GDNP.V - Bullish.


Good Natured Products Inc (GDNP.V) produces and distributes one of North America's widest assortments of better everyday products® made from the highest possible percentage of renewable, plant-based materials and no BPAs, phthalates or other chemicals of concern potentially harmful to human health and the environment.

GDNP.V offers over 400 products and services through wholesale and retail channels, including e-commerce stores. From plant-based home organization products to compostable food containers, bioplastic industrial supplies and medical packaging, we're focused on delivering a great customer experience to make more plant-based products readily accessible to more people as the path to deliver meaningful environmental and social impact..

Coverage was initiated on November 2018 with notes on June 2019. April 2020. and November 2020.


News Releases


Nov. 26 - Announces Quarterly Results for the Three and Nine Months Ended September 30, 2020.


Dec. 1 - Announces Acquisition of Integrated Packaging Films: a leading rollstock sheet extruder with over 20 years' experience, for consideration of approximately $16.7 million. The Acquisition will be satisfied by payment of $12.5 million in cash, the issuance of 833,467 in common shares of the Company at a deemed price of $0.47 per Common Share, and the issuance of a $3.3 million vendor take-back note, subject to customary working capital adjustments.


IPF's customers serve a diverse set of end markets, including electronics, retail, industrial, food and medical packaging. IPF currently serves nearly 100 customers from a dedicated 32,000 square foot leased facility on 2.9 acres of land. Customers are primarily located in the northeast and midwest United States and Eastern Canada.


IPF generated trailing twelve-month ("TTM") revenue ending September 2020 of approximately $17.0 M.


Bought Deal Private Placement of Common Shares: Entered into an agreement with Canaccord Genuity Corp. to act as lead underwriter and sole bookrunner pursuant for a bought deal private placement basis, 8,520,000 Common Shares at an issue price of $0.47 per Common Share to raise aggregate gross proceeds of $4,004,400.


Dec. 17 - Announces Closing of its Bought Deal Private Placement: issued 8,520,000 common shares in capital of the Company at an issue price of $0.47 per Common Share for gross proceeds of $4,004,400.


The net proceeds of the Offering are expected to be used for completion of the acquisition of IPF Holdings Ltd. and associated transaction and integration expenses, as disclosed in the Company’s news release of December 1, 2020.


Dec. 22 - Announces the Closing of its Acquisition of Integrated Packaging Films: Closed the strategic acquisition of, through a wholly owned subsidiary, IPF Holdings Inc. dba Integrated Packaging Films (“IPF”), for $16.7 million.


Jan. 12 - Announces Preliminary Unaudited Results for Full Year 2020 and the Three Months Ended December 31, 2021:


FY2020 is anticipated at $16.4 million to $16.7 million, an increase of 62% to 65% compared with the year ended December 31, 2019. The Company expects to release its audited FY2020 financial results in April 2021.


Reported revenue for Q4 2020 is expected to be between $5.0 million to $5.3 million, an increase of 98% to 110% compared with the fiscal quarter ended December 31, 2019.


Jan. 19 - Plant-Based Better Bites Bakery Switches to good natured(R) Packaging for National Retail Distribution: Better Bites has a total of 13 products from bite-sized cake bites to single serve cupcakes, that are distributed to some of America's leading grocery retailers including Kroger, Whole Foods Market, Super Target, Costco and H-E-B.


Jan 26 - Issues Annual Letter to Shareholders:


To support our 2021 plans and beyond, we’re also repositioning and enhancing our key executive team to align with our growth strategy objectives. Our current Vice President of Finance, Kevin Leong, will assume the role of Chief Financial Officer, effective February 1, 2021. Current Chief Financial Officer and Executive Vice President of Operations, Don Holmstrom, will take on the new role of Executive Vice President of Corporate Development, Strategic Partnerships and Capital Planning effective February 1, 2021 with a focus on our acquisition pipeline.


We would also like to formally introduce our owners to Jon Roby, formerly of Nike & Under Armour, who transitioned from our advisory board to assume the new role of Vice President of Operations in September 2020.


