ABRW - pullback from $1.97 to $1.26 = screaming screaming screaming opportunity of a lifetime ......
As you may know, I was pounding the table at .30 cents earlier this year when I saw an 8-K filing that Brent Willis was taking over as CEO. Willis was the former #2 guy at InBev and past President of Coca-Cola Latin America, overseeing 35K employees.
Why would Willis take over as the CEO of a $3.5 million market cap company when he's worth well over $100 million and has no need to prove himself again ? Because Kombucha is the fastest growing category in the beverage sector and American Brewing (now Bucha, Inc.) has by far the best tasting product on the market.
So enter Willis with ABRW's sales at $2.47 million last year and slightly losing money. What has he done in less than 3 months ? He's already taken the annual revenue run rate to nearly $5 million from $2.47 million and get this .... he walked into a bank and came out with a $10.7 million dollar check at less than 4.5% interest to help fund the purchase of Xing Tea, a company over 20X ABRW's size and very profitable. How many OTC CEO's can walk into a bank and get a loan for anything ? Maybe 1 out of 1,500. The acquisition closes June 30th and as part of the transaction, Xing's owners will get $7 million in ABRW stock based on VWAP for the month of June, currently $1.67, so it looks like they will get no more than 4.37 million shares and assuming a VWAP of $1.60, which brings the fully diluted share count to less than 21 million shares and $2 million of the $10.7 million loan is for working capital.
Starting July 1st, Xing and Bucha will begin cross-selling in each other's markets and sales are set to skyrocket.
Not only will the combined companies immediately operate with an annual EBITDA of $3.5 million, margins will soar as well as profits. Almost every other small beverage play trades at a price/sales ratio at 6X that of ABRW's and they're losing money. Not many people understand the deal, but this is one for the ages IMO.
Current P/S ratios of other beverage companies:
ABRW (combined & after completion of acquisition) - .49 (very profitable)
CELH - 5.79 (have lost money for many years - trades at 11X the valuation of ABRW)
MNST - 11.51 (profitable)
REED - .76 (has never made money and a competitor of ABRW)
PLSB - 2.74 (has never been profitable)
WTER - 1.65 (has never made money)
Only Monster Energy and American Brewing are profitable and most all of the other companies trade at several multiples of what ABRW trades at, but it won't be that way forever, as ABRW is way way under the radar and hardly followed by anyone.
The disconnect is enormous and Willis has already said there are other accretive acquisitions in the works and that he truly thinks he can challenge the Kombucha leader (GT's) and with his beverage industry connections, it's certainly possible. ABRW is a stock whereby people will look back many multiples higher IMO, saying "woulda coulda shoulda."
