Kirkwood Diamond
Google Finance
Filing
Oct. 3, 2017
Q1 2018, Year-end Mar. 31
Current Price: $0.30, Share outstanding 140m. Cap: $42m
1.Basic Information
(1) History .
The company was founded by Andrew Green and Murray Marshall at the year 2000 by combining a liquor store and 2 small wineries. At 2006, it purchased 20 Bee Winery. 20 Bee Winery was formed by local wineries in Niagara region trying to create a premium brand but went badly in debt.
At year-end of Mar. 2009, it generates revenue around $26m and net income around $3.5m. Around $10m in its own wine sale and $16m in agency revenue. At Apr. 2010, it almost got acquired by Pounder Venture Capital Corp valued at $88m. However, the later the deal was terminated.
The business was in somehow in trouble since then. By year-end 2012, its revenue is $28m and EBITDA is only $1.6m. At Dec. 2012, White knight Acquisitions II Inc proposed to acquire it valued at only $15m.
At Sept. 2013, Diamond hired Murray Souter, former CEO of Black's Photography, to replace Murray Marshall as new CEO. By year end of 2013, the company's revenue is $23m and negative in EBITDA.
At Sept. 2013, the acquisition went through with only 27m shares issued to Diamond which is only $5.4m worth as $0.20/share price at that time. Also, the company issued 42m shares at $0.20/share in private placement for a net proceed of over $8m. Among which 21m was issued to Oakwest Corporation, an investment company I guess. At the time of acquisition finished, the company has total 73m shares outstanding. Among which Oakwest Corporation holds 23m shares (31%). CDS & Co. holds 31m shares(42%). CDS & Co. is the previous major holder of White Knight. It seems to be the sum of retail shareholders. Rest should be held by the previous Diamond shareholder.
At Oct. 2014, it formed a partnership with other party called Kirkwood Diamond solely for the agency business. Each holds about 50%.
At Apr. 2015, the company placed private placement of 27m shares at $0.12/share. Net proceed was $3m. Bring total shares to 100m. By year-end, Oakwest holds 29m(29%). CDS & Co holds 34.5m(34.5%).
At May 2015, Murray Marshall, the founder of Diamond, was arrested for alleged tax fraud in putting wine on the black market. Diamond says Marshall left the company at 2014 and it terminated its relations with the alleged First Nation Winery. Don't know much about the arrest and the investigation. At Feb. 2017, Marshall died.
At Dec. 2016, the company placed private placement of 40m shares at $0.22/share. Net proceed was $8m. Total shares now are 140m. Oakwest didn't participate this placement. Still holding 29m(21%) shares. CDS & Co. holds 93.5m(67%) which increased by 59m.
Apr. 2017, the company acquired rest of the 50% interest of Kirkwood Diamond for $4.4m.
(2) Business-related:
Own wine sale: Sell its own branded wine, including to LCBO, its own retail store, grocery store etc. The sales are around 50% of total revenue.
Kirkwood Diamond agency business: Importing and exporting ?? etc. Includes wine and liquor.
(3) Management.
Murray Souter: Previously he was the CEO of Black's Photography. The company later went into trouble after he left. Don't know much about him. Based on last 3 years data, he seems did quite a good job to turn the company from loss to profit. Also, revenue grew quite well since he took over the CEO role.
(4) Debt and Credit Facility.
At June 2017, the company has $9.6m in credit line carrying interest of prime+2.5%. $Also around 6.7m term loan carrying the same interest.
At Oct. 2017, the company replaced all of those credits with BMO credits. Which includes $13m operation line, $10m term loan, $7m other loans. Totally $18.5m was drawn. Interest rates seem lower by $100k/year.
(5) Insider holding, options, Insider trading info, share buyback.
John De Sousa: He is the owner of the De Sousa winery which is one the winery the company owns. He owns 4.8m share.
Oakwest: The original supporter of White Knight, holds 29m shares.
(6) Employee numbers
(7) Industry comparison.
(8) Major events
2. Financial data.
3. Valuation
(1) There are several positive developments of the company: 1) New retail store replacing the old one opened at May 2017 which brings a higher direct sale. 2) Exporting to China continue to grow well. 3) Ontario now lets grocery store to sell wine which brings more opportunity for the company besides LCBO. 4) The company bought back the 50% interest of its agency partnership which will bring extra income. 5) Lower loan will annual interest expense close to $500k.
(2) Currently, the net income is just $1m the best. That makes it a 40 P/E. Actually very expensive if not counting the growth.
(3) Assume 3 years later which is fiscal 2021, revenue reaches $60m, EBITDA is $9m; $90m EV; $10m in debt, 150m shares, that support a $0.53/share by then.
4. Risk
(1) The growth and profitability maybe not continue.
(2) Don't know whether the company was involved in the fraud allegation. Previous to 2009, the company seems to be highly profitable which was very suspicious.
(3) The company's debt is quite high and several million more is needed for constructing a new storage facility. It is very likely to issue new shares this year as well.
5. Conclusion
My estimation for 2021 is quite optimistic for the company. The current price of $0.30 is quite expensive. However, if the company can grow well, it might be a good investment in the future.
6.Links
