Agilyx Ord Shs AGXXF

CG Investment Report: Summary

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From Keith Carpenter of Canaccord Genuity. Price target reaffirmed at $23.50.

On Tuesday, Alliance Grain Traders hosted an analyst/investor tour of the new food ingredient facility in Minot, North Dakota. As the legacy business has returned to a stable profitability level, the next stage of growth for AGT will likely come from the build-out of the food ingredient business, a business that we estimate is already providing greater than 2x the margin to that of the legacy business. The company is ramping up the second 35ktpa line at its Minot, North Dakota food ingredients facility and we anticipate the announcement of the third line expansion in Q3/14. Furthermore, AGT has 200kt of spare capacity within its legacy business that it will look to upgrade for the expansion into the food ingredient business, providing the company with a high margin growth profile off of a low capital cost. We estimate that by 2018, we could see a run rate of C$111M in annualized EBITDA, which would be 85% higher than the C$60M in EBITDA AGT realized in 2013. We also expect this strong earnings growth momentum to expand the company’s multiple going forward.