emirates and in China.
They have already identified some more difficult forestry sites in New Zealand - at low prices and of no interest to the large players here - from which ASE Woodflow can remove the timber economically using new revolutionary equipment.
The Marlborough Sounds, for example, is one area where resource consenting is very difficult for traditional harvesters yet there are many hectares of high quality timber available but extraction and transportation are difficult issues. ASE Woodflow know they can extract here economically as their method of extraction from difficult sites such as this has already been trialled – over 120,000 tones have been harvested via this new methodology.
ASE Woodflow has an order from a buyer based in China requiring 30,000 tonnes of Pinus Radiata logs. The buyer is new to New Zealand and is a flooring company presently sourcing logs from other markets for their products. They have indicated an interest to go to contract for 30,000 tonnes per month, equating to one full log ship, for a two year period.
It also has a contract prepared for a seller of Pinus Radiata logs, a forester who can source trees from forests in the Taranaki and Northland regions. The price differential between buyer and the seller will be around $30 per tonne.
Recent falls in log prices, as demand has fallen from China, have seen prices significantly lower than six months ago and forestry gangs are sitting idle and forestry managers are looking for new buyers.
The China buyer will pay 20% deposit on execution of the contract and those funds will be held in escrow with Public Trust and released to ASE Woodflow upon the harvester delivering logs to an agreed delivery point per the schedule of logs required. They will execute and irrevocable letter of credit with ASE Woodflow’s bank prior to any work commencing with the harvester. Title passes to the buyer from ASE Woodflow once the logs are placed on the ship FOB.
In summary
- ASE Woodflow has a buyer for an initial 30,000 JAS tonnes of logs.
- The same buyer wants to look at taking more logs for a longer term.
- Additional buyers have indicated they will take log specifications not wanted by this buyer.
- ASE Woodflow has a seller with trees that is looking for work.
- Space is available on the wharf and wharf agents and ports are looking for business.
The company is looking for investor/s to provide the capital to proceed with this initial contract. The amount required to harvest the first order and deliver it FOB to the wharf is $1.5 million. The investor will receive a 25% shareholding in ASE Woodflow for their $1.5 million. An alternative investment option could be in the form of a Convertible Note.
An IM will be available soon. Expressions of interest are being taken now.
Invest in Education
A well known Private Training Establishment - with over 20 years of profitable operation - has major growth plans over the next 5 years. These plans are both organic and acquisition based and the company is looking for working capital to fund the expansion.
Funds raised will be used to complete the development and approval of degree status courses and the marketing of courses to international students. It will also provide a war chest to pursue potential complimentary acquisitions.
The investment will involve the issue of Convertible Notes, which will pay an interest rate of 9% per annum, payable quarterly. At the end of their 3 year term, at the option of the holder, the Notes can be;
- converted into the ordinary shares in the PTE’s holding company at an agreed conversion rate, or
- repaid in cash, or
- rolled over for a further 2 years.
Based on the company’s past accounts and financial projections, there is expected to be significant upside for the investor on conversion of the Notes. The first tranche of Notes will be for a total of $1 million with oversubscriptions allowed.
This is a unique opportunity to participate in a business with proven results embarking upon an aggressive expansion strategy. An IM will be available soon. Expressions of interest are being taken now. Interested parties should contact Andrew Larsen on (09) 306-8638 or via email on a.larsen@tbkcapital.co.nz
Projects - Update on Current
CleanPaleo
CleanPaloe is an emerging New Zealand company, which specialises in the manufacture and supply of packaged foods that cater to the Paleo lifestyle. You may have seen their product range as you shop - they are already in more than 70 retailers now.
The business has shown unprecedented growth in the food industry, and after trading for only 16 months, is already stocking supermarkets, pharmacies, and health/organic food stores here in New Zealand. They are also in discussions with both major supermarket chains here.
CleanPaleo foods are now also distributed through the 4 major states in Australia and have just sent their second there – an order 40% larger than their first order and only one month after the first one arrived. They’ve also just entered in to discussions with a Kiwi company that has similar products distributed to 15+ countries worldwide, and which is interested in marketing CleanPaleo through those channels.
The company is now about to expand its presence globally to take advantage of its first mover status and the lack of competition. They are already recognised as the worldwide leader for their innovative packaged Paleo foods. Their aim is to be a major presence in the world food market.
Accordingly CleanPaleo is looking to raise capital to:
- Purchase and manufacture the required stock to meet current and future orders.
- Complete the research and development of their desired product range.
- Effectively market their brand and products for launch into Australia, the U.K., the U.S., and Europe.
