SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
Turner,
there are a number of reasons why a stock can be cheap. lack of knowledge, wirehouse analyst coverage, misunderstanding, victims of the past, etc. These are mostly perception issues which can be fixed very quickly. This is why we focused on the issue that cannot be fixed easily, which is the business. Since our view is that the business is terrific, it is why this is an opportunity we are invested in.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
Ambil,
thanks. goodwill is something that we have seen become a worthless asset more times than not. breaking down the HAIN goodwill was just an example of it. The greatest example of how bad goodwill can turn out to be is the AOL/Timewarner deal.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
WFM is only part of the organic story. They've done a great job and earned a huge valuation. We think STKL can do the same if they receive the same attention by marketplace.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
william ditti,
glad you liked it. the Mascoma investment (FKA bioprocess group) has a huge upside to current value being held on the STKL books (33mm). investors always react with extremes in both directions, panicking the value will go to 0 when things go lower, and thinking its priceless when things go higher. But spotting those extreme emotional reactions is what creates many investment opportunities. Both divisions are terrific businesses and investments for STKL to own by themselves, but are still only a small part of the overall $30+ value we still in STKL.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
southgent1951,
although FCF is a critical factor in analysing a business, we do not use it exclusively since some growing businesses are best analysed by their Operating CF. The reason why this is best in the STKL story is that despite them being a $1.1 Billion dollar business, they are still relatively small next to many other food makers (organic and non organic). This means that if one of those larger business were to buy STKL, they would not need to make the same infrastructure investments that STKL does (since a bigger business will presumably have more than enough in place already), and therefore the acquiring company would only care about what the operating CF is which excludes the cap ex.
As far as bioprocess group, see other comments i made as well as article itself, as it is only a small part of entire STKL story (bonus).
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
I agree with Paulo, and was hoping that I would deliver that message in the thesis. In addition to getting OPM for free by buying STKL, the rest of STKL is worth far more than current price with or without OPM. OPM and Mascoma are just a $4 - $6 bonus shareholders get by getting STKL.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
Valuable Insights,
thanks for reading. there's no 100% assurance that a certain multiple is right or wrong, the 12x EBITDA and 1x P/S are just what I believe to be fair numbers based on my 14+ yr wall street experience in running money as well as by looking at comps. here is the list of comp in the industry http://bit.ly/12X8IQ0
As you will see from the comps I listed in the article (and link here), the average P/S multiple for the industry is 1.77x Sales, whereas the STKL currently is less than a third of that. a 1x PS would still be lower than the industry by nearly 50%, but double what it is currently.
as far as growth for OPM is concerned, the 49% I mentioned was predominately through the acquisitions which I listed in the article. as mentioned, we believe those acquisitions were very smart and will turn out to be game changers for the company. ultimately, OPM is only a tiny part of the entire STKL story, so the reason we spent some time on it was to show that it is worth quite a bit more than the market and STKL has accounted for it on its books. But this just adds to STKL value which we believe is much higher with or without OPM (and Mascoma)
the 10% organic growth rate I mentioned is what the company itself projects, which is inline with the 5-10% organic growth projected by HAIN and others in the industry, so we dont view it as aggessive. The additional growth we added on top of that is the growth due to acquisitions, which is also inline with the company's (and HAIN) past success.
