Tuesday, 22 January 2013

Catalyst Report: “We View Neptune As Extremely Undervalued.”

Neptune Technologies & Bioressources
Basic Shares: 60.0 million
Fully diluted: 67.5 million
Robin Cornwell of Catalyst Research is taking a strong stand that the market is missing the boat and is sticking with his $7.75 price target on Neptune.

The report’s title sums up several thoughts; “Management Makes Good Progress on Action Plan, NTB Share Price Considered Extremely Undervalued & Could Make NTB Vulnerable to Predator.”

To support his position, Mr. Cornwell states the following:
  • We expect only modest revenue production over the next 12 months (about $12 million run-rate) but see full production resuming by next year (about $45million run-rate).
  • We give full credit to management, which has made significant progress in its recovery action plan.
  • Management indicated that an initial insurance payment of $6 million is expected shortly, which will top up cash to about $40 million.
  • Confidentially agreements with several outsourcers have been entered into, which we believe will conclude with a partnership agreement to help resolve both the short and long-term supply chain of NKO™.
  • Management indicated that the plant construction is expected to begin about March of this year with a nine-month timeline to completion and insurance covering most of reconstruction costs.
  • In fact, Neptune’s market capitalization does not even reflect Neptune’s combined cash position and controlling interest in Acasti (TSX.V-APO:C$2.45, NASDAQ-ACST:US$2.50).
  • In our opinion, this undervaluation seriously exposes Neptune to predators, as it ignores the value of Intellectual Property, insurance, patents, control premiums, distribution agreements and NeuroBioPharm Inc. 
To view the report in its entirety, please click here.