Life On Earth Inc (fka LFER)

[Chris T]

Hispanica International (HISP): An Emerging Pure-Play in the $12 Billion Ethnic Food Industry

Value investing

By RYAN ALLWAY

September 6, 2016 10:50 pm ET

Latin Americans account for 17.3% of the total U.S. population, or roughly 55.3 million people, according to the Pew Research Center. With over $1.2 trillion in buying power, the rapidly growing demographic represents a lucrative opportunity for companies across a wide range of industries. Univision – which is planning to IPO in the near future – is a great example, having generated nearly $3 billion in revenue in 2014 alone according to its S-1 SEC filing.

Hispanica International Delights of America Inc. (OTC: HISP) has developed a portfolio of ethnic food and beverage brands along with a wholesale division that it plans to expand through strategic acquisitions. According to the company’s fact sheet, U.S. sales of ethnic foods are expected to surpass $12 billion in revenue by 2018 and multi-national companies are starting to focus on catering to the demographic with new product launches.

In this article, we will take a look at the company’s plans to become a top five ethnic food company and why investors may want to consider the stock.

Building a Solid Foundation

Hispanica International is primarily a distributor of proprietary, licensed, and third party Hispanic and ethnic food and beverages throughout the United States. Currently, the company generates about $200,000 per year in revenue from its exclusive distribution agreement with Gran Nevada and plans to grow that figure to over $1 million per year. The firm also entered into an agreement to acquire the exclusive distribution rights to ‘Swirly Buns’ in late-2015.

The company aims to expand into three core areas moving forward: Food distribution and manufacturing, beverage brands, and distribution food service. Management plans to accomplish this expansion through a minimum of ten to 15 strategic acquisitions over the next couple of years. These acquisitions are expected to generate hundreds of millions of dollar in annual revenue and tens of millions of dollars in profits, according to the company’s fact sheet.

These acquisitions will essentially create a launch pad for the company’s future proprietary brands and products to complement its licensed and third-party products. The launch of branded products could create significant long-term value as a high margin opportunity to grow revenue across a diverse range of foods and beverages. Meanwhile, these products will also target the rapidly growing Latin American, as well as other ethnic minority demographics in the U.S.

Robust Acquisition Pipeline

Hispanica International acquired Energy Sources Distributors Inc., a wholesale distributor of specialty beverage products, earlier this year in an all-cash transaction. With a distributor in place, the company now has access to top retailers in the Northern California market, including 7Eleven, Safeway, Lucky, and Nob Hill Foods. Management plans to leverage this distribution to sell its proprietary, licensed, and third-party products in a very attractive market.

According to the company’s 10-K SEC filing, Energy Source Distributors generated about $2.8 million in revenue and $127,701 in net income during the year ended May 31, 2016. These figures suggest that the combined company should have an annual run rate of about $3 million in revenue – no small number for a company with a $10 million market capitalization. Excluding interest expenses, the company’s bottom line could also see some improvements.

Management noted that the next acquisition in review could add a further $10 million in revenues in an investor presentation, while bringing a distribution presence into the lucrative New York City and Tri-State region. With the potential for ‘many’ of these acquisitions to close in 2016, investors may want to take a look at the company as it is positioned to significantly expand its revenue base and potentially realize strong synergies.

Looking Ahead

Hispanica International has reached a key tipping point in its corporate history as it has secured a $7.5 million line of credit and started to make key strategic acquisitions. With revenue poised to surpass $3 million following the ESD acquisition, investors may want to keep a close eye on the stock over the coming year as it grows to $13 million and beyond. These efforts could start to pay dividends over the long-term by creating a launch pad for its own proprietary products.

For more information visit, the company’s website at www.hispanicadelights.com.

Source:http://analysis.secfilings.com/articles/62-hispanica-international-hisp-an-emerging-pure-play-in-the-12-billion-ethnic-food-industry