in regards to factoring growth into the valuation, the most important part that I hoped to show from the article is that even "without" the growth, the company is currently worth much more than the current price. If growth is achieved, than it should fetch much higher valuations than even the ones i mentioned. IMOS is a completely different company and sector so I dont see how the comparisons would make sense to eachother, but I am sure there are other articles discussing IMOS vs. its sector.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
thanks Dominic,
I've spent the last 14 years of my career searching out similar opportunities in the market, and it's never easy. the opportunities that are the most obvious are usually the ones we missed. IMO, SunOpta is the obvious choice that we havent missed.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
trickdog,
As I mentioned in the article, my debate is not to change anyone's diet or whether organic food is better than traditional, but rather to simply provide the facts about the company at hand, SunOpta, and the world that they're in. The Non GMO vote is not something I created, its something thats going on with or without my thesis on STKL. the fact that MON is the biggest NO vote contributor is a fact, not something I created, but rather something I found interesting. Not sure why you're offended by me mentioning it, as my mention will not have any affect on their $51BB market valuation or their business. you should not be ashamed to own MON, or any publicly traded business for that matter. its your money to do what you please with. not sure why you're calling my research a shameful pumping, or that you're not surprised by that, but I guess I'll just leave that mystery up for translation. The facts are listed in the article with my translation of them in order to arrive at a valuation. If they dont please you, you can just ignore and move to another article. good luck.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
bluedaug,
yes $17mm writedown was in fruit business was exaggerated by market, and along with market collapse, destroyed huge market value for company. This has all been corrected and is far behind the company. The fact that the market has not rewarded them for recent long term and recent success is why we believe this is an opportunity. Investors' feelings can change from day to day, but the business's steady success is indisputable.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
thekhoos,
cashflow has improved drastically over past year, where first 9 months generated +$38mm versus -2.7mm last year. This should increase in line with rest of numbers over next year.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
southgent1951,
thanks. As you can see we believe STKL is much more than a powerball, as the business and assets we're valuing are already there even if you exclude the projected growth. Of course the growth we're projecting should be exceptional, but even if you exclude them from the valuation, you would still come our ahead by a mile at the current price.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
PSalerno,
thank you. I think you misunderstood the section about the Non GMO ingredients. The whole purpose of STKL (as well as other organic food companies), is that the ingredients are "not" secret. its the traditional food that has GMO, (i.e. secret ingredients).
the change from cellulosic ethanol technology as majority of business to organic food as current majority of business was surely not the plan coming out of the gate in 1973, but already happened 13 years ago and should not make their success irrelevant. The business makes over a billion dollars a year, and should be valued accordingly.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
Hello Paulo and thanks for reading. like all valuation methods, 12x EBITDA on the Opta Mineral Group is just one format of what we believe is justified based on a 30%/yr growth rate (they grew sales 49% this year) . We have also used a P/S valuation method, and even a 1x p/s multiple of current sales ($138mm) would arrive at a value that's over 3x the current value STKL has on the books for them. although different industries have different valuation methods, a 1x p/s multiple is considered extraordinarily cheap in most industries. Further, if they achieve the $250mm goal in next 1-2 years, then a 1x P/S would again amount to a much higher valuation again. Most importantly the OPM is just a small part of overall valuation of STKL. As i noted above, we believe a buyer of the organic food business could pay north of $29 per share. Since you only mentioned the OPM valuation, I assume you dont disagree with the valuation methods I put on the other 2 businesses. So, Even if all of our estimates are wildly optimistic and should all be cut in half, the total value of all divisions should be between 16.50 to 18.50 per share, which is considerably higher than current 5.58 price. do you agree?
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
http://bit.ly/Tq3j1b
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
there are a number of reasons why a stock can be cheap. lack of knowledge, wirehouse analyst coverage, misunderstanding, victims of the past, etc. These are mostly perception issues which can be fixed very quickly. This is why we focused on the issue that cannot be fixed easily, which is the business. Since our view is that the business is terrific, it is why this is an opportunity we are invested in.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
thanks. goodwill is something that we have seen become a worthless asset more times than not. breaking down the HAIN goodwill was just an example of it. The greatest example of how bad goodwill can turn out to be is the AOL/Timewarner deal.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
glad you liked it. the Mascoma investment (FKA bioprocess group) has a huge upside to current value being held on the STKL books (33mm). investors always react with extremes in both directions, panicking the value will go to 0 when things go lower, and thinking its priceless when things go higher. But spotting those extreme emotional reactions is what creates many investment opportunities. Both divisions are terrific businesses and investments for STKL to own by themselves, but are still only a small part of the overall $30+ value we still in STKL.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
although FCF is a critical factor in analysing a business, we do not use it exclusively since some growing businesses are best analysed by their Operating CF. The reason why this is best in the STKL story is that despite them being a $1.1 Billion dollar business, they are still relatively small next to many other food makers (organic and non organic). This means that if one of those larger business were to buy STKL, they would not need to make the same infrastructure investments that STKL does (since a bigger business will presumably have more than enough in place already), and therefore the acquiring company would only care about what the operating CF is which excludes the cap ex.
