DALLAS, TX / ACCESSWIRE / January 17, 2018 / Input Capital Corp. (TSX-V: INP)
COMPANY DESCRIPTION
Input Capital Corp. ("Input" or "the Company") is a Canadian Grain Commission licensed and bonded grain dealer that has adapted the streaming business model from
the mining and metals industry and applied it to agriculture. The result is an innovative, growth-oriented agriculture streaming company with a focus on canola, the largest and most profitable crop in Canadian agriculture. Input enters into multi-year streaming contracts with farmers across western Canada and generates revenue by selling the canola purchased from these farmers to well-established grain handling companies and canola crushing plants located across Alberta, Saskatchewan and Manitoba; as last reported, Input had 375 active streaming contracts in place. Additionally, Input recently launched a new mortgage stream initiative, with over $25M in mortgage streams approved to date. Input is headquartered in Regina, Saskatchewan and has 24 full-time employees (report presented in CAD$).
SUMMARY
Over the last two years, this well-managed, financially disciplined company has fine-tuned its business model to decrease risk and increase Input's number of revenue producing canola streams; additionally, the Company has continued to evolve in order to address the needs of farmers by introducing new offerings.
- New initiatives: the marketing stream and mortgage stream - At the beginning of 2017, Input launched the marketing stream, an alternative offering to the original capital stream, resulting in a dramatic expansion of its customer base. With significant interest, Input quickly signed up over 160 new producers in the first 9 months. In January 2018, a mortgage stream pilot was also announced, introducing a conventional farmland mortgage product that uses canola streaming as a payment vehicle; Input has approved over $25 million in mortgage streams to date, with over $11M funded by the end of Q2 FY18 and another ~$14M in Q3 FY18.
- Improved portfolio - The marketing stream focuses on aggregating a larger number of smaller contracts, resulting in a more diversified and stable portfolio. While with both the capital and marketing stream offerings Input makes a deposit, and the producer commits to delivery of a specified amount of canola (tonnes) each year over the life of the contract, the marketing stream differs from the capital stream by offering smaller deposits with the crop payment tied largely to the sales price, rather than a fixed price. Thus, marketing streams have the potential to generate higher cash returns at lower risk.
- Large addressable market - By providing a wider range of offerings to farmers, recent initiatives have significantly expanded the Company's addressable market. Given Input's current market penetration of over 300 farms and its impressive momentum since the beginning of the year, the Company has a sizable opportunity to make the more than 50,000 Canadian canola farmers into Input clients.
- Growth opportunities in canola farming - The steady increase in the global population, particularly in developing countries, combined with developed countries' demand for healthier oils, are two factors driving the steady growth of canola. In western Canada, one-third of the cultivated acres are planted with canola, and Canada as a whole exports 90% of its canola production, which accounts for approximately 70% of all global exports.
- Attractive IRR - Input's streaming contracts provide attractive returns. The Company's legacy capital stream contracts generate IRRs in the 15% to 20% range, and the newer marketing contracts generate IRRs in the 30% to 40% range. Returns on the newer mortgage streams will be maximized with margining via term debt tied to mortgages.
- Insider ownership - Insider ownership has increased to 28% on a fully diluted basis as of 3/31/18; additionally, Input announced a normal course issuer bid in December 2017 and has since purchased and cancelled ~534,000. Notably, the Company pays a regular dividend to shareholders, which currently is yielding ~3%.
- Valuation - For the investor looking to benefit from the growing global canola market with reduced risk, Input Capital should offer that near-term appreciation as INP.V begins to trade more in-line with comps; see page 7 for further details.
The full report can be accessed by clicking the following link:
http://stonegateinc.com/reports/INP.V%20Update%20JUNE%202018%20Final.pdf
About Stonegate Capital Partners
Stonegate Capital Partners is a Dallas-based corporate advisory firm dedicated to serving the specialized needs of small-cap public companies. Since our inception, our mission has been to find innovative, undervalued public companies for our network of leading institutional investors who seek high-quality investment opportunities.
SOURCE: Stonegate Capital Partners