UpgradeFollowing better-than-anticipated fourth-quarter results, Industrial Alliance Securities analyst Neil Linsdell said EnWave Corp. has “navigated a difficult fiscal 2020.” The Vancouver-based technology company, known for its Radiant Energy Vacuum for the dehydration of organic materials, reported revenue of $10.8-million, down 33 per cent year-over-year but topping the analyst’s $9.9-million estimate.
“The decline was expected in part due to a different promotional program (buy one, get one) with Costco (COST-Q) versus last year’s coupon program,” he said. “REV equipment sales were also lower, as orders and commissioning activities have been impacted by travel restrictions and business disruptions. We did however see an improvement from FQ3, which was more significantly impacted by supply chain disruptions and lockdowns, specifically on Moon Cheese sales through Starbucks (SBUX-Q) in the U.S., as many locations restricted customer traffic in stores.”
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) and earnings per share of $20,000 and 1 cents, respectively, exceeded Mr. Linsdell’s projections of losses of $1.1-million and 1 cent.
“In the last couple of months, EnWave has continued to sign and advance partnerships, and book new unit sales, including with Nippon Trends Food Services (Dec. 1), for ramen noodles, purchasing a 10kW REV unit with a commitment for a 100kW unit within 12 months,” the analyst said. “Patata Fritas Torres (Nov. 30) in Spain will add a 100kW unit to its existing 10kW unit for dried cheese snacks. NuWave Foods purchased10kW and 60kW units for shelf-stable donuts and fritters, with a commitment for another 60kW unit within 18 months. Enwave’s pharma partner, GEA Lyophil, (Nov. 13) purchased a lab-scale unit for product trials and internal evaluation projects. The Company is also launching a toll manufacturing division (REVworx ) in March 2021 to further promote REV™ technology and help partners trial new products before committing to setting up in-house.”
“EnWave also recently announced a newTerpene Max process to deliver 10 per cent more retained terpenes than traditional drying. This followed the November 12 announcement of EnWave’s first U.S. cannabis royalty license with GentleDry Technologies, which provides drying solutions to legalized cannabis cultivators in the U.S. Pacific Northwest.”
Keeping a “buy” rating, Mr. Linsdell bumped his target to $1.80 from $1.75. The average is $1.56.
“Despite some setbacks/delays in machine sales, and a slow progression with Canadian cannabis partners, we are expecting an accelerated roll-out of Moon Cheese across multiple retail channels and partners to drive growth in 2021,” he said. “We also expect the Company to use its current $18-million cash balance and NCIB to support the share price if it weakens.”