Feb. 9 - Announces $15 Million Bought Deal Offering and Debt Retirement: 12,500,000 common shares in the Company at a price of $1.20 per Offered Share for aggregate gross proceeds to the Company of $15,000,000 .


Business Development Bank of Canada Debt Retirement Transaction: Entered into an agreement with BDC Capital inc., a subsidiary of the Business Development Bank of Canada (“BDC“) for the conversion of $2.5 million USD of the Company’s existing long term credit facility into Common Shares at the Issue Price.


Feb. 10 - Announces Upsize to Bought Deal Offering: Agreed to purchase, on a bought deal basis, 16,750,000 common shares in the Company at a price of $1.20 per Offered Share for aggregate gross proceeds to the Company of $20.1M.


Feb. 24 - Named Top Performer on TSX Venture Exchange: Named to the 2021 TSX Venture 50.


Mar. 4 - Announces Closing of its $23.1 Million Bought Deal Offering & Debt Retirement: Issued 19,262,500 common shares at price of $1.20 per common share for gross proceeds of $23,115,000. Insiders of the Company subscribed for a total of 41,200 Offered Shares for total gross proceeds of $49,440 under the Offering.


The net proceeds of the Offering are expected to be used by the Company for potential future acquisitions, general working capital purposes, and capital expansion projects.


BDC Capital inc. Debt Retirement: Conversion of $2.5 million USD (at an exchange rate of $1.2753 CAD/USD, being the Bank of Canada end of day exchange rate of February 8, 2021) of the Company's existing long term credit facility into Offered Shares at the Issue Price. The Company issued 2,656,875 Offered Shares to BDC as part of the transaction, which increased its total ownership in good natured® to 12,323,542 Offered Shares. In addition, the Company will pay US$738,311 in cash to BDC to further reduce its outstanding debt to BDC.


Mar. 12 - Announces Grant of Equity Incentive Compensation: Options to purchase 687,000 common shares were granted, with an exercise price of $1.29 per common share. Twenty-five percent (25%) of each grant vests on March 11, 2022 with the balance vesting in equal monthly increments over the following three years.


Also granted: a) 128,000 DSUs, b) 963,710 PSUs, and c) 198,250 RSUs . Each DSU, PSU and RSU entitles the holder thereof to receive either one Common Share, the cash equivalent or a combination of cash and Common Shares.


Mar. 16 - Adds Recyclable Plant-based PET Packaging to Its Growing Product Assortment: Launched Bio-PET, a thermoformed packaging material designed to co-mingle in the recycling stream with petroleum-based packaging.


Bio-PET material will be used to make packaging and extruded rollstock sheet containing 20-30% plant-based content, up to 50% recycled content and is readily accepted in curbside recycling programs in Canada and the US.


Apr. 13 - Announces Preliminary Results for the Three Months Ended March 31, 2021: Reported revenue for Q1 2021 is expected to be approximately $8.0 million, an increase of approximately 160%, compared to $3.05 million for the fiscal quarter ended March 31, 2020. Gross margins for Q1 2021 are expected to be reported between 36% and 38% compared to 36.3% for the fiscal quarter ended March 31, 2020. The Company plans to release full Q1 2021 results in May 2021.


Apr. 30 - Announces Year Ended December 31, 2020 Audited Financials and Schedules Investor Webcast May 5, 2021.


May 5 - Announces Acquisition of Illinois-based Ex-Tech Plastics Inc.: Acquire all of the operating assets of Ex-Tech Plastics Inc., a manufacturer of high quality, rigid plastic sheets, and real estate assets owned by a related company ETP Inc. for cash consideration of approximately $14.1 million USD.


Ex-Tech operates seven different extrusion lines in a dedicated 75,000 square foot facility on 9.5 acres of land. Ex-Tech’s 105 customers serve a diverse set of end markets, including retail, food, and medical packaging. Customers are primarily located in the midwestern and southwestern United States.


Ex-Tech’s FY2020 revenues were $25.8 million USD or approximately $33 million CAD, and when added with IPF’s trailing twelve month revenue of $17.1 million CAD and with our fiscal 2020 revenue of $16.7 million CAD, the Ex-Tech acquisition will nearly again double the revenue of good natured®.


