Google Finance
Filing
Year End June 30.
Sept 22, 2015(Updated Mar. 2017)
2016 Q1 Data
1.Basic Information
(1) History
A family based green house farm. Much like Village Farms. However, it is much smaller and it mainly to produce the baby plants to supply other farms. The company was founded by Jack Benne(Dad) and Leo Benne(Son) at 1993.
As end of 2016, it has 53 acres of farms in Canada. Its major customer should be Costco USA.
The Q4 quarter seems always the best quarter which double the revenue of Q3. Q1 seems the weakest quarter with just 1/3 of Q4.
At 2016 the sales to Canada and USA both count around 50% of revenue.
(3) Management.
Both Jack and Leo seems very passionate plant grower and very creative in farming method.
(4) Debt and Credit facility.
At Dec. 2016, its net debt is around $23m. Grows debt is around $25m. Most are fixed interest between 3%-4%. Annual interest is around $800k.
(5) Insider holding, options, Insider trading info, share buy back.
The Benne family holds 62% of total shares. There are 2.2m options outstanding at quite low price level.
(6) Employee numbers
(6) Employee numbers
(7) Auditor
(8) Industry comparison.
Don't know much about any other baby plant grower. Comparable greenhouse grower is Village Farms. When compare to VFF, BVO had above 25% gross margin which much higher than VFF's 15%. EBITDA is about 15% compare to 12% of VFF. Its business is also more stable than VFF.
(9) Major events
At end of 2015, it planed the construction of the last 8 acres farm of its current location. The dev completed at Sept. 2016 quarter and increased its acreage from 45 to 53. The cost is $8m which seems fully invested at Dec. 2016.
At June 2016, it creates the CubicFarm systems company to market its container style vertical farming equipment. BVO holds 54% of the CubicFarm. Later the company issued around $575k in 64250 shares at $8.95/share which diluted BVO's holding to 51%. Based on the number I guess the initial total shares is around 1m to 1.1m. So the company is valued at $9m and BVO's share is close to $5m.
Dave Dinesen is the CEO of CubicFarm and I am guessing that he holds the rest of the shares. Previously he founded and run the BackCheck company for 15 years which was acquired by competitors. Don't know how big it was but it seems to have at least 500 employees.
2. Financial data.
At June 2016, it creates the CubicFarm systems company to market its container style vertical farming equipment. BVO holds 54% of the CubicFarm. Later the company issued around $575k in 64250 shares at $8.95/share which diluted BVO's holding to 51%. Based on the number I guess the initial total shares is around 1m to 1.1m. So the company is valued at $9m and BVO's share is close to $5m.
Dave Dinesen is the CEO of CubicFarm and I am guessing that he holds the rest of the shares. Previously he founded and run the BackCheck company for 15 years which was acquired by competitors. Don't know how big it was but it seems to have at least 500 employees.
2. Financial data.
(1) The company isn't having much growth during the past. From 2006 to 2013 revenue was kind of flat. But after that, it is able to grow from $20m level to $30m level while acreage only grows 1/3 from 34 to 45.
(2) Original I was kind of doubt whether its big increase in revenue at Q4 2016 is sustainable But the new 8 acres of farm creates 18% more capacity for the company and should start to contribute to its revenue starting at Q3 2017. I feel it can at least maintains current revenue level.
(3) If it can maintain current level of revenue and 16% EBITDA margin, it can generate $5m EBITDA. Current price $1.02. Cap $26m. Net debt $21m. EV/EBITDA around 9 times. Now really cheap. However, if using $800k interest, $1.5m maintenance CapX. 10% tax, its real income could close to $2.4m.
(4) The CubicFarm idea if works out would be a significant part of the company. Although it is hard to tell whether it can workout. I do feel its system is quite good compare to Freight Farm.
4. Risk
(1) Don't know how much it relies on Costco or any big customers. If it lost major customer it could be bad.
(2) Clearly the weak Canadian dollar help the company both on revenue side and on profit side. If the Canadian dollar goes up. It will be bad for them.
(3) The green house business seems a very capital extensive industry. The company's debt/equity ratio although is down now but still above 100%. Village farm actually defaulted its debt twice during the past.
5. Conclusion
The company is well managed and the current price is quite acceptable although I wish it has been cheaper.
(Mar. 2017) The company's share doubled since I first wrote about it at 2015. Current price is $1.02 down a little bit from the peak last year. I wish I had put more effort on it last year. Currently it is trade around 12 P/E to normalized income. If the company can keep its 2016 revenue and income, then current price is quite cheap. Also the management is doing very well. The new 8 acres farm and the CubicFarm could also bring good result for the company.
6.Links
http://www.vancouversun.com/life/garden+jack+benne+gift+growing+great+plants/11305213/story.html
Nov. 03, 2016
Current price 1.17
The company's Last quarter is really good and the full year revenue increased to over $31m. It is EBIDTA increased to $5.8m as well. However, current net debt is $19m. Market cap $30m. Totally gives an EV/EBIDTA ratio of 8.4. If the company can continue growing, then it would be ok. If not, the price is quite fair for a stable business.
Oct. 24, 2017
Current price $1.46. Market cap $38m.
(1) Recently the share price raised quite a lot. Today the company released news that the CubicFarm business is growing.
1) It issued 125,142 new convertible preferred shares at $8.95/share. This diluted its holding from 51% to 46%. This means before issuing shares total share is around 1.15m. After issuing shares total shares is around 1.3m. Consistent with the previous calculation. I guess the new shares were also issued to Dave Dinesen. It is strange that the company only recorded $120k in minority interest for CubicFarms on its balance sheet. In the future, the company will report it as an investment instead of subsidiary since its share has dropped below 50%.
