Black Book Presentation Today (STKL)
We are hosting our SunOpta Black Book presentation - "Game Changer" today at 2 PM ET.
Event Details:
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SunOpta recently announced a game changer - the sale of its frozen fruits business for $141M, including a promissory note of $20M. Included in the sale are the primary assets of the business, including two production facilities as well as the inventory. On a trailing 12-month basis, the business had revenue of $263M and EBITDA of $15M. On a forward basis, the business likely would have had losses if the interest expense for the inventory was netted against the income. The frozen fruit business was a drag in several ways – margins, growth, valuation multiple, and leverage. SunOpta’s leverage improves dramatically with the sale to just above 2x forward EBITDA. That provides capacity for a share repurchase plan or more growth capital and upside to the shares. The game-changing event does not change the upside potential for the shares doubling or tripling, but it firms up downside scenarios and enables balance sheet options.
SunOpta reports Q3 results on Wednesday.
ADDING TO THE LONG BIAS LIST (BRBR)
We are adding BellRing Brands to our Long Bias list. BellRing Brands stands out in Consumer Staples with volume growth and a growing TAM.
The company’s Premier Protein brand has many growth drivers that we endorse: 1) GLP-1 drugs are not a challenge – possibly a benefit. 2) The product’s portability, convenience, and healthy attributes are secular winners. 3) Its focus on protein is a secular dietary share gainer.
The valuation implies a long-run rate for convenient nutrition shakes. The additional capacity in 2023 and 2024 will enable growth opportunities in flavors, distribution, and promotions. In the near term, we are mindful of the category’s inflection when capacity enables growth becomes capacity catching up to demand.
We will monitor that inflection, but in the meantime, capturing revenue opportunities could expand Premier Protein’s TAM.
Idaho gets busy (LW)
U.S. packers shipped 7.2M cwt of fresh potatoes in October, up 8.6% YOY. Adjusting for the calendar, the daily shipping rate increased by 3.7%. Much of the growth in the month was driven by Idaho’s 32% increase, while the Columbia Basin decreased by 6%. Idaho’s harvest quality is considered good, and after two years of shortages, the processors will have enough raw product to run the plants at capacity this year. In the past four weeks, Idaho’s Russet potato price has fallen 4.6%. Don’t expect lower spot prices to have much of an impact on overall prices.