The current management team operating Ex-Tech will be joining the good natured® team. Expected to provide synergies of approximately $1.0 to $1.2 million USD in the twelve months following the close of the acquisition


The Company will begin accounting for 100% revenue and financial results from the acquired Ex-Tech business concurrent with closing which is expected later in May 2021


May 11 - Announces Canada’s First Compostable & Microwavable Plant-based Packaging : Working with its recently acquired in-house manufacturing facilities, Shepherd and IPF, along with our team members across engineering, packaging and product development, the Company today announced it will be presenting its new and innovative Microwaveable To Go Containers at the Grocery and Specialty Foods West virtual trade show.


These containers are designed to be compostable, are made from 97% plant-based materials and contain no chemicals of concern that are potentially harmful to human health and the environment.


May 27 - Announces Quarterly Results for the Three Months Ended March 31, 2021


May 28 - Announces the Closing of its Acquisition of Ex-Tech Plastics: for cash consideration of approximately USD $14.1 million (the “Acquisition”). The terms of the Acquisition were first announced on May 5, 2021.


July 6 - Expands Capacity at IPF to Meet Increased Demand for Plant-Based Compostable and Recyclable Packaging: In line with plans announced in Dec. 2020 and in connection with the acquisition of Integrated Packaging Films, good natured® has invested to expand the facility's annual production capacity by 50%, to 33 to 35 million pounds annually.


The Company has entered into a purchased agreement for a high-speed extruder which is expected to be installed in August 2021 and be operational in the fourth quarter of 2021.


The new high-speed production line has an output of 1,800 to 2,000 pounds per hour versus the existing production line output of 800 pounds per hour, more than doubling the production output per hour with similar operational costs levels. The new line will replace the existing Line 4 and add roughly 9 million pounds of net new capacity.


July 20 - Announces Preliminary Results for the Three and Six Months Ended June 30, 2021:


Expects to report revenue for Q2 2021 in the range of $12.0 million to $12.4 million, an increase of approximately 225% to 240%, compared to $3.7 million for the fiscal quarter ended June 30, 2020.


Reported revenue for H1 2021 is expected in the range of $19.9 million and $20.3 million compared to $6.7 million for the six-month period ended June 30, 2020.


Summary


GDNP.V has been re-rated (again) by the market in the last eight months. Going from a low of $0.28 cents all the way up to a recent multi-year high of $1.98. Currently, valuation is hovering slightly north of the $1.00.


Acquisitions

December 2020, GDNP.V acquired Integrated Packaging Films (IPF) for $16.7M. IPF had a TTM revenue of $17M.


IPF's customers serve a diverse set of end markets, including electronics, retail, industrial, food and medical packaging.

IPF currently serves nearly 100 customers from a dedicated 32,000 square foot leased facility on 2.9 acres of land.


May 2021, GDNP.V acquired all the operating assets of Ex-Tech Plastics, a manufacturer of high quality, rigid plastic

sheets, and real estate assets for a cash consideration of roughly $14.1M USD.


Ex-Tech operates seven different extrusion lines in a dedicated 75,000 square foot facility on 9.5 acres of land. Ex-Tech’s

105 customers serve a diverse set of end markets, including retail, food, and medical packaging. Customers are primarily

located in the midwestern and southwestern United States.


Initiatives

GDNP.V announced two product launch and expanded its capacity at IPF to meet increasing customer demand.


Product launch

March 2021, GDNP.V introduced food safe Bio-PET, a thermoformed packaging material designed to co-mingle in the recycling stream with petroleum-based packaging.


Bio-PET material will be used to make packaging and extruded rollstock sheet containing 20-30% plant-based content, up to 50% recycled content and is readily accepted in curbside recycling programs across both Canada and the US.

May 2021, GDNP.V disclosed its first compostable and microwavable plant based packaging. Made from 97% plant-based materials and contains no chemicals of concern and harmful to humans and the environment.


This is one of the first available hot food packaging options on the market that combines the zero-waste benefits of commercial composting with affordable price points.


Capacity Expansion

GDNP.V recently expanded capacity at IPF to meet growing demand of plant based compostable recyclable packaging. The expansion will increase the facility's annual production capacity by 50%, to 33 to 35 million pounds annually.


