GREY:CHALF - Post by User
Post by
PortlandBlazeron Oct 15, 2021 6:56am
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Post# 34008248
Revenues and margins
Revenues and marginsI agree, the share consolidation has been a disaster, losing half the market capitalization of the company. The only benefit will be in things we can't immediately see like negotiations with debt holders or companies CHAL wants to buy. Are we getting better terms because our stock price looks a little more like we're a real company? I don't know.
On the operations side, things look really solid. The company just pre-announced Q3 revenue of US$8 million and gross margins of 46%. When I line up those stats against prior quarters, I see really solid top-line growth, and solid gross profits. We'll see in the full quarter report if they have kept operating costs contained, but they have done that in previous quarters as revenues have grown.
In past quarters, we've seen steady growth in EBITDA. With debts trending down over time, the interest expense should be contained. The recent announcement of a $10 million private placement of convertible debt should only have been undertaken if the acquisition it paid for produces positive cash flow after financing costs. We'll see the answer after a quarter or two of operations integration. But the incremental US$8.1 million of revenue per year from the acquisition, or US$2 million per quarter should lift the current run rate of quarterly revenue to over US$10 million.
In the quarter report, I hope they disclose same store sales growth, so I can know if the top line growth is coming from solid management of stores they've run for a year or more, or if it's coming from acquistions.
US$10 million of revenue per quarter is $40 million per year, and converts on currency exchange to C$50 million per year of revenue. The current market cap of the company at C$0.75 per share is C$44.25 million, so the company is trading for 0.9x current run rate of revenue, with a 46% gross profit margin.
How cheap is cheap, and when will the stock reflect the value creation by the operation team? I don't know. But a Ben Graham analysis, independent of any hype around cannabis, suggests this company is looking cheap relative to its growth and cash flow.