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Ask RO
When we'll see a presentation on the company's strategy and pro forma projections. They've had months...it's time to put up or shut up.
Edward for President!
Ro is useless
Step up and be a real company. RO has said nothing of value to help shareholders understand what's going on.
Can we get a real IR firm?
Not this RO clown who's on vacation most of the time? Management, are you there?
Option value of the cannabis drug
If the company gets expedited approval of the cannabis drug, the market cap potential could expand dramatically. Right now, it seems like a $3-$5 target is very much possible, but it's a fluid target with very little downside IMO.
I have over 5% of the float locked down. We still haven't seen the algos go nuts yet with volume. In those situations, the float usually turns over multiple times. I suspect it will take a PR or filing with more details on the merger for that to happen, but you never know. A day trading email list could spark a frenzy too.
Intiva has every incentive to push the stock up to raise equity to fund development of the drug. They'll likely want to uplift to Nasdaq too to appeal to institutional investors.
Only been a couple of weeks
I'm sure Intiva is working on the required filings. That gives shareholders a golden opportunity to accumulate stock before we find out what assets will be transferred into the shell. If you believe that there's well north of $10mm of assets that will be transferred into the shell, you should be buying the stock here.
I would bet that they're getting help from consultants or bankers on putting together a valuation for the assets that will be included in KDRH. They'll want to maximize the value of the new company and I imagine uplift to Nasdaq at some point shortly thereafter. The key moment for the stock will be when they release a filing or merger presentation with the valuation of the assets. The stock will rerate at that point from a penny stock to a stock worth a few dollars at least. That's my view.
This is a unique opportunity IMO that really hasn't been discovered by many yet (as evidenced by the small trading volume). I've been accumulating a lot and doing my part to lock down the float.
Not much float left
Now we wait to hear about all of the assets that will dumped into KDRH. Should be very interesting (and hopefully extremely profitable).
Dirt cheap valuation
Considering that there could be $100mm-$200mm of assets that could be dropped down into KDRH, the risk reward is phenomenal here. Mkt cap is only ~$8mm.
Kind of amusing..much cheaper way for the parent to "IPO" its assets versus going through the lengthy and costly SEC registration process. For once, the little retail investor gets a chance to participate at a bargain valuation.
I hope they aren't paying Richard Oravec much
Because he isn't doing anything. I guess his approach to investor relations is silence.
I think they will post a profit
Assuming they can generate more than $3mm in revenue, they should easily post a profit. The CEO knows that he needs a higher stock price to affect a reverse split at a reasonable ratio (ie. 10-30 to one) so he can have some liquidity for the stock to eventually raise equity. The only path to getting there is by showing the market the profitability potential of the business. The gross margins were very strong and easily leave room for a healthy profit once revenue scales.
I think we'll get some PRs on new business wins in July. Hopefully that will help boost the stock price to a more reasonable level.
Not sure who's selling here, but it's a buy IMO. I've stated my valuation case in a prior post, so I won't rehash.
That's good work.
Thanks for sharing.
Only 4mm shares in the float
This could get interesting. I'm surprised there isn't more interest in the stock, but that's good for me.
Follow up thoughts post CC
I listened to the conference call. I don't believe it's been posted yet to the Verus Foods website, but if you email the IR team they will provide it to you. A few observations:
1. The gross margins were very strong. Management indicated a range of 16-20% for the year. The past quarter only included buffalo meat, but as they ramp some of the frozen vegetable and french fry products, that will help boost margins. Traditional beef shipments will likely be at the lower end of the range. In short, high teens margins seem quite doable.
2. Operating income break even only requires $3mm in revenue per quarter. That means that the annual opex will be a very low $2mm. I assumed $3mm in my prior post to allow for incremental advertising, but the point remains that with $100mm in revenue, the company will be highly profitable.
3. CEO is working hard on new business deals. Apparently the Vietnam deal ($29mm order, could have been a lot larger but they need more working capital) was signed just shortly before the earnings call. I'd expect to hear of more deals in the next few weeks as the CEO was in Asia during the call and is actively sourcing new business. I've encouraged IR to post new business wins (signed deals) as soon as possible to help build some momentum for the stock.
