Analyst Predicts Demand and Production Output Will Push Neptune Technologies' Price

| About: Neptune Technologies (NEPT)

Our premium subscribers first heard about this stock when it was trading at the $2.32 mark just a few weeks ago. Now we're hearing that more institutional buyers and high profile firms are getting ready to take positions in the company. That, in-turn, should lead to even more buying by retail investors. It's a snowball and visibility effect that we've seen countless times and this company certainly deserves it.

Versant Partners analyst, Doug Loe, in an exhaustive, 87-page initiating coverage report on Neptune Technologies & Bioressources Inc. (NASDAQ:NEPT) (Pending:NTB) and a small report on its 60% owned subsidiary, Acasti Pharma (TSXV-APO.V), points out some of the most compelling reasons to take notice of the growing krill oil vs. fish oil health movement

Of meaning to investors and those watching the company is his one-year target price of $6 dollars on Neptune and $3 dollars on Acasti Pharma

NTB’s May 16th closing price was $3.09 +0.09 (3.05%) and Acasti was unchanged at $1.05

Promising results from a new cholesterol drug have helped call attention to Neptune, which is aiming for cholesterol/hyperlipidemia's ultimate prize, but unlike most companies dealing with clinical studies and regulatory approvals, Neptune is a revenue generating company whose products are already marketed and distributed in over 20 countries worldwide

The Versant Partners’ report, subtitled: "Krill oil franchise poised to outperform in multiple consumer and medical markets" features a few key points of note.

With NEPT’s fiscal year end being February, Mr. Loe is calling for:

  • F2012 revenues of $21.79 million and earnings $4.34 million ($0.09 EPS)
  • F2013 revenues of $32.39 million and earnings of $8.81 million ($0.17 EPS)
  • F2014 revenues of $45.37 million and earnings of $15.69 million ($0.30 EPS)

Loe cited management plans to meet forecasted demand by increasing current plant production from 130 thousand kilograms of krill oil per year to 430 thousand kilograms per year by 2015, a 300% production increase

The report pinned its share price targets not only on the business Neptune has in hand, but also its future. By far, the biggest foundation Mr. Loe constructed on which to base his conclusions came from his meticulous research into the product itself – Neptune Krill Oil or NKO as it is branded on the market - and all its further refined products, such as Acasti’s drug candidate called ‘CaPre’

Along the way, Loe also gives a significant nod to the functional food alliances Neptune developed with Yoplait – which is 50% owned by General Mills – and the food manufacturing behemoth, Nestle

Mr. Loe wrote that both Yoplait and Nestle "should conclude development," of their research into Neptune Krill Oil by the end of the current year and that assuming all goes well, the sales of krill-oil infused food products by these giants would be a major revenue driver for Neptune in 2013/14

A very recent financing has left Neptune with an estimated $17.6 million in the bank and total debt of $5 million. On Friday, Neptune announced that it has closed the second portion of its oversubscribed private placement financing which was announced on May 3rd

Neptune is an industry-recognized leader in the innovation, production and formulation of science-based and clinically proven novel phospholipid products for the nutraceutical and pharmaceutical markets

NEPT stock ran to as high as $3.95 recently before some profit taking (and completely clueless bashing by shorts who take massive positions in the stock before issuing their "trade like me" alerts) pulled the price back. Despite all of that Tuesday's closing price was up 0.05 (1.61%) to $3.15.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.