Story is still alive and well
Updated
Since my last post this has been downtrending and I am sure tested the patience of many shareholders, but I believe fundamentals are getting stronger going into 2022 and we will have much to look forward to. This is currently trading at a 16m valuation, , that's a ps ratio of 1 for this year! They will be completed their Beiseker Blending and Granulating Facility that should give a boost in revenue going into 2022.
Below is a write up me and another investor has written
Company is forecasting 28M of revenue (per slide 14 of their most recent presentation) in 2022 which it should have extremely high visibility on given its driven by a straight-forward expansion of its Beiseker facility - this expansion is already underway via a recent Twitter post. Applying a conservative 15%-20% EBITDA margin on that revenue equates to 4.2M-5.6M of EBITDA in 2022. Applying a very conservative 10x NTM EBITDA multiple equates to a valuation of 42M-
56M or 200% upside to today's value. And this is just on today's assets (with the near-term and fully funded Beiseker expansion). This target also implies just a <2x NTM sales valuation. Find me another high-growth, clear ESG, profitable micro cap that trades at just 2x NTM sales.
And none of that analysis includes the Bethune facility - which is very advanced and nearing FID. The company projects this facility to be online in late 2022 and drive 2023 revenue to over 100M. At 15%-20% EBITDA margin that equates to 15M-20M of 2023 EBITDA and at 10x valuation that's 150M-200M EV valuation. Assuming this project costs 330M of debt and equity (rule of thumb is $150 per tonne of capacity), that would put the pro forma EV (at current share price) at 45M vs. a reasonable EV valuation of 150M-200M.
Then there's the positive indicators: 1) CEO purchased almost 120k worth of stock this summer at $0.35 and exercised his warrants at a strike price of 0.45 putting in an additional 40k(currently under $0.20) + other insider purchases; 2) company just issued a private placement (to fund Beiseker expansion) at above market value (0.20/share) with warrants that expire in ONLY 6 months from issuance (April 2022). So in the last 6 months the CEO purchased a large amount of stock well above today's value + issued securities (likely to some of his core shareholders) at above market value with very short term warrants. This tells me he is very optimistic around the near-term outlook of this company.
Demand:
At the moment they are selling out and currently have a backlog indicating strong sales for spring 2022 when the Beiseker facility (blending and granulating) is finished expanding. This will increasing their production capacity from 5k tonne to 20k tonne per anum,
earthrenew.ca/earthrenew-publishes-q3-2021-shareholder-update/
Distribution agreements
They have a distribution agreement with P&H, the largest Canadian owned milling company with 30 facilities in Alberta, Manitoba and Saskatchewan, this does not include the other facilities in BC and Ontario. .
parrishandheimbecker.com/find-a-location/
"The agreement allows P&H to distribute Replenish’s regenerative agriculture products across its 30 facilities throughout Alberta, Saskatchewan, and Manitoba for a period of six years, ensuring a reliable channel for movement of both blended and granulated supplies."
Another distribution agreement is with Aberhart Ag,which will help with distribution in western canada earthrenew.ca/replenish-nutrients-welcomes-aberhart-ag-as-an-authorized-distributor/
Comparison
Comparison to other Companies GRN and XBC: As of December 4,
GRN is trading at a ps of 4 and XBC is trading a a ps ratio of 4.3 and ERTH has margins very comparable to GRN. ERTH is trading below their PS at 0.875 (at $0.17) based on their expected annual rev of 16m in 2021. After the expansion in Dubolt and Beiseker their forwad looking annual rev is 28m making their their forward ps ratio gets even more ridiculous at 0.5 .in 2023 revenue is expected to reach over 100m rev when their Bethune project comes on line, There is a shortage for fertilizer and they are currently backlogged. If we assume GRN as fair value then ERTH today should be valued at 0.78 today, not 0.17 based on its p/s multiple. Just imagine that sp when they get rerated at a p/s similar to GRN reach over 100m annual rev in 2023.
Where are we now?
I believe a large part of the drop for the last month or 2 is just the waiting game for them to develop their facility and tax loss harvesting. Not only do we have the near term catalyst of the Beiseker facility completed, 2022 we expect revenue to almost double and by 2023 with the Bethune expansion we expect revenue to be above 100m! We may become ebidta positive and possibly profitable in the near future and so based on the multiple GRN is trading at this is more then a 10x from here
Technicals
We're continuing to test this log down trendline andwith taxloss season over and catalysts coming up I believe a breakout is likely. We are starting to see more divergence forming indicating the downtrend is getting weeker and eventually the long signal will be the RSI crossing 50 on the daily and macd crossing the zero line. If you are an investor and believe in the story and the team I would not wait to load up .
