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Everyone should ping IR
And ask for an conference call immediately. They've been postponing calls for the past several months (haven't done one in over a year). Anshu needs to clarify many things and this will help the valuation.
I've already done this several times.
Big catalyst is when they announce larger funding
They need to secure a working capital based revolver to really deliver on the backlog. That's the announcement that the market is waiting for to properly value the stock.
On the positive side, just based on the $20mm revenue guidance, the stock is only trading at ~0.4x sales, so that's dirt cheap. Given the expected growth rate over the next 3-5 years, it should trade closer to 1.5-2x sales, which would put the stock between $0.02-$0.025. It's possible for them to deliver a lot more than $20mm in revenue in FY 19, but we have no visibility on how that can happen- yet.
Anshu needs to fix the capital structure...it's what's holding the stock back and he did a poor job of managing that.
Why has it taken another six weeks?
Like I said, financing conditions have only gotten worse, not better.
Just asking reasonable questions. I don't care what anyone does either way, but this is taking an extraordinarily long time.
It's called reasoning
Not cheerleading or "speculating" as you seem to do...just admit, you're advocating buying a blank shell and, at this point, hoping against hope that a deal happens...
Hope isn't an investment strategy for most. If this deal were a slam dunk, given the Chinese counter party, I can assure you the stock would be trading a lot higher. The Chinese would be bidding this stock up to much higher levels.
No
I'm saying the audit doesn't matter if he can't get financing. The latter is the condition of success, not the former.
I'm saying getting financing in this market environment for a Chinese retail company is very difficult, if not impossible on reasonable terms. Why do you think it's taken so long and Richards has had virtually no communication in several months?
Looking for plausible, not "speculative" explanations...
That's a reasonable response
I can understand and respect that perspective. At least it's rational and grounded in reasonable thought.
My argument is probable
I have 20 years of capital markets experience as an investment banker and investor. Do I know for certain? No. But weigh the facts. We also know that Richards lamented financing conditions over a month ago (if we are all to believe the communication he had with another poster). Have financing conditions for an acquisition improved? I can tell by spreads and the performance of Chinese stocks that's certainly not the case.
Like I said, if you want to own an empty shell that's fine. That said, the probability of a fruitful merger is extraordinarily low.
There's not going to be a merger
Doesn't mean you can't play the shell given the current paltry valuation and lack of debt, but getting financing done for a Chinese textile/furnishing company in this market is going to be close to impossible. If he does a pure equity deal, the R/M shareholders will get next to nothing.
The hold up here isn't the audit...that's an excuse...it's the financing package to get a deal done.
Not saying the stock has a lot of downside, just be prepared for the deal is off filing...or at best case, at much worse terms than contemplated on this board.
Relax on the filing
It was an extremely complicated quarter given the spin-off. Doesn't mean anything if they're a couple days later than normal (yes, I know it's already late). What matters is that they get the disclosures and financials done correctly.
Keep in mind, they need the Nestbuilder guys to produce financials too as of the third week of July. Not everything is in Verus' control.
It's actually quite complicated
Whey you spin off an entity, you still have to consolidate it for the period that you owned it. In this case, they owned Nestbuilder through the third month of the quarter, so it's a cumbersome process to produce financials.
I've been a CFO for an early stage growth company, so I can attest to the difficulty of producing financials. It's compounded by the fact that Verus is a public company, even though the financials don't have to be audited for an interim period.
After this quarter, I would hope that management can produce financials on time without excuses. That said, I think the reason for delayed financials since Verus was launched is reasonable.
Updates saved for earnings release
My understanding (you can confirm with IR) is that the company is going to finally have another conference call after earnings are released. It makes sense to save updates for the earnings press release and then discuss them on the call.
Hopefully we get the conference call sometime early next week.
We're on the same page
Alain Bankier should be market savvy, so the lack of IR effort is surprising to me, particularly given the strong sector backdrop.
The best explanation I can come up with, other than them waiting for substantive news, is that they want to keep the price low for the permanent CEO. By doing so, the new CEO's options would strike at a lower price, which would make the compensation package more attractive. This would be particularly true given the current depressed stock price level after the selling pressure from share registration and warrant exercises.
Market cap differential
The market cap differential versus companies like Cannabics has gotten extremely wide. I attribute that to lack of an effective IR campaign to educate investors on the positive attributes of the company. At this stage, they have to do a much better job selling the vision in order to get a market cap that will allow them to raise capital at reasonable prices.
Silence isn't golden in this space...love the team, but not impressed with their IR effort to this point.
I got the same message from IR
Just to corroborate the contents of that message.
I disagree to a large extent
What matters more is the forward outlook, particularly for an OTC/growth company. The past quarter still was encumbered with spin off issues and lack of financing. It doesn't tell much about the future trajectory of the business.
Stock's are priced off of forward expectations, not trailing earnings.
I wouldn't expect the 10-Q today (not a big deal at all)
They typically (over the last several quarters) have filed for an extension and then release it a few days later. This quarter was the last with Nestbuilder, so it's a little more complicated from a reporting perspective.
It also sounds like there could be some new information included in the filing that merits additional time to include in the release. Keep in mind, this filing would be particularly important to potential lenders, so getting it done right is of paramount importance.
I would expect the filing by middle of next week based on historical patterns.
Guess we're going to have to wait for news
Keep extending the warrants and not much in the way of news flow out of the company. Hope that changes soon.
Interesting story, but not sure what that has to do with my post
My post had nothing to do with reverse splits. Quite the opposite.
The company has articulated previously through IR that it doesn't want to go the reverse split route at this time.
Mechanics of a buyback
Not saying they will do this, but I have alerted the company to what BEM* (Beta Music) recently did. The shareholder base is probably too diffuse to do something exactly similar, but there are some large holders that might comply. This would reduce the shares outstanding until the price reaches a much higher level.
