Micro-Cap With Nutraceutical E-Commerce / AI Focus Growing Rapidly Through Acquisitions
The health and wellness market is one that is broad and deep, covering hundreds of thousands of products that made up a $3.7 trillion worldwide industry in 2015. With personal health and wellbeing a strengthening trend across the planet, the Global Wellness Institute estimates that market size was achieved through 10.2% growth across 2013-2015, making it one of the fastest growing industries worldwide.
There are leading players in the market, considering the scope of portfolios for companies like Estee Lauder (NYSE:EL) and Coty (NYSE:COTY), but there is plenty of room for market share for smaller companies following the same model of consolidating brands, like the plan of
Relevium Technologies Inc. (
TSX: V.RLV,
Forum). The Montreal, Canada-based company is focused on acquiring profitable businesses, products and technologies in the health and wellness sector, with a particular interest in e-commerce sales channels.
This strategy is underscored by the fact that less than 10% of sales in the health and wellness market are generated through online sales. In today’s highly digitized and mobile world, expectations are for online sales to grow 17% annually, aligning Relevium to try and capital on two large growth segments.
The company sets its sights on acquisition targets that are generating between $2 million and $20 million annually that can be acquired at favorable multiples in the area of 4-times earnings before interest and taxes (EBIT). In June, Relevium executed on this model, completing the acquisition of nutraceutical product company BioGanix for US$5.8 million (3.7X EBIT). The buyout brought BioGanix’s website properties, formulations, inventory and product pipeline under the Relevium umbrella.
BioGanix has a strong e-commerce presence, generating 90% of its trailing-twelve-month C$5 million in revenue and C$1.3 in trailing-twelve-month cash flow from Amazon.
Founded to produce superior products in the U.S. using only the best ingredients to overcome shortcomings in popular nutraceutical products that failed to meet claims or even contain the listed amounts of active ingredients, BioGanix has quickly gained market traction and a strong feedback profile (99% positive) on Amazon. Products include the top selling product on Amazon in the “Carb Blocker” Category and others that have broken into the Top 200 in their respective category ahead of tens of thousands of competitors.
The proof is in the sales, which have grown from zero at launch in 2013 to just over $5.0 million in 2016, while net income has risen from zero to nearly $2.0 million.
During the first 50 days of operations as part of Relevium, sales continued to improve, climbing to approximately C$700,000, an increase of 52% from the year prior period, as the integration of new management works with existing Relevium management to optimize operations.
Relevium says that it has a pipeline of potential acquisitions all falling within their requisite sales and EBIT parameters, with an aggregate of revenue in excess of C$80 million and EBIT of C$24 million.
As the seasoned management team makes decisions on new acquisitions – for which it is targeting one every six months – Relevium is working to grow existing sales and add new products, both through BioGanix’s pipeline and through a partnership struck in May with Hempco Food and Fiber (TSX-Venture:HEMP), an established provider of premier hemp seed foods for more than 15 years. In this partnership, the two companies are collaborating to develop a hemp-based nutraceutical and nutritional products line. Per the pact, Relevium has exclusive distribution rights for any future products through its portfolio of brands via popular and global e-commerce platforms such as Amazon and Jet.com.
Elsewhere, Relevium made its first move into big data and artificial intelligence, engaging Montreal-based agileDSS as a data architect for the purpose of developing a consumer trend recommendation engine, a solution for optimizing and automating the product development cycle. The plan is to transition away from human interpretation of data and use artificial intelligence to evaluate demand for new products and the best demographics for product launches ahead of developing trends.
While many may think of Silicon Valley in California as the global hotbed for tech, Montreal is quickly emerging as a global hub for data analytics and artificial intelligence. This is evidenced by investments by Google (NASDAQ:GOOGL) to open an AI lab in the city, Microsoft (NASDAQ:MSFT) saying it is buying Montreal-based AI firm Maluuba and Montreal-based startup incubator Element AI announcing a whopping $102 million Series A round.
The phrase “right place, right time” may be often overused, but such is not the case here with Relevium looking to tap local talent to build next-generation technology to make the most informed decisions on what consumers want and where by plugging into the power of big data and AI.
Relevium remains highly overlooked by most of the investment community, but not by insiders who have plenty of skin in the game. BioGanix founder Albertus Petrus Engelbrecht rolled his profitable company into Relevium for cash ($2.6M up front, $675K in 12 months), $675K in stock up front and a $2.1M convertible note, demonstrating his belief in the future of the company. Considering the conversion price for Engelbrecht’s note is at C$0.1396, he is obviously optimistic that shares are going to maintain current levels (C$0.155) and appreciate going forward.
Overall, insiders hold 33% of the 65 million shares outstanding, leaving a public float of approximately 29.9 million, enough shares to keep the stock liquid, but few enough to mean that even slight buying pressure can move shares quickly.
Relevium is aggressive in executing on a compelling business model targeting large and growing market opportunities, with the new AI initiatives particularly compelling with its implications to make succinct and prescient decisions in product development and launch. When taking a closer look at health and wellness, investors should take note that there is a quickly rising appreciation for self-care and holistic approaches, with consumers increasingly looking to e-commerce to purchase products. These are exactly the areas that Relevium, with its sub $10M market cap, are squarely pointed for growth, giving them the opportunity to grow long legs and garner market attention in the near term.
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Full Disclosure: Relevium Technologies Inc. is a paid client of Stockhouse Publishing.