Ag Growth International Inc T.AFN

TD

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Ag Growth International Inc.

(AFN-T) C$48.54

AFN to Host Investor Day Event

On February 2, AFN will host an in-person investor day in Toronto (link to invite; virtual option available). AFN indicated that management will provide an update on the company's operations, recent developments, and strategic priorities.

Impact: NEUTRAL

 This will represent the first time that AFN has hosted an investor day, and the first opportunity for some market participants to hear from AFN's recently appointed CEO, Paul Householder, in person (recall, Mr. Householder assumed the CEO role in September 2022, having previously served as AFN's COO).

 Strategic Priorities: As a reminder, on AFN's Q3/22 conference call, management discussed being focused on three key areas over the foreseeable future: 1) operational excellence; 2) profitable organic growth; and 3) balance- sheet discipline. We expect management to address each in more detail.

• Outlook: We expect management to speak to AFN's outlook during the investor day, though it remains to be seen to what extent specific guidance/targets are provided. Although management discussed AFN's 2023 outlook on the Q3/22 conference call (calling for higher y/y EBITDA and EBITDA margins), AFN is yet to provide formal 2023 EBITDA guidance. Although formal 2023 guidance may not be issued until the Q4/22 results are released on March 7 (consistent with historical practice), we would not be surprised if management were to discuss some of the long-term growth and margin improvement opportunities it sees.

• We acknowledge that with the recent increase in AFN's share price, the return to our target price has become relatively low. That said, we remain constructive on AFN's outlook and we continue to see the stock's valuation as attractive (8.0x 2023E adjusted EBITDA vs. AFN's 10-year average EV/FTM EBITDA multiple of 9.3x). We will revisit both our estimates and target price as deemed appropriate following the investor day.

  TD Investment Conclusion

  We see global agriculture fundamentals as positive and supportive of AFN's near- to medium-term outlook. We are also attracted to the company-specific revenue growth and margin improvement opportunities that AFN offers. We view AFN's valuation as attractive, and we see management's focus on deleveraging as a positive that has the potential to support an increase in the stock's valuation over time.