There are other alternatives. For example, the company could raise a preferred and do a dutch tender for shares. Dutch tender offers specify a range of prices that the company would be willing to buy shares. The shareholder could then indicate the price they'd be willing to receive in order to tender their shares. The lowest price that satisfies the buyback target (# of shares) is the price received by all sellers. In effect, they'd be creating a demand curve for the stock.
Doing an open market purchase won't retire nearly as many shares as this approach as the price would get bid up dramatically upon announcement, particularly given the company's low current market cap. I would advocate doing a dutch tender for prices ranging from $0.008-$0.01. There's plenty of retail buyers that would find those prices attractive and the company could retire a meaningful number of shares in the process.
In my view, this is the most efficient way to reduce the greatest number of shares.
Porteno, what's you call on the stock today?
Any predictions on where it trades to?
Perhaps, but the Indian buffalo meat industry is huge
There are a number of suppliers, both in India and elsewhere, that can provide Halal meat that meets the requirements of the buyer. My point was that if Al-Taj were critical to Verus, they would disclose that.
No mention of Al-Taj in the presentation
I think Verus is going to be just fine without them as a supplier. We can put that issue to rest (if it already hasn't).
The margins on the first $100mm in revenues are going to be well below the steady state given they are pure distribution.
You forgot the bottled water
That was the really exciting product introduction IMO. Huge category and it looks like they're going for premium positioning (judging by the label).
Moreover, Anshu never..
Released a PR about the supposed "JV". If he viewed the relationship as being important or critical to Verus, I'm sure he would have disclosed and used it for marketing purposes. Whatever relationship the two companies have or had was obviously a lot more important to Al-Taj.
I'm not going to waste more time on this. I never viewed Al-Taj as being significant to Verus. Just a commodity supplier of which there are many willing to fulfill the remainder of a $78mm order.
Let's keep in mind that Verus is building valuable consumer brands too in fast growing markets. If a couple of the beverage lines take off, the valuation explodes. Those are high margin products that garner multiples well in excess of 2x sales.
Management needs to change the name and symbol
Makes it unnecessarily difficult to draw the connection between the current name and it being a cannabis company. In this market, might add a lot of market value just to change the name and symbol.
I'm expecting a lot of announcements in the fall..should be an exciting time for this stock.
When does the symbol change get approved?
That might provide your answer in the absence of additional information on financing.
Don't lose sight of this...
From Anshu's first earnings call as CEO..keep in mind, the $78mm buffalo meat deal is not with Altaj..they're just a commodity supplier...
"Investors should view this as a kind of hybrid start up, with the roots of a seasoned multi-year operation and the potential to move rapidly through its initial phases of growth. The best way to think of Verus is as a 2.0 startup version of my former business. I am bringing with me all of the relationships and sales networks gained after years of selling into the Middle East and Africa. As you can tell from the first contract for $78 million worth to beef, I have some very good relations in our target markets. We have both supplier relationships in major producing nations such as Brazil, Belgium, India and the U.S., and customer relations across a spectrum of wholesale, retail, HORECA and food service buyers in many different countries. This will enable us to hit our stride very quickly."
Exactly...has zero impact
Even if true, why does it matter? First, there are numerous suppliers of buffalo meat in India and elsewhere. The $78mm contract doesn't specify country of origin (to the best of my knowledge). Easy for Verus to find another supplier and perhaps one offering better prices enabling higher gross margins for Verus. Second, anyone can see from the Twitter feed that the company has shifted its focus from wholesale to retail and building valuable brands and shelf space in the GCC countries (and more broadly in MENA).
The stock is trading at less than 0.5x a conservative estimate of revenue. That estimate only includes the recent Dubai deal at $1mm/month and assumes $5mm in other revenue. We all know that's extraordinarily conservative given the multitude of other, higher margin, opportunities that are in the pipeline. Anshu originally talked about doing $50mm in revenue in FY 2017 after he first announced the contract. He obviously didn't come close to that number for a number of reasons, principally lack of financing, but it's within his reach now for FY 2019 (and possibly a much higher number if he has any shred of capability on the corporate finance side).
By the way, if the email is true, would you want to stay in business with a partner that talks about relationships to a random guy via email? I wouldn't. That's the definition of amateur hour and is poor reflection of their business practices.
That's because Altaj is just a supplier
They aren't the end customer for the contract.
Verus was never supplying meat to Altaj
It's the reverse. Altaj is the meat processor that was apparently supplying Verus. You're misunderstanding the relationship.
Verus was the conduit for Altaj to reach markets in the GCC, not vice versa.
The buyer is in the UAE
Altaj was just a supplier. Dime a dozen and Verus cam source buffalo meat from numerous other sources.
The focus has long shifted from meat distribution to other products.
Do you definitively know what's going on here?
If you do, please share..99% of us are in the dark.
It's rational, not speculative
Your other stocks are not of import..what's going here is germane to the discussion.
Then the target tells Richards...
We want 90% of the company...take it or leave it...
He's playing this about as stupidly as possible.
Chinese would be leaking a positive outcome
If it were in the cards...you're telling me that the target's shareholders would be keeping their mouths shut? Come on...
Not informative either
What's the point? He doesn't have financing..
Don't disagree
Richards isn't playing this smart. Being coy doesn't work.
Time to confess
Zero faith in this merger..even puffadder has to admit, it looks bleak.
I totally agree
Oct quarter should show big % growth, but it's still a small base. That's why I refer to projections in FY 19 terms. That's the more relevant period as far as I'm concerned.
I want to see the credible path to doing $15-$20mm in quarterly revenues.
I'm talking about timeline to realize the backlog
And margins on that revenue...not saying it's not undervalued here, but to realize its potential, the market needs more information.