Recent thoughts on Input Capital.
As of Feb/March 18, Canola prices are high. It is a Boom time for farmers, with high prices on offer. Very hostile environment to the company which's prices seem like far too low, compared to what is on offer. I would expect very low deployment this deployment season.
This may change as prices drop, and it seems that they are scheduled to: India Imposed tariff on lentil - to expect many farmers increase Canola planting. As they say, high prices are best handled by high prices. Its a universal truth with farmers all around the world. Low prices make Input Capital's offer more attractive (especially marketing streams).
Still on learning curve how to market the Capital streams. playing around with different ways to present the deal to find the best way.
I believe the company is trying to find ways to increase the return on Equity, but without taking up long-term debt this will improve ratios such as ROE.
Interested to hear more about the mortgage streams, seems like more data coming this 2nd Quarter 18.
Overall, interesting to see how close the business is to the Ag swings themselves. Investors don't usually like like these type of businesses. Demands too much long-termism. hard to see orderly progress / Growth.
The complicated financials are also a minus.
The MT really need to grow faster. With slow Deployment this deployment this season, we might be looking at a lost year. (Every year, 20% to 16% of the MT goes poof).
If MT goes down or remains stable, there is no growth but for higher canola prices. That's bad news and a shrinking book.
They really need to show they can translate the argued high IRR streams to high return on investment / Capital (still remains to be seen on the P&L).
Plus side -
Insiders really have a good incentive to figure things out. They invented Marketing streams, they invented Mortgage streams, they are evolving and learning how to communicate better the transaction to farmers.
They have little to no Balance sheet risk. Self-funding.
Will they be a good bond or a good equity investment - that's the question.
At these low prices, I am sure they are mauling over buying shares. If deployment fails to break into a higher range, perhaps that's one way of using access capital.