The company is obviously behind from a capital markets perspective (name change, reverse split, distribution of whatever value is tied to the legacy real estate business (probably not much)). Once they settle the lawsuit (RBIZ could see an infusion of a little over $1mm if victorious), that will enable them to get all of the aforementioned capital markets changes done. In the interim, I think the current stock price is absurdly cheap.
Richard Oravec
Not sure if you read this board (you probably do), but it would be very helpful if you could post a summary of the weekend's events and their impact on the business. There's been a huge information void since the initial acquisition PR from early April. While some on this board have done a highly admirable job digging up information for the benefit of everyone else, having information come directly from the Company would do wonders for the stock.
My take on the quarter and guidance
I can see some disappointment on the level of revenues, but the company did maintain full year guidance of $100mm. Given the quarter was back end loaded, it is probably reasonable to assume that next quarter will produce several million dollars in revenue.
Clearly, the company needs some working capital financing. I'm not sure if they addressed this on the call, but that is something that I would like to understand better. That said, even if the revenue target gets pushed back some, if they can exit the year at $25mm/qtr in revenue, that would be phenomenal sequential growth.
I think the biggest positive is the gross margin. 17.7% on such a low revenue level is fantastic in my view. I was hoping for low double digit gross margins, so the margins were much closer to a branded food business than those of a pure distributor. The CEO seemed to indicate that these gross margins were sustainable.
If you give them credit for $100mm in revenues (at least on a run rate basis for FY 2018), at a 17% gross margin and with $3mm in opex, the untaxed EPS should be $0.06 (based on 250mm shares outstanding). Tax effect that at 20% and it's $0.05. I don't think it's unreasonable to put a 10x multiple given the growth and margins (and applying a healthy risk factor), so that equates to a $0.50-$0.60 stock. It will probably take a couple of quarters of execution to get there, but I think the risk/reward is phenomenal at this juncture.
He's still got a lot of authorized shares left
My guess is he'll do a reverse split soon and then keep diluting.
This is like DRYS. It is very sad to see.
That book value keeps getting diluted
Jack doesn't care about shareholder value. Just keeping the lights on. Each successive PR has minimal value given they're on their way to almost 30mm shares.
Very sad. There was a lot of promise here, but management and the BOD just want to keep getting paid.
Getitgogone...Jack did it again!
Even worse than his usual shenanigans...I'm even flabbergasted at this point.
Why anyone still owns this stock I have no idea...your upside is gone now thanks to poor financial management and corporate governance.
How about releasing some financials first?
What are they, two months behind on releasing them?
Hey Getitgogone
Is there a price where you'd step in and buy? Is it too scary to own now given Stover's complete disregard for shareholder interests?
Hard to say
There will be a lot of stock to absorb and the deal won't get done above $2. That's going to represent a lot of overhead resistance.
Perhaps Stover has another meaningless PR up his sleeve.
That's massive dilution at this price
Over 6mm shares against an existing basic share count (excludes options and warrants) of 8.8mm. So we're talking close to 15mm shares excluding warrants.
So doing the valuation math, assuming he does $17mm in revenue in 2017 and applying a 3x revenue multiple (very generous), then the upside is a stock price a little over $3. Not sure why anyone would buy here unless they have superior insight into revenue growth.
It was obvious to me
From doing an analysis of the cash flows and the state of the balance sheet. It's sad that he's done such a poor job managing the balance sheet and hurt shareholders so much. I feel bad for those that have fallen for his tricks.
That said, I will keep an eye on it. In the low $1s, it's probably worth a trade back to $3. Unfortunately, with each raise, he reduces the upside potential for the stock.
I will consider it
If the moderators will allow it.
I think it's an interesting story
I'm attracted to the battery and electric vehicle story like everyone else here. It has huge potential and the stock could be significantly undervalued.
That said, there are many unknowns. We have little understanding of the pro forma balance sheet and earnings potential. There's unit expectations that are thrown out there by various sources, but nothing from the company to US investors. We have no clue about the margins, cash flow etc. either. Is this company adequately capitalized to capture the unit volume it's talking about? I have no clue...does anyone on this board have a clue?
