Input Capital (TSXV: INP) â Initiating Coverage - First ... - Baystreet.ca

More documents

Recommendations

Info

Page 20 2012 2013E 2014E Liquidity Analysis Cash + Marketable Securities $ 14,316,375 $ 3,459,409 $ 4,207,075 Working Capital $ 17,500,396 $ 8,054,104 $ 8,997,592 Current Ratio 45 20 17 ROE N/A 6.3% 8.5% Valuation For our valuation, we considered the following 3 scenarios. 1. Input does not reinvest funds generated from operations, or raise any new equity to expand its existing portfolio. This is a very unlikely scenario. 2. Input raises new equity to expand its portfolio - Although this is a realistic scenario, we feel that forecasting the terms of equity financings in the future (such as share price at the time of financing) is indeterminate at best. 3. Input grows through reinvesting its free cash flows – this scenario is as likely as (2). However, we believe this scenario provides us a better indicator of the fair value of the company, as it generates more predictable cash flows. The key assumptions we used in our model are: • We anticipate that Input reinvests all of their free cash flow until they have a capital base of $300 million. This will take 18 years. After this point, we assume the company maintains its asset base. • No debt or equity raised. • Discount rate of 10% • We use $450 per tonne as the long-term net price received by Input. • We assume no bonus tonnage is received by Input. Given these assumptions, our discounted cash flow model (DCF) gave a fair value estimate of $2.55 per share. The calculation is shown below. Discount Rate 10% Total PV $ 92,010,476 Cash - Debt (at the end of FY2012) $ 1,510,470 Equity Value $ 93,520,946 Shares O/S (dil) * 36,651,724 Value per share $2.55 *Calculated based on the treasury stock method The table below shows our comparables valuation – which gave a fair value of $2.82 per share. © 2013 Fundamental Research Corp. “10 Years of Bringing Undiscovered Investment Opportunities to the Forefront “ www.researchfrc.com PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Page 21 Input Comparable Input's FV Est. EV/ EBITDA 8.7 12.10 $2.51 P/CF 10.3 17.60 $3.14 Average $2.82 *Inputs metrics were based on our FY2014 estimates *Comparable metrics were based on the trailing average of metal streamers, and grain/bean industry players. Returns are extremely sensitive to the net canola prices received by Input. Our share estimates based on varying canola prices ranges from $0.64 to $8.12 per share. Sensitivity analysis - canola net prices Net price of canola $ 350 $ 400 $ 450 $ 500 $ 550 DCF Model $ 0.64 $ 1.33 $ 2.55 $ 4.65 $ 8.12 Comparable fair value $ 2.10 $ 2.46 $ 2.82 $ 3.20 $ 3.58 Rating Risks Based on our valuation and outlook, we initiate coverage on Input Capital with a fair value of $3.00 per share, and BUY rating. The following risks, though not exhaustive, may cause our estimates to differ from actual results: • Input Capital is the first to use an agriculture streaming model. • The company may need to raise additional capital through equity offerings and dilute current equity. • A decrease in the price of canola would negatively affect Input. • Timely Deployment of capital is crucial to the success of Input Capital • There may be new entrants to the industry increasing competition for Input. This may negatively affect returns. • Farmers may breach contracts with Input Capital. • Expected returns will drop, or rise, if any of the inputs used in our base case scenario move unfavourably, or more favourably, respectively. © 2013 Fundamental Research Corp. “10 Years of Bringing Undiscovered Investment Opportunities to the Forefront “ www.researchfrc.com PLEASE READ THE IMPORTANT DISCLOSURES AT THE BACK OF THIS REPORT
Page 1 and 2: Siddharth Rajeev, B.Tech, MBA, CFA
Page 3 and 4: Page 3 • Public company status gi
Page 5 and 6: Page 5 Gord Nystuen - Vice-Presiden
Page 7 and 8: Page 7 Source: Barchart Inflation:
Page 9 and 10: Page 9 Source: Ontario Ministry of
Page 11 and 12: Page 11 below shows the seasonality
Page 13 and 14: Page 13 will cause rent/mortgages t
Page 15 and 16: Page 15 Canola cash receipts (in $1
Page 17 and 18: Page 17 Source:Barcharts We believe
Page 19: Page 19 million (EPS: 0.06) in FY20
Page 23 and 24: Page 23 Cash Flow Statement 2012 20
Page 25: Page 25 Fundamental Research Corp.

Input Capital (TSXV: INP) â Initiating Coverage - First ... - Baystreet.ca

Create successful ePaper yourself

Delete template?

Save as template?

Input Capital (TSXV: INP) â Initiating Coverage - First ... - Baystreet.ca