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

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Page 8 Source: FRC Input Streaming Contracts The first step in the streaming contract process is adequately capitalizing the farmer so they can optimally farm their land. Management generally wants the farmer to have $300 per acre of working capital, which they feel is the cost to optimally farm each acre. They will look at the farmer’s finances, historic yield, and conduct a financial analysis to structure a contract that is acceptable for both parties. After Input has an idea of the capital requirements required by the farmer, they will use a conservative canola price, and determine the amount of annual tonnage required to generate at least a 20% return. Estimated expenses incurred by a typical canola farm operator, according to the Ontario Ministry of Agriculture and Food (“OMAF”), are shown in the table below. Keep in mind that farming costs in Saskatchewan and the western provinces may have slight variations. As shown in the chart, fertilizer is the largest expense in farming, followed by seeding. We feel that the $300 per acre working capital target Input has set would meet the needs of the majority of farmers. It would also allow some additional capital for unexpected expenses. Keep in mind, that streaming contract financing may decrease some of these costs (for example, because financing is received upfront, the farmer can make better purchase timing decisions with regard to items like fertilizer). © 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 9 Source: Ontario Ministry of Agriculture and Food . An example of a streaming contract is shown below for a $1 million initial payment. Based on the price of canola less annual payments (fixed price), an annual base tonnage is set. Farms usually only have a percentage of their land seeded with Canola, but can use the initial payment for the whole farm. On average, Input will require 0.52 tonnes of canola per acre per year from the farmer. Over the last 5 years, the average tonnes per acre per year produced in Canada was 0.75 tonnes, indicating that Input receives approximately 70% of the total production (as per this example). Since 1990, the lowest annual tonnage per acre in Canada was 0.49 tonnes, indicating that the 0.52 tonne mark provides good coverage for Input’s yield. Initial Payment $1,000,000 Contract Length (years) 5 Canola Price ($/t) less fixed annual payment $ 400 Annual CF required for a 20% IRR $335,000 Base tonnes required 838 Farm Size (Based on a $300 per acre initial payment) 3,333 Canola Acres (based on average) 1,600 Tonnes of canola per acre due to Input 0.52 Average tonnes per acre over last 5 years (Canola Council) 0.75 Yield coverage (Yield due to Input/Average yield) 70% © 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: Page 7 Source: Barchart Inflation:
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 and 20: Page 19 million (EPS: 0.06) in FY20
Page 21 and 22: Page 21 Input Comparable Input's FV
Page 23 and 24: Page 23 Cash Flow Statement 2012 20
Page 25: Page 25 Fundamental Research Corp.

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