Below is a write up me and another investor has written
Company is forecasting 28M of revenue (per slide 14 of their most recent presentation) in 2022 which it should have extremely high visibility on given its driven by a straight-forward expansion of its Beiseker facility - this expansion is already underway via a recent Twitter post. Applying a conservative 15%-20% EBITDA margin on that revenue equates to 4.2M-5.6M of EBITDA in 2022. Applying a very conservative 10x NTM EBITDA multiple equates to a valuation of 42M-
56M or 200% upside to today's value. And this is just on today's assets (with the near-term and fully funded Beiseker expansion). This target also implies just a <2x NTM sales valuation. Find me another high-growth, clear ESG, profitable micro cap that trades at just 2x NTM sales.And none of that analysis includes the Bethune facility - which is very advanced and nearing FID. The company projects this facility to be online in late 2022 and drive 2023 revenue to over 100M. At 15%-20% EBITDA margin that equates to 15M-20M of 2023 EBITDA and at 10x valuation that's 150M-200M EV valuation. Assuming this project costs 330M of debt and equity (rule of thumb is $150 per tonne of capacity), that would put the pro forma EV (at current share price) at 45M vs. a reasonable EV valuation of 150M-200M.
Then there's the positive indicators: 1) CEO purchased almost 120k worth of stock this summer at $0.35 and exercised his warrants at a strike price of 0.45 putting in an additional 40k(currently under $0.20) + other insider purchases; 2) company just issued a private placement (to fund Beiseker expansion) at above market value (0.20/share) with warrants that expire in ONLY 6 months from issuance (April 2022). So in the last 6 months the CEO purchased a large amount of stock well above today's value + issued securities (likely to some of his core shareholders) at above market value with very short term warrants. This tells me he is very optimistic around the near-term outlook of this company.
Demand:
At the moment they are selling out and currently have a backlog indicating strong sales for spring 2022 when the Beiseker facility (blending and granulating) is finished expanding. This will increasing their production capacity from 5k tonne to 20k tonne per anum,
earthrenew.ca/earthrenew-publishes-q3-2021-shareholder-update/
Distribution agreements
They have a distribution agreement with P&H, the largest Canadian owned milling company with 30 facilities in Alberta, Manitoba and Saskatchewan, this does not include the other facilities in BC and Ontario. .
parrishandheimbecker.com/find-a-location/
"The agreement allows P&H to distribute Replenish’s regenerative agriculture products across its 30 facilities throughout Alberta, Saskatchewan, and Manitoba for a period of six years, ensuring a reliable channel for movement of both blended and granulated supplies."
Another distribution agreement is with Aberhart Ag,which will help with distribution in western canada earthrenew.ca/replenish-nutrients-welcomes-aberhart-ag-as-an-authorized-distributor/
Comparison
Comparison to other Companies GRN and XBC: As of December 4,
GRN is trading at a ps of 4 and XBC is trading a a ps ratio of 4.3 and ERTH has margins very comparable to GRN. ERTH is trading below their PS at 0.875 (at $0.17) based on their expected annual rev of 16m in 2021. After the expansion in Dubolt and Beiseker their forwad looking annual rev is 28m making their their forward ps ratio gets even more ridiculous at 0.5 .in 2023 revenue is expected to reach over 100m rev when their Bethune project comes on line, There is a shortage for fertilizer and they are currently backlogged. If we assume GRN as fair value then ERTH today should be valued at 0.78 today, not 0.17 based on its p/s multiple. Just imagine that sp when they get rerated at a p/s similar to GRN reach over 100m annual rev in 2023.
Where are we now?
I believe a large part of the drop for the last month or 2 is just the waiting game for them to develop their facility and tax loss harvesting. Not only do we have the near term catalyst of the Beiseker facility completed, 2022 we expect revenue to almost double and by 2023 with the Bethune expansion we expect revenue to be above 100m! We may become ebidta positive and possibly profitable in the near future and so based on the multiple GRN is trading at this is more then a 10x from here
Technicals
We're continuing to test this log down trendline andwith taxloss season over and catalysts coming up I believe a breakout is likely. We are starting to see more divergence forming indicating the downtrend is getting weeker and eventually the long signal will be the RSI crossing 50 on the daily and macd crossing the zero line. If you are an investor and believe in the story and the team I would not wait to load up .
Note
finally broke out! the reported to expect q4 to be netpositive and tailwinds for this company is finally coming together. Great sign to show this strength during during a red day!
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