As you can tell, I'm more of a fundamental investor. I care about valuation and financial projections. I'm ok with uncertainty, but I'd at least like to see the pro forma balance sheet. I also don't take numbers like shares outstanding at face value particularly when there are convertible securities out there. Equity is merely the most junior claim on the assets of a company. You have to understand the other components of the capital structure to assess a stock's value.
People insist on arguing this..
But I am done. I agree that this could still be significantly undervalued using the proper share count converting Wang's stake. That said, it does make a big difference in determining the ultimate valuation of the common when all of the effects of the merger are completed.
This is true for straight preferreds
But we're talking about convertible preferred here. There's a big difference.
Looking at the market cap computed using just basic shares is very misleading and incorrect from a valuation perspective. That's not the way institutional investors will look at the stock. Now if "dumb" retail wants to exclude the dilutive effect of convertible securities, like this preferred, that's fine for them. I'm just trying to get to the bottom of the real valuation of this company (particularly when doing a relative valuation analysis compared to BYD and others).
These preferred shares are convertible
Because of that conversion feature, which is not typical of all preferred shares, they will be considered dilutive instruments. As such, when they publish financial statements (still waiting on those huh?), you will see the preferred included in the diluted share count. Comparing these preferreds to the standard preferred issue is wrong. You have to look at the terms.
The new CEO bought convertible preferred shares so that he could gain control upon conversion. Even if you don't want to include them in the share count (that is wrong, but I give up if you don't understand), you should look at the ENTERPRISE value and compare it to BYD. That normalizes for the differences in capital structure.
I rest my case..if you're still in denial or don't understand, not much more I can do.
Not true
This gets to the difference between basic and diluted shares. The market will look at the diluted share count (factoring in the conversion of the preferred and any in the money options) to assess the FULLY DILUTED MARKET CAP AND ENTERPRISE VALUE.
I will leave it at that. If you still don't understand the difference, please read up on it. I won't waste my time any more. I've made my (valid) point.
It's wrong not to convert the preferred shares
They will become part of the shares outstanding. Even if you don't convert them, you should include the preferred in a computation of enterprise value, which is the more important metric in assessing valuation. So we're really talking about 1.6 billion shares here. Doesn't mean the stock isn't undervalued, but let's be accurate here.
Is the market cap really $51 million
Did you factor in the conversion of preferred shares? Isn't the share count now close to 1.5 billion shares (ignoring employee options)?
Looked at the balance sheet
The term loan expires in 2019, but they are comfortably in compliance for now. They need to execute and can either refinance that loan or raise equity to pay it off.
I'm new to this story and I see that the acquisitions didn't work. There's a reason it's a penny stock. That said, there were a lot of positives in the most recent quarter and I don't believe liquidity is a near term issue.
It looks very cheap to me
Run rate EBITDA is $30mm and the enterprise value is ~$92mm. Back to y/y revenue growth and the company is solidly cash flow positive. These types of businesses aren't being rewarded with high multiples, but I think a 7x multiple is reasonable. I like it here.
Getitgogone..what did you think of the numbers?
Revenue growth wasn't stellar, but I expected that given Jack was more focused on capital raising. Burned a lot of cash in the quarter, which isn't good though partly due to one time payments. I won't be surprised if Jack does another capital raise soon given warrant exercises won't happen given they're out of the money.
Any current thoughts
Do you have any current thoughts on this stock? The numbers looked good to me, particularly given the current valuation.
Guidance
The company actually guided to $100 million in first year revenues. They also said that they would reach breakeven at only $5 million in revenue, so I believe the margins should be well above traditional food companies. The company also said that double digits gross margins are possible in many of their food categories.
I've been told that we'll get more detailed guidance and metrics on the next earnings release.
I think a $50 million market cap is justified if the company can stick to the aforementioned numbers. That would equate to a $0.20 stock. It could be higher assuming they have more deals to announce, which I believe they will.
Share count
Does anyone know what the exact share count is pro forma for Wang's conversion? Is it right to assume that it's the posted share count plus 750mm shares (factoring in conversion of his preferred shares)?
Working on other deals
Will exit FY 2017 at greater than a $100mm run rate in revenues. The company said they'd be break even at $5mm in revenue, so they should be solidly profitable at $100mm in revenues. The current market cap is absurdly low. Should at least be trading at a $50mm market cap.
