Deveron UAS (DVR.CN) specializes in yield optimization for agriculture through the usage of drones to collect and analyze data.
We initiated official coverage on June 25th. Since our last note on the company, the following releases were issued.
Sept. 25 - Bonduelle names Deveron UAS as Preferred Drone Partner.
Nov. 15 - Announced partnership with Climate Corporation, a subsidiary of Monsanto Company (NYSE: MON). The objective is to deliver farmers with aerial imagery, combined with analytics, via Climate FieldViewâ„¢ digital agriculture platform.
Nov. 24 - Establishes Advisory Board and grants stock options. Dr. Ian Grant and David F. Masotti named to Advisory Board.
3.5M stock options ( at $0.365) granted to directors, officers, consultants and advisors. Options may be exercised before November 22, 2022.
In our last note, we addressed the issue that the company should provide guidance. We also noted that profitability would be a great attribute to add the company's story. Well, it seems that the company was able to achieve this objective. However, similar to Q2, Q3 earnings were not issued a news release.
Q3 Earnings (Ending Sept. 30th for the last 9 months) showed $174K in drone income. Q3 drone income was $98K vs. $51K in Q2. This represents a sizable increase (86%) over the previous quarter in income, with an estimated acreage flown over of 58,291 or 236 sq km for the last 9 months.
DVR.CN also reported a $2.3M in assets and $740K liabilities. Most of the assets are from financing (private placement - $1.8M) with the remainder (from Boreal Sales $1.2M). Overall, DVR.CN shows a net loss of ($452K) in the past 9 months, but a $80K profit in Q3. Since DVR.CN has $0.72M in cash, we expect that they will probably need to raise funds again in the next six months.
The day after the Q3 earnings were available on SEDAR (Nov. 14), the Climate Corporation's announcement was made (Nov. 15). Subsequently, insiders renewed their options at $0.25 (Nov. 20) : Mr. Carmelo (100K), Mr. Borland (125K) and Mr. Pirie (250K). However, a number of insiders sold shares: Mr. Carmelo, CFO sold (100K) at about $0.30 cents (Nov. 21) and David McMillian, CEO (50K) and James Borland (100K) at $0.33 cents (Nov. 28-30).
Summary
While the number of partnerships established by DVR.CN in the past year is impressive, the drone income generated thus far is small but growing. Adoption seems to be still in "trial mode" for DVR.CN. Nonetheless, GreenCastle Resources (VGN.V), DVR.CN's parent company, continues to accumulate shares and has recently declared a 37% ownership in DVR.CN with recent acquisitions averaging $0.25 cents.
However, the recent insider selling activity caught our attention. The selling also coincides with the seasonal nature of DVR.CN's business. Activities tend to be lower after harvesting and through the winter. This is also reflected in stock price, the 52week low ($0.20) was recorded on February 2nd 2017.
We still believe that DVR.CN is a strategic asset with a high growth potential but we consider fair valuation at $0.25 given the recent developments.
It will be interesting to see how DVR.CN ends the year and performs in the next two quarters. Below is our forecast for the week.
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