Original-Research: Agrios Global Holdings Ltd. - von GBC AG
Einstufung von GBC AG zu Agrios Global Holdings Ltd.
Unternehmen: Agrios Global Holdings Ltd.
Anlass der Studie: Research Note
Kursziel: 1.38 CAD
Kursziel auf Sicht von: 31.03.2021
Analyst: Matthias Greiffenberger, Julien Desrosiers
Sales are growing - Q1 results show promising development
The company continues to invest in its Shelton facility as it approaches
completion. Additionally, the company’s focusing on growth has led to
important increases in their expenses in the last quarter. We believe these
investments will lead to new income lines in the near future.
Agrios Holdings has posted strong revenues in line with our projection. The
company’s rental and IP revenues reached USD 0.652M and the
products-and-service revenues USD 0.354M. Even if the total sum of revenues
for the 2nd Quarter 2019 is lower than Q1 of this year, we believe them to
be in line with the Q3 and Q4 2018.
The company’s account receivables have grown from USD 4.249M to USD 5.003M
from Q1 2019 to Q2 2019. The rise of receivables is the main driver for
lower revenues in Q2 2019 since an approximate additional USD 0.800M has
not yet been received from their client. As discussed in our initial
coverage we forecast that once the high amount of receivables is reduced,
we will be seeing more stability in the company’s revenue stream and we
will be able to establish more accurately the quarter-to-quarter revenue
As discussed earlier, we believe that Agrios’ client will benefit from the
positive market winds blowing in the industry to increase the sales price
of their products for minimal additional expenses. This should result in
higher net profits that could be partly used to pay their open bills with
The company total expenses have risen this quarter, in line with our
projections. Since the company realised gross profit margins of 25%, the
company was able to limit the net losses to USD 0.727M for the Q2 period,
which is a small increase from Q2 2018 USD 0.654M. The new personnel hiring
costs, increased publicity budgets, salaries and consulting fees are the
main driver for this increase in expenses. It is important to note that the
shared-base payments have been reduced.
The company’s cash balance is just over USD 1M, stable from the last
quarter and having taken into consideration the proceeds of USD 0.754M from
convertible debentures. The company’s cash reserve remains low. With the
company growing its expense rate, it will have to focus on further
increasing its net revenues in the next quarters.
Agrios is in line to meet our total revenues and EBITDA projections for FY
2019/2020. We expect the total revenues to rise significantly during the
year to reach USD 8.40M by FY 2019/2020. Since the company has injected a
massive amount of capital (over USD 1M) into its facility, hired new
employees and deployed a publicity budget of USD 0.170M this quarter, we
expect to see these investments turn into an important increase in revenues
in the short term. Therefore, we remain confident that Agrios Holding
should reach our projected financials for FY 2019/2020.
The company revenues and EBITDA margin year-to-year results have seen
important improvement. One of the keys for the company’s long-term success
is that the EBITDA margin reach a value of over 20% in the next few years.
For Q2 2018, the EBITDA margin was -148.50% which can be expected from the
company’s development stage. Now that the company is starting to post more
important revenues, we see the EBITDA margin improving to -66.70%. We
believe the company will achieve positive EBITDA margins by FY 2019-2020.
Agrios is a company in the take-off phase. Its major strategy is now to
focus on growing their revenue streams. The company has the potential to
decisively raise their earnings in the next few years, through the
acquisition of additional clients and the addition of new lines of revenue
with little additional capital expenditure.
Through the deployment of their data-driven technology, Agrios wants to
enable producers to maximize their yield of premium quality end-product
and, consequently, increase their margins. The company’s revenues are
dependent on the producers’ success as higher production and margins
results lead Agrios to grow their client base. Moreover, as the company is
improving its technology, it is raising confidence in the economics of
their growing solutions services and equipment.
Moreover, we are pleased to see that the company is continuing to massively
invest in their facility as it is near completion and will, we believe,
help the company concentrate their working capital on acquiring/building a
new facility and continuing its growth phase.
The adoption of accounting new standards, IFRS 9, IFRS 15 and IFRS 16 on
April 1rst 2019, had a negligible impact on Agrios’ financials.
We confirm our target price of 1.38 CAD and our BUY recommendation.
Die vollständige Analyse können Sie hier downloaden:
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Date and time of completion of this research: 05/09/2019 (17:50)
Date and time of first distribution: 06/09/2019 (10:00)
Target price valid until: max. 31/03/2021
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