The Company has entered into a purchased agreement for a high-speed extruder which is expected to be installed in August 2021 and be operational in the fourth quarter of 2021.


Financing

December 2020, a bought deal of $4M (8.52M share at $0.47 cents) was completed towards the acquisition of IPF.


February 2021, another bought deal for $15M along with a debt retirement initiative was announced. The next day, the offer was upsized to $20M and it eventually closed within a month oversubscribed at $23M; 19.2M shares at $1.20.


The net proceeds of the Offering are expected to be used by the Company for potential future acquisitions, general working capital purposes, and capital expansion projects.


Not only did the company repay BDC Capital Inc, BDC Capital Inc. raised its ownership of GDNP.V shares to 12.3M

In total, GDNP.V raised north of $24M in the last eight months reflecting an interest from institutional investors.


Earnings

In the last eight months, three quarters were officially reported namely Q3 2020, Q4 2020 and Q1 2021.

Revenue for GDNP.V accelerated drastically from $4.65M in Q3 2020 to $7.0M in Q1 2021. In the same period, Net Income (Loss) went down from -1.71M to -1.9M. Granted, acquisitions are to be factored in the growth in revenues but the performance of the Net Income (Loss) is impressive and reflect GDNP.V's ability to efficiently scale.


Comparing FY 2020 revenue with FY 2019 also shows a significant growth. However, Q4 2020 Net Income (Loss) were significantly higher than Q3 2020 or Q4 2019 due to IPF's acquisition, as well as, others one time costs.


In the fourth quarter our logistics and warehousing expenses increased due to a planned plant-based resin inventory build we executed ahead of capacity increases, new product launches and customer material transition at Integrated Packaging Films. These were purposeful decisions made to support our future growth initiatives.” GDNP.V's CEO.


Recently, GDNP.V gave some preliminary results for Q2 2021. An estimated revenue of $12M for Q2 2021, would put a H1 2021 revenues at $19.9M which already eclipsed FY 2020 ($16.71M). Net Loss figures will be watched closely.


Appointments

Earlier in 2021, GDNP.V made a number of organizational changes to align with its growth strategy objectives. VP of Finance, Kevin Leong was promoted to Chief Financial Officer (CFO), Don Holmstrom, the previous CFO and EVP Operations moved over to EVP of Corporate Development, Strategic Partnerships and Capital Planning to focus on the acquisition pipeline. Jon Roby transitioned from GDNP.V's advisory board became Vice President of Operations.


Options

In March 2021, 687,000 options to purchase common shares were granted at $1.29. In addition other incentives were awarded: a) 128,000 DSUs, b) 963,710 PSUs, and c) 198,250 RSUs. Each DSU, PSU and RSU entitles the holder thereof to receive either one Common Share, the cash equivalent or a combination thereof.


In Short

In the past eight months GDNP.V's valuation has drastically changed. Revenues doubled in Q1 (2021 vs. 2020) and are set to quadruple in Q2 (2021 vs. 2020). Much of this variance is the result of acquisitions, on top of organic growth.


The ability to contain Net Income (Loss) through this growth phase have been impressive to date and will certainly impact valuation going further. Hence, brokerages have been active in setting price targets: Cannacord ($1.90, July 20th), Beacon ($2.15, July 20th) and Raymond James ($2.00, July 21st).


GDNP.V closed at $1.03 today, still significantly below the amount of the last bought deal ($1.20). While sentiment and valuation have been flat of late, the case for GDNP.V still remains very bullish.

DISCLAIMER: The work included in this article is based on current events, technical charts, and the author’s opinions. It may contain errors, and you shouldn’t make any investment decision based solely on what you read here. This publication contains forward-looking statements, including but not limited to comments regarding predictions and projections. Forward-looking statements address future events and conditions and therefore involve inherent risks and uncertainties. Actual results may differ materially from those currently anticipated in such statements. The content of rally is provided for informational and entertainment purposes only and is not a recommendation to buy or sell any security. Always thoroughly do your own due diligence and talk to a licensed investment adviser prior to making any investment decisions - rally cannot take responsibility for your investment decisions.

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