Verde Agritech Ltd. (VNPKF) research, news, and more from GeoInvesting

Company description

Wed, 16 Feb 2022 12:57:02 GMT

Verde Agritech Plc, an agri-tech company, explores for and develops mineral properties primarily in Brazil. The company produces and sells K Forte, a multinutrient potassium fertilizer; and Super Greensand, a fertilizer and a soil conditioner. It holds 100% interests in the Cerrado Verde project, which is the source of potassium silicate rock, a glauconitic siltstone material located in the western Alto Paranaiba region of Minas Gerais State, Brazil. The company was formerly known as Verde Potash PLC and changed its name to Verde Agritech Plc in June 2016. Verde Agritech Plc was founded in 2005 and is headquartered in Belo Horizonte, Brazil.

Research

Mon, 14 Nov 2022 16:16:06 GMT

Verde Agritech Plc (OTC:VNPKF) ($NPK.TO) ($5.20; $288.3M market cap), an agricultural technology company that produces fertilizers announced Q3 2022 results:

Sales of $27.2 million vs $10.6 million in the prior year
EPS of $0.12 vs EPS of $0.06 in the prior year

“The growth experienced throughout Q3 2022 reflects yet again the market’s growing demand for our Product. With Plant 2's commissioning, we expect Verde to continue its growth trajectory and improving bottom-line. It was a pity that we could not fulfill all the orders placed in our books, having had to turn down so many orders because of the operational constraints then present, yet I applaud our team for their efforts and dedication during this quarter,”

Research

Wed, 19 Oct 2022 04:00:00 GMT

Verde Agritech Plc (OTC:VNPKF) (NPK.V) ($3.45; $180.2M market cap), an agricultural technology company that produces fertilizers, announced it has concluded the repairs to the access road to Plant 2 that caused a temporary shut down.

“Fortunately, the road issue did not damage human or environmental wellbeing and was surmounted quickly and definitely. Now we can put all our focus on achieving another year of record production and delivery,” commented Verde’s Founder, President & CEO, Cristiano Veloso.

In early September, the company provided updated guidance (yet still extremely strong) as it had run into unforeseen access road issues at its plant 2 site.

Research

Fri, 09 Sep 2022 15:14:09 GMT

Verde Agritech Plc (OTC:AMHPF) ($NPK.TO) ($5.41; $297.4M market cap), an agricultural technology company that produces fertilizers, provided updated guidance as it has run into some unforeseen issues with its Plant 2 production facility.

The company stated that roadworks it was performing for increased truck accessibility to and from its second plant incurred unforeseen groundwater issues. The solution is already engineered and being implemented. As a consequence, over the next 4 to 8 weeks, limited delivery from Plant 2's production facility may be likely, with an impact to the Company’s 2022 results.

The company provided an updated guidance table, seen below:

The table above shows how Q3 and Q4 will be impacted. What we are not thrilled about, is management's failure to show that they had recently revised up guidance in May, and do not show the reflection of the revised guidance versus the May guidance but only versus the original January 2022 guidance.

As you can see, today's revisions are much lower than the previously issued guidance.

Research

Wed, 10 Aug 2022 04:00:00 GMT

Verde Agritech Plc (OTC:AMHPF) ($NPK.TO) ($6.50; $368.7M market cap), an agricultural technology company that produces fertilizers announced Q2 2022 results:

Sales of $24.8 million vs $5.3 million in the prior year and guidance of $22.9 million
EPS of $0.19 vs EPS of $0.01 and guidance of $0.21

“Verde's growth over Q2 2022 was underpinned by increased productivity and the market's growing demand for our Product. I would like to congratulate our team for their efforts and contributions during this period. We trust that our expanding production and market presence will lead us to meet our goals for the year and continue to create sustainable long-term value for Verde's stakeholders,” declared Verde’s Founder, President & CEO, Cristiano Veloso.”

