As of Sept 2018, Farm Boy had annual sales of around $500 million and was purchased for around $800 million. This gives it a price to sales multiple of 1.6.
If we exclude the Future of Cheese acquisition and the recent equity raise for remodelling, the company had the following share structure.
convertible debentures: 27,272,727 convertible at 11 cents per share with maturity date Oct 25,2022
We also have a half a warrant exercisable at 18 cents/share which would add another 27,272,727* 1/2 =~
13,636,363 shares to the fully diluted share count.
As of Jan 2021, we have a fully diluted share count of
43.3m + 27.27 + 13.63 =~ 84.2 m
These cash proceeds from the warrants and debentures would extinguish their debt position while adding about $5.45 million plus the $0.8million on the balance sheet as of Oct 2020. This money would provide enough capital for an additional 2 stores after Oct 25, 2022.
Their total enterprise value fully diluted would be approximately $29.11 million which compares to expected annual sales of over $29 million for a 1:1 ratio. This compares favourably to the Empire acquisition of Farm Boy at around a 1.6 times multiple.
You need money to make money and I think the real growth will begin after Oct 25,2022 when these debentures and warrants come due. There is no reason why they couldn't add 1 to 2 stores per year which was their original growth target. In any case,
I believe at these prices the downside is limited but the upside potential is significant. We have not even talked about the growth potential for the Future of Cheese which I view as a separate part of their business. In a couple of years, that company alone could be worth more than the current market for the parent company today.