As far as bioprocess group, see other comments i made as well as article itself, as it is only a small part of entire STKL story (bonus).
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
thanks for reading. there's no 100% assurance that a certain multiple is right or wrong, the 12x EBITDA and 1x P/S are just what I believe to be fair numbers based on my 14+ yr wall street experience in running money as well as by looking at comps. here is the list of comp in the industry http://bit.ly/12X8IQ0
As you will see from the comps I listed in the article (and link here), the average P/S multiple for the industry is 1.77x Sales, whereas the STKL currently is less than a third of that. a 1x PS would still be lower than the industry by nearly 50%, but double what it is currently.
as far as growth for OPM is concerned, the 49% I mentioned was predominately through the acquisitions which I listed in the article. as mentioned, we believe those acquisitions were very smart and will turn out to be game changers for the company. ultimately, OPM is only a tiny part of the entire STKL story, so the reason we spent some time on it was to show that it is worth quite a bit more than the market and STKL has accounted for it on its books. But this just adds to STKL value which we believe is much higher with or without OPM (and Mascoma)
the 10% organic growth rate I mentioned is what the company itself projects, which is inline with the 5-10% organic growth projected by HAIN and others in the industry, so we dont view it as aggessive. The additional growth we added on top of that is the growth due to acquisitions, which is also inline with the company's (and HAIN) past success.
in regards to factoring growth into the valuation, the most important part that I hoped to show from the article is that even "without" the growth, the company is currently worth much more than the current price. If growth is achieved, than it should fetch much higher valuations than even the ones i mentioned. IMOS is a completely different company and sector so I dont see how the comparisons would make sense to eachother, but I am sure there are other articles discussing IMOS vs. its sector.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
I've spent the last 14 years of my career searching out similar opportunities in the market, and it's never easy. the opportunities that are the most obvious are usually the ones we missed. IMO, SunOpta is the obvious choice that we havent missed.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
As I mentioned in the article, my debate is not to change anyone's diet or whether organic food is better than traditional, but rather to simply provide the facts about the company at hand, SunOpta, and the world that they're in. The Non GMO vote is not something I created, its something thats going on with or without my thesis on STKL. the fact that MON is the biggest NO vote contributor is a fact, not something I created, but rather something I found interesting. Not sure why you're offended by me mentioning it, as my mention will not have any affect on their $51BB market valuation or their business. you should not be ashamed to own MON, or any publicly traded business for that matter. its your money to do what you please with. not sure why you're calling my research a shameful pumping, or that you're not surprised by that, but I guess I'll just leave that mystery up for translation. The facts are listed in the article with my translation of them in order to arrive at a valuation. If they dont please you, you can just ignore and move to another article. good luck.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
yes $17mm writedown was in fruit business was exaggerated by market, and along with market collapse, destroyed huge market value for company. This has all been corrected and is far behind the company. The fact that the market has not rewarded them for recent long term and recent success is why we believe this is an opportunity. Investors' feelings can change from day to day, but the business's steady success is indisputable.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
cashflow has improved drastically over past year, where first 9 months generated +$38mm versus -2.7mm last year. This should increase in line with rest of numbers over next year.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
thanks. As you can see we believe STKL is much more than a powerball, as the business and assets we're valuing are already there even if you exclude the projected growth. Of course the growth we're projecting should be exceptional, but even if you exclude them from the valuation, you would still come our ahead by a mile at the current price.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]
thank you. I think you misunderstood the section about the Non GMO ingredients. The whole purpose of STKL (as well as other organic food companies), is that the ingredients are "not" secret. its the traditional food that has GMO, (i.e. secret ingredients).
the change from cellulosic ethanol technology as majority of business to organic food as current majority of business was surely not the plan coming out of the gate in 1973, but already happened 13 years ago and should not make their success irrelevant. The business makes over a billion dollars a year, and should be valued accordingly.
SunOpta: Cheap Organic Food Company With 2 Secret Ingredients [View article]