Neptune Wellness Solutions Inc (NEPT)

[FUNMAN]

Thanks "DS CPA" for the detailed DD. I would like to say, "go on"; I can soak up all of the DD you are willing to share.

One point so many investors overlook about the extraction business in general is that there are going to be many more non-public companies getting into the business than there are public companies.

That's going to allow for the phone to ring off the hook with buyers who have what they think are "better ideas" or "better products". What they all need is the essential ingredient that only the extraction companies can provide.

Extraction companies provide essential products much like the public water utility provides essential water to a community and is always guaranteed a profit. That's why their dividends are so secure, as are their municipal bonds.

Now NEPT will never be guaranteed a profit, but they provide an essential service / product that the rest of the cannabis industry needs for part of the overall brand portfolio. Moreover, few companies got into this end of the business. Most just wanted to grow the most amount of weed.

Extraction is just "so-not-sexy-at-all", and the PPS's will never fly like some of the other high flying notable high market cap companies, but their steady stream of revenues from long term contracts will sustain steady PPS growth based on solid GAAP black fundamentals. Extractors will be profitable a long time before the giant cannabis names.

Here is an example of steady revenue:

Neptune Signs Multi-Year Extraction Agreement for 230,000 kg Including Turnkey Solutions with The Green Organic Dutchman

https://neptunecorp.com/wp-content/uploads/2019/06/NEPT-PR-TGOD-ENGLISH.pdf


Regarding the private placement, you have to love this move:

"John Moretz, Chairman of the Board, and Michael Cammarata, President and CEO of Neptune, invested US$5.0 million in the aggregate as part of this ..." US$41 Million Private Placement. That's commitment and putting your money where your mouth is.


Thanks for sharing the folling DS CPA. Please feel free to add to it. I promise I won't get bored

My bullish case is as follows:

1. Per private placement PR, their 200,000 kg capacity is fully contracted for fiscal 2020 and fiscal 2021. That is prior to their expansion via Phase IIIA and the SugarLeaf acquisition (expected to be 1,500,000 kg in Canada and 1,500,000 kg in U.S. by end of year).

2. As far as I can tell, maximum planned capacity is 7,500,000 kg. That is the 3,000,000 kg aforementioned along with the remaining approved 4,500,000 kg expansion for Phase IIIB in Canada.

3. Management recently stated that these two facilities could support revenues in excess of $450m at 50% capacity. They did not provide inputs / variables but my assumption is that is using the full planned capacity amount of 7,500,000 kg, meaning 3,750,000 kg extracted would equate to $450m in revenue. Taking this ratio, that implies minimum revenue of $24m annually for fiscal 2020 and 2021 based on 200,000 kg contracted. That would assume SugarLeaf has no existing sales and they cannot sell their excess capacity. However, it’s easy to see how something like $100m in revenue based on their capacity by end of year is easily achievable. In MediPharm’s most recent earnings call they mentioned there is no shortage of customers and that their phone is ringing off the hook; I expect the same is/will be true for Neptune once the capacity is online.

4. New CEO has significant ties to Unilever and specifically Schmidt’s Naturals (a Unilever brand) that just launched a hemp-derived product line. CEO tweeted about that launch, and the PR yesterday just happens to mention that one of the new customer relationships is a large nutraceuticals company in the U.S. which gives me reason to speculate we could be the supplier for this product line. Ben & Jerry’s is also a Unilever brand and they have announced they plan to have a line of CBD ice cream once FDA / the legal climate is settled. That could be another potential large scale customer for Neptune given the existing ties and our large capacity. To put it in perspective, MediPharm has only about 250 - 300k in capacity and they are making money hand over fist. We will blow them out of the water in terms of available capacity.

I could go on, but I will leave it at that. I usually don’t provide my DD to this degree but this board is dead and the stock is low volume enough that nobody is paying attention to how undervalued this is.