2) The new $1.1m funding will be used for R&D of CubicFarm, which will set up 10 machines to grow plants and sale to local. It also logged sales of 2 machines for $1.6m each.
3) It formed a partnership with a Chinese company to produce the machines it needed.
(2) Overall I am very bullish about the CubicFarm machines. It is obviously better than the popular one on the market. It executed well, this business could be a much much better one than BVO itself.
(3) The company supposes to release fiscal 2017 result pretty soon. I still feel it can generate similar or better result than last year.
Oct. 30, 2017
Price: $1.5. Market Cap: $39m.
(1) For whole fiscal 2017, revenue $35m, net income $3.0m. The CubicFarm expense is around $1m. Added back around 400k expense share in the CubicFarm. Its real income should be around $3.4m. EBIDTA should be around $6.8m not including expense in CubicFarm. CapX 6.4m, of which 2m are actually maintenance.
(2) Assuming in 2019 $8m EBIDTA , CapX $1.5m, Interest $0.8m, Tax 20%, Real income could be around $4.5m. Using 15P/E, and assume CubicFarm worth $5m. It should support a Cap of $70m by then.
Sept. 28, 2018
Q4 2018 Data
Price: $2.41. Shares: 26.2m Market Cap: $63m
(1)Today aftermarket the company released full-year 2018 data. So the price hasn't reflected it yet. Full-year 2018 revenue is similar to 2017 and 2016. EBITDA is around $7.2m. CapX 2.5m which are all maintenance. Interest expense: $0.8m. Operating income is around $4.8m compared to $4m last year. However, this year there is no expense on CubicFarm side compare to $0.7m incurred in last year. Using 20%, real income is around $3.2m which is actually worse than last year if not include expense on the CubicFarm side.
(2) Assume by 2020 it can generate $8.5m EBIDTA, CapX 2.5m, interest $0.8m. 20% tax. Real income is around $4.2m. Using 20 P/E. 28m shares. CubicFarm extra $5m. Its fair price by then would be around $3.2. Current price is actually not cheap anymore.
(3) In the past 2 years, the share price was lifted quite nicely. But it might somehow related to the cannabis fever. Once people realize that this company wouldn't participate in the cannabis space or when the cannabis bubble busted, it might be getting cheap again.
http://www.vancouversun.com/life/garden+jack+benne+gift+growing+great+plants/11305213/story.html
Nov. 03, 2016
Current price 1.17
The company's Last quarter is really good and the full year revenue increased to over $31m. It is EBIDTA increased to $5.8m as well. However, current net debt is $19m. Market cap $30m. Totally gives an EV/EBIDTA ratio of 8.4. If the company can continue growing, then it would be ok. If not, the price is quite fair for a stable business.
Oct. 24, 2017
Current price $1.46. Market cap $38m.
(1) Recently the share price raised quite a lot. Today the company released news that the CubicFarm business is growing.
1) It issued 125,142 new convertible preferred shares at $8.95/share. This diluted its holding from 51% to 46%. This means before issuing shares total share is around 1.15m. After issuing shares total shares is around 1.3m. Consistent with the previous calculation. I guess the new shares were also issued to Dave Dinesen. It is strange that the company only recorded $120k in minority interest for CubicFarms on its balance sheet. In the future, the company will report it as an investment instead of subsidiary since its share has dropped below 50%.
2) The new $1.1m funding will be used for R&D of CubicFarm, which will set up 10 machines to grow plants and sale to local. It also logged sales of 2 machines for $1.6m each.
3) It formed a partnership with a Chinese company to produce the machines it needed.
(2) Overall I am very bullish about the CubicFarm machines. It is obviously better than the popular one on the market. It executed well, this business could be a much much better one than BVO itself.
(3) The company supposes to release fiscal 2017 result pretty soon. I still feel it can generate similar or better result than last year.
Oct. 30, 2017
Price: $1.5. Market Cap: $39m.
(1) For whole fiscal 2017, revenue $35m, net income $3.0m. The CubicFarm expense is around $1m. Added back around 400k expense share in the CubicFarm. Its real income should be around $3.4m. EBIDTA should be around $6.8m not including expense in CubicFarm. CapX 6.4m, of which 2m are actually maintenance.
(2) Assuming in 2019 $8m EBIDTA , CapX $1.5m, Interest $0.8m, Tax 20%, Real income could be around $4.5m. Using 15P/E, and assume CubicFarm worth $5m. It should support a Cap of $70m by then.
Sept. 28, 2018
Q4 2018 Data
Price: $2.41. Shares: 26.2m Market Cap: $63m
(1)Today aftermarket the company released full-year 2018 data. So the price hasn't reflected it yet. Full-year 2018 revenue is similar to 2017 and 2016. EBITDA is around $7.2m. CapX 2.5m which are all maintenance. Interest expense: $0.8m. Operating income is around $4.8m compared to $4m last year. However, this year there is no expense on CubicFarm side compare to $0.7m incurred in last year. Using 20%, real income is around $3.2m which is actually worse than last year if not include expense on the CubicFarm side.
(2) Assume by 2020 it can generate $8.5m EBIDTA, CapX 2.5m, interest $0.8m. 20% tax. Real income is around $4.2m. Using 20 P/E. 28m shares. CubicFarm extra $5m. Its fair price by then would be around $3.2. Current price is actually not cheap anymore.
(3) In the past 2 years, the share price was lifted quite nicely. But it might somehow related to the cannabis fever. Once people realize that this company wouldn't participate in the cannabis space or when the cannabis bubble busted, it might be getting cheap again.
