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S&W Seed: Adding more acres in the Imperial Valley. Plenty of cash left to buy more land.

February 22, 2013 | Comments : 0 Recommended this article: (0)

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S&W Seed: Adding more acres in the Imperial Valley. Plenty of cash left to buy more land.

By Ian Gilson, CFA

On February 21, 2013 S&W Seed (NasdaqCM:(SANW)) announced that it has acquired 114 acres in Calipatria in the Imperial Valley California, where is already has significant acreage. The cost was $830,000 or $7,281 an acre.

This purchase moves S&W Seed slightly closer to the target production of 10 million pounds of seed annually. This would require access to about 15,000 acres under high yield alfalfa cultivation, either owned, leased or under contract. The company currently has seeds from about 11,000 acres. To acquire 4,000 acres at $7,500 an acre would cost about $30 million, somewhat more than the current assets on the balance sheet.

An acre of productive land under cultivation with S&W Seed's high yield seed could generate about $3,500 worth of seed. With a gross profit margin of 35%, that is $1,225, it would take 6 years to pay-back the purchase price.

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