2022 Guidance

Research

Tue, 24 May 2022 14:50:15 GMT

Verde Agritech Plc (OTC:AMHPF) ($NPK.TO) ($7.40; $374.6M market cap), an agricultural technology company that produces fertilizers, announced plans for redistribution of gains and corporate restructure plans.

Return of capital to shareholders:

“Working alongside Verde’s management, the Committee determined that ongoing and expanding sales is expected to generate enough accumulated cash flow in the second half of 2022 to warrant returning gains to shareholders in the coming months.”

By year end 2022, the Company expects to be able to return a minimum of C$10 million to shareholders while maintaining a minimum of C$30 million in cash and receivables.

For 2023, Verde expects to continue returning gains to shareholders while maintaining a minimum of C$30M in cash and receivables, in addition to fully self-funding Plant 3, without need for equity or debt financing.

Re-Domiciliation:

“Verde is currently domiciled in the United Kingdom, a country with which it has no other business connection beyond its incorporation address and the relatively high costs of reporting and compliance under local regulations. Verde is also aiming at an increased access to a wider commodities market for its products. Furthermore, the United Kingdom bars companies from making any type of payment to shareholders while there are no distributable reserves available in the parent Company. The Re-domiciliation to Singapore will provide all the commercial advantages explained in the next section while also enabling the Verde group of companies (“Group”) to eventually execute its P4G through dividend, variable dividend, share buyback and other potential structures that will be further studied in the event that the Re-domiciliation is completed.”

There will be no impact to current shareholders:

“To implement the Re-domiciliation, Verde shareholders' shares will be exchanged for shares in a new Singaporean company (“New Verde”) on a one-for-one basis. Following the share exchange, New Verde will become the sole parent company of the Group. There will be no changes to the respective shareholdings of each Verde shareholder. Verde’s listing on the Toronto Stock Exchange will be replaced with New Verde’s listing on the Toronto Stock Exchange, with no impact on Verde shareholders.”

Research

Wed, 11 May 2022 15:07:29 GMT

Verde Agritech Plc (OTC:AMHPF) ($NPK.TO) ($6.76; $345.4M market cap), an agricultural technology company that produces fertilizers announced Q1 2022 results:

Sales of CAD 11.3 million vs CAD 831,000 in the prior year
EPS of CAD 0.06 vs loss of 0.03

“2022 has started in a very shaky manner for the agricultural market globally. In Brazil, which depends on imports for over 96% of its potash supplies, the concern with fertilizers has been at the forethought of most farmers. Despite the record rainfalls during the period, which postponed Verde’s delivery of an additional 25,133 tonnes of Product in Q1 2022, our Team successfully reached a growing portion of Brazil's market. Verde's target towards the delivery of 1,000,000 tonnes by the end of 2022 is further boosted by these latest results.” declared Verde’s Founder, President & CEO Cristiano Veloso.”

2022 Guidance

On May 03, 2022, Verde announced an increase in its 2022 and 2023 guidance, previously published on January 10, 2022. The Company’s original and revised 2022 targets are detailed on a quarterly basis, to reflect the market demand's seasonality, as follows:

The company also maintained its 2023 sales target guidance of 2,000,000 tonnes. If we assume the margin profile stays the same, the 2023 sales target would equate to EPS of $1.74.

Research

Tue, 03 May 2022 14:29:16 GMT

Verde Agritech Plc (OTC:AMHPF) ($8.16; $413.8M market cap) ($NPK.TO) an agricultural technology company that produces fertilizers announced updated guidance for 2022 and 2023.

Fiscal 2022:

Fiscal 2023:

If we assume the margin profile stays the same, the 2023 sales target would equate to EPS of $1.74. At its current price, the stock is trading at a P/E multiple of 9.3 and 4.6 on 2022 and 2023 projected EPS guidance, respectively.

However, we caution that commodity prices can be very volatile and affected by unpredictable circumstances. For this reason, using current pricing environments, especially when they are near all time highs, might want to be taken with a grain of salt.

