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: 1.64 CAD
Kursziel auf Sicht von: 31.03.2021
Letzte Ratingänderung: -
Analyst: Matthias Greiffenberger, Julien Desrosiers
“Still on track” Target price raised to 1.64 CAD (previously: 1.38 CAD) Buy
Rating confirmed. Agrios’ financial results are improving while the company
continues to invest in its Shelton facility. By year’s end, the facility
should be completed, paving the way for a new growth phase. The company’s
expenses have significantly decreased and all metrics have improved.
Agrios Global Holdings is a company in the take-off stage, with a strong
growth potential. It currently owns one state-of-the-art cultivation
growing facility in Washington State that is leased to a licensed Tier 3
cannabis producer and processor. The company provides data-driven aeroponic
cultivation equipment rental and growing services to cannabis producers.
The company’s technology can also be used for any type of indoor
cultivation. The indoor aeroponic market in the USA could reach USD 40
billion annually by 2022. Moreover, the American cannabis market could
reach USD 75 billion annually by 2030. Specifically, the Washington State
market represented approximately USD 1.371 billion in 2017 and is expected
to grow to USD $2.28 billion by 2020.
The cannabis landscape in Washington State continues to show signs of
recovery and we believe that the company can profit from this positive
trend. However, legislation continues to be an important unknown as the
state has just banned flavored cannabis vaping products. We expect such
regulations to come and go given that the industry is still at a very early
stage and since cannabis is still illegal on the federal level.
An interesting case occurred in Washington State where a man sued producers
over an illness due to the poor quality of a cannabis product. This
increases our confidence in Agrios’ approach of quality over quantity and
ensuring perfect reproducibility of their products. We continue to believe
that their digitalized and automated growing facilities represent the
inevitable solution to many of the current and future issues for cannabis
Q2 2020 Results
Agrios Holdings has seen an increase in their products and service revenues
and a small increase in their rental and IP revenues, aggregating to a
total increase of 11.53% compared to the previous quarter, up to USD 1.093M
from USD 1.007M. The revenues will have to grow significantly in Q3 and Q4
2020 in order to reach our year-end projection.
We had, however, accounted that most of the sales would be registered in
Q4. With amounts receivable reaching a high of USD 5.72M this quarter
compared to USD 4.25M in the last one, it is clear that the company posted
strong sales growth numbers. As discussed in our initial coverage, it is
important for Agrios Holdings to focus on reducing the amount receivables
given that the company currently has only one large client. If they can
achieve this objective, we consider it reasonable to project that Agrios
Holdings will reach our projected year end sales numbers.
The company’s overall financial position has greatly improved year on year.
As seen in the chart, amounts receivable have grown, while cash position
has increased and financing activities have been greatly reduced. As we
expected, with the Shelton facility being near completion, investment in
new equipment and development will now be replaced by free cash flow.
We estimated the 2020 accounting year to generate a small deficit of USD
1.5m. We predicted that the company would post negative cash flow in Q1 and
Q2 and turn cash flow positive in Q3 2020. The company seems well on track
to achieve this result.
As can be seen, the current EBITDA is USD -0.524m, greatly improved from
USD -1.789m in September 2019. EBIT has also improved, from USD -1.843. to
USD -0.615m. Additionally, both EBIT and EBITDA margins have consequently
risen, and the net profit resulted in a loss reduction of 68% compared to
The next big step for the company is the refinancing of their USD 4.27m
loan, which is coming due. The company has already disclosed that they are
in negotiations to convert their loan from short-term to long-term debt.
In the next few quarters, we expect the company to develop new income
verticals, continue to improve their financials and post their first cash
flow positive quarter.
As the cannabis industry matures in the USA, moving from quantity to
quality, Agrios will be positioned in a niche market where their production
costs will rival the lowest in the sector while their quality will be the
best amongst their peers. Agrios’ focus on the duplication of the unique
cannabinoids mix generated in each strain could be the key to unlocking
pharmaceutical partnerships. This evolution of the cannabis market into a
more educated and mature sector will most definitely provide Agrios with
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Offenlegung möglicher Interessenskonflikte nach § 85 WpHG und Art. 20 MAR. Beim oben analysierten Unternehmen ist folgender möglicher Interessenkonflikt gegeben: (5a,5b,11); Einen Katalog möglicher Interessenkonflikte finden Sie unter:
Date and time of completion of this research: 09/12/2019 (11:00)
Date and time of first distribution: 09/12/2019 (12:00)
Target price valid until: max. 31/03/2021
-------------------übermittelt durch die EQS Group AG.-------------------
Für den Inhalt der Mitteilung bzw. Research ist alleine der Herausgeber bzw.
Ersteller der Studie verantwortlich. Diese Meldung ist keine Anlageberatung
oder Aufforderung zum Abschluss bestimmter Börsengeschäfte.
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