The first capital raising is to instigate an organic global approach focusing first on the Australasian market. A cornerstone shareholder would be offered a seat on the board of directors of the company.
Subsequent capital raisings will be in several stages to launch entry into the global markets. We expect these to be of interest to corporate or institutional investors. Were the initial investors to participate in these later rounds CleanPaleo recognises the current shareholders could end up with a minority interest in the company.
An IM will be available next week. Reply to this email to secure your copy.
Kiwi Rider Limited
Kiwi Rider is a new company formed to introduce a new, spectacular, and very profitable adventure tourism attraction to New Zealand and Australia. Similar businesses are already earning their operators substantial returns in the U.S., Asia, South Africa and throughout Europe.
The equipment central to the operation has been sourced, and a favourable purchase price negotiated with the U.S. based sole supplier of this particular product. The supplier wants to enter the New Zealand and Australian markets and is keen to negotiate a Sole Purchase and Supply Agreement with Kiwi Rider. A formal MOU between the two is in place now.
The company is raising capital through the issue of new ordinary shares for 74% of the company. The other 26% will be owned by the founder, who is experienced in setting up Bungy Jump operations overseas, and will manage the operation.
The funds sought will be sufficient to establish its first operation in New Zealand. The business has the potential and aim to produce a return greater than the full investment after the first full year of commercial operation. Accordingly it could possibly self-fund its expansion in selected locations in New Zealand and even Australia.
Kiwi Rider is now in discussions with parties interested in taking an active majority shareholder role.
The IM is available now on signing a Confidentiality Agreement.
Exploron - Social Network Aggregator
Allele is a New Zealand based start up developing the Exploron “app” that eliminates the every day hassle of checking in, monitoring and interacting with multiple social networks. It’s aimed at “Socialites” - people heavily active across multiple networks like Facebook and Twitter.
Today millions of people around the world check into social networks on their Smartphone. Unfortunately they also experience a jumble of relevant and irrelevant activity within their social sphere. We are increasingly becoming tangled-up with information in our social networks that simply does not matter to us!
Allele solves the frustration of information overload felt by over 90% of social network users with Exploron. This app eliminates the everyday hassle of checking in, monitoring and interacting with multiple social networks by Socialites on-the-go. Exploron understands what information is relevant to the user’s world from his/her networks and deciphers what really matters from what doesn’t.
The company is raising $110,000 for the seed round to build the proof of concept for trial in the Australasian market. Following the conclusion of the proof of concept the business will be seeking either a further capital round, probably via Crowd Funding - for which it is ideally suited - or a “merger” with an established business in the same space.
The IM is available now.
Imersia
This is a great New Zealand story where investors will have the opportunity to participate in a capital raising here prior to a typical “Series A” round out of Singapore or the U.S.
Imersia Limited, is a New Zealand company that has invented a revolutionary and patentable method of distributing digital and immersive gaming technology content to any location without any hardware. Content can be delivered to any location on Earth where there is connectivity.
This offer appeared in our last Capital Comment Opportunities newsletter. They’ve already had strong expressions of interest from a number of private investors and it’s unlikely the offer will remain open after this week.
So if you’re interested you’d better reply to this email or call me now.
Retirement Village Expansion
Whitby Retirement is raising capital to expand their existing retirement village and build an aged care facility on adjacent land. See offer here.
The owners have now given a large investor an exclusive option to take up the 50% offer and they are now undertaking due diligence.
Freeflow Pipes
This offer has now closed fully subscribed.
Happy to hear from you
I’m always happy to hear from you if you’d like to comment on the matters raised in Capital Comment – or of course it you’re looking for debt or equity for business or property or would like to invest in either.
The best way to keep in contact is to phone me on +64 9 307 3257 or +64 21 902 901, or simply email john.paine@tbkcapital.co.nz
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None of the above are offers of Securities to the Public and are available only to eligible investors as defined by the Securities Act, or those excluded from the Offer provisions of the Securities Act. They are intended for distribution only to selected people to whom, under the relevant laws, they can be lawfully distributed. They cannot be distributed in any other jurisdiction, or to any other people. They are not offers or solicitations in any jurisdiction in which such offers or solicitations are not authorised, or in which the person making such offers or solicitations are not qualified to do so, or to any person to whom it is unlawful to make such offers or solicitations. Any representation to the contrary would be unlawful. No action has been taken by any person that would permit a public offering in any jurisdiction where action for that purpose would be required.
Cheers
JP
John Paine B.Sc., Dip BIA
TBK Capital Limited
Level 15, BDO Building
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901
Email john.paine@tbkcapital.co.nz