Interviews

Fri, 22 Apr 2022 04:00:00 GMT

4/22/2022 Fireside Chat with Cristiano Botelho Veloso, CEO, Verde Agritech (AMHPF) (NPK.TO)

Research

Fri, 25 Mar 2022 04:00:00 GMT

3/25/2022 Research "Skull" Session Clip - Verde Agritech Plc (AMHPF)

Research

Tue, 22 Mar 2022 20:23:22 GMT

Verde Agritech Plc (OTC:AMHPF) ($6.30; $317.1M market cap) ($NPK.TO) an agricultural technology company that produces fertilizers announced Q4 2021 results: (Had previously provided guidance for fiscal 2022 and 2023 on January 10, 2022)

Sales of $10.8 million vs $2.2 million in the prior year
EPS of $0.03 vs a loss of $0.003 in the prior year

Maintained prior guidance for Fiscal 2022 and 2023 but expects to revise upward:

Fiscal 2022 guidance of $72 million in sales with $0.50 CAD EPS (700,000 tonnes)
For 2023, Verde’s sales volume target is 1.4 million tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”).

The company did provide a more detailed quarter to quarter guidance for fiscal 2022:

“The 2022 Guidance is a noticeable leap from 2021 numbers. We still expect, however, to revise these numbers upwards as the year progresses to reflect both Product demand and increased potash prices, despite Q1 having been one of the wettest ever rainy seasons and the oil price increases,”

You can see our reason for tracking note here . The company will host a conference call on April 6, 2022 at 9 AM EST.

Research

Thu, 03 Mar 2022 15:38:01 GMT

Verde Agritech Plc (OTC:AMHPF) ($6.32; $319.9M market cap) ($NPK.TO) an agricultural technology company that produces fertilizers, announced it expects to reach 3 million tonnes potash production capacity in 2022.

“In the face of recent geopolitical events involving Russia and Ukraine, noticeably the collateral impact of economic sanctions on Russia and its ally Belarus on the potash supply to Brazil, Verde’s Board of Directors has unanimously approved an accelerated investment program to sustain the Expansion Plan.”

On February 16, 2022, we released our Reasons for Tracking note highlighting the company’s strong guidance for fiscal 2022 and 2023.

Fiscal 2022 guidance of $72 million in sales with $0.50 CAD EPS (700,000 tonnes)
For 2023, Verde’s sales volume target is 1.4 million tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”).

Shares have already risen 40% since our “Reasons for Tracking” note and surpassed our near term price target of $5.85 based on a forward P/E of 15 on 2022. However, we mentioned if the company executes on its guidance, the numbers imply EPS of around $1.00 CAD or $0.78 USD for fiscal 2023. Accordingly, the stock has room to approach $15 CAD or $11.75 USD by attaining a P/E multiple of just 15 on 2023 EPS guidance.

It’s important to note that the 2023 guidance is based on 1.4 million tonnes of production, given today’s news and recent geo-political environment, that number could be conservative.

Reasons For Tracking

Wed, 16 Feb 2022 13:01:44 GMT

Founded in 2005 and headquartered in Brazil, Verde AgriTech PLC (NPK.TO) is an agricultural technology company that develops and produces fertilizers. It's solutions are for crop nutrition, crop protection, soil improvement and increased sustainability to make agriculture healthier, more productive, and profitable for farmers. Their multinutrient potassium fertilizer marketed in Brazil under the brand K Forte and internationally as Super Greensand is one of Verde's sustainable products to improve the dynamic community of microorganisms associated with plants and soil.

We recently came across the company through some momentum screens and due to the stock's sharp rise in the weak market we’re in. We were hoping shares would pull back a little before publishing this RFT (Reasons For Tracking) . However, we decided to bring you our preliminary information today due to the company’s strong guidance, which we will discuss in this note.

