Village Farms 4th quarter call

Release earnings Monday evening, call at 11 Eastern on the 20th.

I expect poor numbers and a sugnificant decline.

If were not fully invested I would take this fat pitch.

Cheers
Qazulight

https://finance.yahoo.com/news/village-farms-international-h…

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Chris…why are you expecting a significant decline and what do you mean…“I would take this fat pitch?”

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Chris…why are you expecting a significant decline and what do you mean…"I would take this fat pitch?

Looking over Village Farms investor presentations. I see the cost of production, the conservative sales price and conservative market estimates.

When I put a pencil to it, I get a value for the company in 2020 or 2021 of about 40 dollars a share. (Yours or anyone elses may be different. Please note: I am a terrible investor. If you are considering this high risk company, do your own analysis.)

As I have been invested in this company for at least 7 years. (I do not remember when I bought the stock, but came across the company in 2004.) I have confidence that the management is trust worthy and has the people to execute.

However, they have just borrowed a lot of money to refurbish the grow facilities. There is no production from these facilities. Worse, (for the numbers) the facility was producing vegatables. This production is off line. The year over year cash flow from
operations will be down, and the company will swing to huge loss this year and quarter and they will show a very large and unmanagable debt based on the current business.

When these numbers hit, I expect a significant decline in the very low volume stock.

For really small players it will be a chance to load up cheap. Any significant purchases will immediately dry up the float.

I do not remember why now, but 4 dollars a share seems to be where I think support will show up. I do not think that the opportunity will last. The time may be as short as extended trading hours, or three days.

I consider this a “fat pitch” because we have a very good idea of the future value of the company. It is not smoke and mirrors. What makes it really easy, we know its coming! We know that the computer algorithms will pick up on the numbers and write auto generated headlines. We know that the float is small. We know that this increases volatility. And we know exactly when the news will break. Its almost like T-Ball. Also, I don’t know, but I believe there is no options trading on this company. There are no futures to smooth price moves out.

Take your dramamine, there are no life jackets and no life boats on this ship!

Cheers
Qazulight

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Thx Chris,
Could be dead money for quite a while. Not sure if the very long term rewards are justified but will hang in there for the time being… it drops below 4 then I’m out. Also have two of the main ETF’s. Last year as you know was ridiculous… 300 to 500% returns in a few months on some of these stocks… this year a different story…

It will happen one day when regulations are relaxed. But on this board dead money and “perhaps” scenarios just do not work. As mentioned just 2 weeks ago or so, had a situation with SMG(a great I thought, accessory business for the budding pot business)and it was just stagnating plus fell 15% on results) so dumped it at a $1200.00 loss and used the funds to add to NTNX… more than compensated in just two weeks…
Yes, there is a reason why our Stocks have performed well provided one learns when to drop the laggards and add to your winners. Doesn’t work all the time but these pot stocks I have, I need to let them go…can always jump in later…

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What Chris failed to write, maybe thinking you and everyone knew, is they are going to be growing pot under Canadian government license for sale in the medical marijuana field, and it should juice up their revenue stream.

Today they are down 2%.

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What Chris failed to write, maybe thinking you and everyone knew, is they are going to be growing pot under Canadian government license for sale in the medical marijuana field, and it should juice up their revenue stream.

Today they are down 2%.

I assumed that. They are predicting 75,000 kilograms going into the market on July 1.

I am a little unclear about how they are going to go from medical to recreational cannibus.

If the numbers I worked out are correct, and I am not confused about what market they will be selling into, the mumbers are like this.

July 1 the first crop, it should be about 75,000 kilo grams. Or, 75,000,000 grams. The wholesale price of cannibus in Canada for medical cannibus is 7 plus dollars a gram. However, the CEO has stressed that with the production coming on line the can see prices fall to 2 dollars a gram and that Village Farms will in the future produce at 1 dollar a gram. The first crop production will be higher, but we can also expect the first crop wholesale to be higher.

As such, I just assumed 1 dollar a gram gross profit. This will probably be higher as Village Farms is selling at wholesale to Pure Sun Farms joint venture. There should be other profits from this joint venture not accounted for in this calculation.

But, if we go with 75 million grams and 1 dollar gross, per year. We will not get a full year as the seedling just went in a week or so ago. If you figure a half year, we should see 17 million in sales in the quarter ending on September 30th and we should see those sales hit the report when it comes out in late November or early January.

If the stock price stayed where it is the market cap of Village Farms would be around 250 million with sales around 35 million and gross profits around 17 million.

That looks to me to be a price sales ratio of about 7 . I am not terribly confident about P/S and how to figure it so I could be completely off in the weeds.

The goal is to convert more facilities until they get to about 300,000 kilograms year. This should take a until 2020 or 2021.

Once they see a full year, they should be showing a gross profit of 300 million a year. With other income from
Pure Sun farms and their legacy business, the company should be able to show a bottom line of about 250 million to 300 million a year. At a P/E ratio of 10 that would be a market cap of 2.5 billion, or barring dilution a share price of 40 to 50 dollars a share.

Those are my numbers. Remember, I am a terrible investor. Do your own work, this is a risky business and the company as it is currently operating is worth about 1.25 a share.

Cheers
Qazulight (Also, my name is not Chris)

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Correction to first assumption!

They can grow 75,000 kilograms per year in the first converted green house. This works out to 17,500 kilograms per crop cycle. This may be off to as I sumply do not how to grow anything. I am just guessing as they said that if they planted the first of March they could sell into the market on July 1st when the recreational cannibus market opens.

Sorry
Qazulight

Not sure how they space their lights or when they cut down the daylight time to trigger flowering but there is a wide range of time they can grow a crop, from say 6 weeks to 5 months.
Also, they are using clones, not seedlings. These are shoots cut off the perfect female or the previous crop. This yields 4 times the buds than seedlings (read: 1/2 males, no buds, 1/2 inferior or more females). Sometimes the females clones. Can be passed on over many years with the strongest strains originating from the Russian/Afgani boarder.

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I bought a little bit - few hundred shares - purely as a non-Saul speculation. Of all the Canadian marijuana growers, this company has the experience in growing and processing to avoid pitfalls that I suspect will cause stumbles for other companies.

And that 75,000 kg annual production is conservative. Their growing location is 1.1 million square feet. There is some municipal pushback, however - this is prime agricultural land that is being converted from growing food to growing marijuana.

I’m looking to see if management really knows what they’re talking about when they say their costs will be under $1 per gram when they get up and running.

From Canada’s Globe and Mail back in Nov, 2017:

With less than nine months left before recreational cannabis becomes legal in the country, analysts and investors are still unclear who the big winners and losers will be. Some publicly traded pot companies don’t report how much a gram of dried bud costs them to make and if they do, the numbers aren’t uniformly calculated. Moreover, producer margins could start to shrink as provinces start to purchase pot wholesale.

…there isn’t an industry standard for reporting production costs, said Vahan Ajamian, an analyst at Beacon Securities Ltd. in Toronto. For example, it’s difficult to determine whether Canopy Growth’s reported costs of $2.78 a gram are being calculated the same way as MedReleaf’s $1.46.

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