Post by
Stupida on Jan 02, 2022 11:07pm
New to this Board
Long time Verde shareholder here finally making some money. Was an invest and forget type of buy in the $1.80 range long ago in a galaxy far far away.
Just wondering if anyone can confirm or poke holes/point out errors with respect to my logic below as just started taking up a review of this stock again given a long absence.
Q3 2021 Profit was about $3.5MM based on 155,000 tonnes sold. In Q4 2021 management projects tonnes sold of 135,000 to reach a total of 400,000 tonnes sold in 2021, so let's say profits are $2.5MM from the Q4 2021 endeavour. That's $6 million for the 2nd half of 2021 in profits. We have been told that the company is now running at full capacity given demand can't be met. Capacity is 600,000 tonnes annually but given permits, they can only reach 480,000 tonnes annually. Assuming the company does produce full out for the entire year, perhaps they conservatively get another $4 million in profit with an additional 190,000 tonnes sold (480-155-135) profitability is $10 million. All based on Q3 2021 pricing for their product. Does that make sense? Please confirm. We do know that prices are now higher-perhaps 20% more, with most of the price increase going to the bottom line.
With say 50 million shares outstanding and $10 million in profits, this company makes 20 cents a share annually. With the current stock price at $2.80, that's a PE multiple of 14 times based on existing capacity. Which seems reasonable especially given further price increases already experienced. Plus there could be errors either way in my analysis.
But the company is building another plant that will provide another 1,200,000 tonnes, tripling current capacity. And 2 lenders have lined up to provide the loan financing and along with internal capital the company hasn't needed to raise any equity money for the new plant that requires a capital expenditure outlay of $5.2 million. It would seem to me this plant is useless unless the permits are increased. I suspect we just haven't heard the positive news yet. Also given the fact that lenders are now willing to lend to this company to build this plant, there is likely something positive here that is yet untold.
So how much is the new plant capacity worth?
Is there demand from customers for this additional capacity?
What are the costs of making and delivering the product in plant 2?
What is the future price for this product?
Will the Brazilian government provide the necessary approvals?
If i could answer these questions, i would know what to do with my Verde holdings. Right now i am going to hold at least to watch a little while longer.
Appreciate ANY feedback.