We are still digging into Verde AgriTech PLC and have not done a deep dive in its business and industry, which is typically a very competitive industry with commodity type attributes, in order to determine what separates it from other fertilizer companies. However, we are intrigued by the following aspects of the story.

It's a play on the environmental, social, and corporate governance (ESG) movement
Recent financial performance
Financial guidance

Here is our first look at AMHPF.

Reasons For Tracking

1. Admirable mission could attract ESG investors and separate the company from its comps

In the little bit of research we have completed thus far, it seems that the Company is looking to separate itself from its competitors by claiming its fertilizer preserves many of the nutrients that are typically lost when using other fertilizers.

“ With successive plantings, the available amount of trace elements present in the soil decreases. Conventional soil nutrition is concerned with replacing only macronutrients, those more linked to factors such as food weight and considered most important, in this case Nitrogen, Phosphorus and Potassium, without replacing trace elements. As a result, the nutritional value of food also decreases and our health loses quality. We want to change that and improve our health through the benefits that glauconitic siltstone, the raw material of our products, such as K Forte and Silício Forte, brings. In addition to potassium, glauconitic siltstone contains many trace elements that increase the nutritional value of foods. Therefore, the more food produced with our products, the greater the supply of healthier and more nutritious food.”

We obviously need to fact check the company’s claims, but the it’s mission fits right in the wheelhouse of Environmental, Social, and Corporate Governance (ESG) investors, a movement that has become extremely trendy.

2. Sales and earnings growth are accelerating as the company heads into fiscal 2022.

The company reported strong Q3 2021 financials in Mid November: (all figures are in CAD)
- Sales of $10.6 million vs $3.9 million in the prior year
- EPS of $0.06 vs $0.02
- Tonnes sold of 154,000 vs 106,000
Q2 2021
- Sales of $5.3 million vs $2.4 million in the prior year
- EPS of $0.00 vs $0.00
Q1 2021
- Sales of $831,000 vs $510,000 in the prior year
- Loss of $0.03 vs loss of $0.02

3. Verde AgriTech PLC Received the regulatory green light to expand its production capacity

“On February 10, 2022 received mining concession for extraction for up to 2.5 million tonnes per year of potash rich ore, which is processed into Verde’s multinutrient potassium products, BAKS® and K Forte®, sold internationally as Super Greensand®, (the “Product”). With this new Mining Concession, the Company is now fully permitted to produce up to 2,833,000 tpy.”

4. Strong guidance for 2022 and 2023 has caught our attention.

On January 10, 2022 the company provided a strong two year outlook:

Fiscal 2022 guidance of $72 million in sales with $0.50 EPS (700,000 tonnes)
For 2023, Verde’s sales volume target is 1.4 million tonnes. This target represents a potential 100% growth Year-on-Year (“YoY”).

Valuation

Based on 2022 estimates, the stock still has some upside to $7.50 CAD and $5.85 USD based on a P/E of 15.

If Verde AgriTech PLC executes on its guidance, the numbers imply EPS of around $1.00 CAD or $0.78 USD for fiscal 2023. Based on those estimates, the stock has room to approach $15 CAD or $11.75 USD by just attaining a P/E multiple of 15 on 2023 EPS guidance.

We do think it’s possible that, given the company’s strong growth outlook, that valuation multiples could expand beyond our assumption.

Caveats

The stock has had a strong move in the last 3 months, nearly tripling from around $1.75 to current price of around $5.50.
With 50 million outstanding shares, the company is at the high end of our ideal capital structure requirement.
Commodity industry that can be met with a high variability in raw material costs
We need to probe the company’s liquidity needs and think that an equity raise is plausible, given the sharp rise in the stock
We need to determine the company’s current production capacity, which could also impact the equity raise risk.
We need to be cognizant that the company is based in Brazil, where fraud may have a propensity to exist. Because of this, we need to do our best to perform some red flag checks.
We have not interviewed management