Google Finance
Filing
Dec. 28, 2017
Q3 2017 Data
Price: $0.49, Share outstanding 75m. Cap: $37m
1.Basic Information
(1) History
The company was IPO'ed at 1997. It might be founded by Mark Redmond with some others. It didn't have 10% major shareholders since the beginning. The company extracts two major components from oats which are mainly used in skin care products like Aveeno etc. At the beginning, it only had 300k in revenue. Mark was running the business for 10 years and the revenue grew to $3.4m in 2007. However, it still lost money and issued quite a lot of shares.
Since 2008, Gilles Gagnon joined the company as new CEO and was able to turn the company into profit since 2010. Also, revenue grew close to $14m in 2016. It didn't issue any new stock until 2016, it issued $10m at $1.06 to build a new manufacturing facility.
The stock price did quite good at 2016 and shoot over $2 at one point, now is down to $0.50 level. Mainly because at 2017 both revenue and profit were down for the first 3 quarters. First, it is because lack of a major new contract, secondly it is running both facilities at the same time which hurts its margin.
(2) Business-related:
Two main products:
1) Oat Beta Glucan: Anti-aging for skin care, already in production. Also can be used to reduce cholesterol and glucose, but still in clinical trial.
2) Oat Avenanthramides: Anti-inflammatory for skin care, for example, Aveeno Eczema Cream. Also can be used in medicine as well.
Currently, those two products are only used in cosmetic. Other usages have to be trialed or commercialized.
Major manufacturing technology: PGX. Currently, it offers both of its products in liquid form. The PGX is a method to extract dry components from the liquid. Once done, its products will be easier to put into medicines. Currently, the PGX is not in real use yet.
(3) Management.
Gilles Gagnon was previously the CEO of AEterna Zentaris Inc from 2003 to 2007. The company is also a bio-tech company. It was doing better when he was in the company.
He seems did quite a good job to turn the company into profit since 2010.
(4) Debt and Credit Facility.
Currently, it still has around $7m in cash from last year's offering. As the new facility is up and running, I think its cash generation should be enough to support its CapX. Bottom line, it shouldn't need to raise money in the next several years.
(5) Insider holding, options, Insider trading info, share buyback.
(6) Employee numbers
(7) Industry comparison.
(8) Major events
2. Financial data.
3. Valuation
(1) Currently, the company was trading less than 7 times for its 2016 EBITDA. and less than 10 times of it 2015, 2016 net income. However, based on currently 3 quarters for 2017, the stock price is quite high.
(2) The PBX and other research projects if successful, could create quite a lots value for the company. However, I view the chances are low.
(3) Assuming it can achieve $20m sales in 3 years. $5m income, 15P/E, it can support $1/share by then.
4. Risk
(1) The new manufacturing and research projects might continue to draw quite a lot cash usage from the company.
(2) Its revenue might likely recover to the previous level or even grow. But its margin might be unstable. Also, higher CAD$ to USD$ hurts its margin as well.
(3) The insiders own quite a few shares.
5. Conclusion
(1) The company is managed well for the past 10 years. The current price is quite cheap based on normal business level. However, it is hard to tell whether it will return to normal level of margin. Also, it is still using quite some cash for researchers and etc. Should watch closely from quarter to quarter.
6.Links