I think the next earnings report will provide more detailed guidance for the rest of the year and perhaps FY 2018. They know they need the stock price to be a lot higher to affect a reasonable reverse split.
I would worry about Q1 results
Jack spent the bulk of the quarter raising capital and negotiating his way out of the RedPath deal. Did he have enough focus to execute on the business and generate sales? Don't forget, Q4 wasn't very good either given a sharp deceleration in revenue growth.
He will book a gain on the resolution of the severance agreements with the former management team, so that will help some. That said, the benefit from that gain will be spread over 2x the number of shares than he had entering the quarter.
Personally, I would wait for Q1 results or perhaps start nibbling in the low $2s.
Hey Getitgogone,
As you can tell from my comments on the other site, my criticism has primarily been focused on Stover. Perhaps I'm being slightly unfair, but I do believe he's done shareholders a disservice by giving away stock at such low valuation levels. The problem now is that there's about 10mm shares including options and warrants. I don't give the company much credit for the cash on the balance sheet as the company is cash flow negative.
I also had a problem with Q4 and repeatedly tried to educate people through my posts. There were a number of posters on the other site extolling the virtues of that quarter given the reported positive EPS. For anyone with a basic understanding of accounting, they would have realized it was a bad quarter and the positive EPS was only due to an accounting gimmick. Revenue growth decelerated dramatically, operating losses widened and cash flow was steeply negative. I think Stover knew he had a bad quarter to report and he rushed to get a bunch of offerings done at higher prices. Perhaps this was smart on his part, but he's alienated a lot of institutional investors (and there aren't that many that will traffic in a name like this given the small market cap). I think that's one of the reasons why the stock can't hold any gains on "positive" PRs anymore.
At the current valuation, it's trading at about 2x trailing sales (again, I don't give them credit for the excess cash nor do I believe the market will either). That's not cheap for a company with negative operating EPS (excluding all of the gimmicks) and negative cash flow. Let's say that he can grow revenues 50% this year. That puts the company at $20mm in revenue. Put a 3x multiple on that and it's a $60mm market cap. That equates to about $6/share in an upside scenario. Keep in mind, he only grew revenues in the low 20s in Q4, so 50% would be a sharp acceleration. Certainly plausible given Aetna and UNH, but far from certain. Just because those insurers cover the tests doesn't mean that doctors will order the tests.
In short, the problem for the stock is that he's diluted the stock so enormously that it will take a huge amount of revenue growth to generate upside. Moreover, it's highly likely that he will have to raise more equity to achieve the revenue growth I'm suggesting given insurers are notorious for beating up suppliers like this with extended payment terms (see what's happened to companies like ADPT recently).
Where could I be wrong? Well, he could boost profitability more than I expect. That said, with 10mm shares outstanding, net income is being amortized over a much bigger base now.
I am watching the stock. I think it's merely a trading vehicle...fine to buy in the low $2s and sell in the low $4s. Rinse and repeat.
Let me know your thoughts when you get a chance..
Renegades17
A few items on my mind
I think this company has a huge problem with investor relations messaging. I've emailed the CEO about this several times in the past two weeks (akohn@digipwr.com).
Q4 obviously wasn't great, but a lot of the disappointment comes from G&A exploding on a q/q basis. I still don't understand why that happened and the company didn't adequately explain it in the press release (nor the 10-K). The gross margins also came in well below my expectations, which wasn't adequately explained either. The company also stated in the 10-K that the $50mm purchase order will produce meaningful revenue and cash flow in 2017, but operating losses were also likely for the foreseeable future. That makes no sense to me given the company was at breakeven in Q3.
I think the acquisition strategy makes little sense at the current valuation. Raising equity is stupid here as it's prohibitively expensive. They need to focus on near-term profitability to boost the stock price and then they can explore raising equity and doing deals. Trying to embark on a growth by acquisition strategy with a market cap of $6mm is about the silliest thing I've heard in my investing career.
With all that said, I think the stock should be trading at least at 1x revenues, which equates to about $1.60 per share. I could see a higher multiple depending on profitability and the level of organic growth.
I will say that Philou Ventures, the largest shareholder, seems to be determined to grow the business. They also have a vested interest in seeing a higher stock price.