[INTERVIEW] Wide Open Agriculture to become world’s largest lupin protein producer, page-9

It was a no brainer at $0.13 I reckon.

Market cap of circa $18m for effectively two businesses being DCF and Buntine.

DCF is generating $11.5m in revenue, having grown for 16 consecutive quarters with yoy sales growth of 17% per their last quarterly. Granted negative margins currently but not unexpected for a growth business that requires scale. Jay hinted towards valuations in the sector around circa 2x revenue (although I don’t fully agree with his statement that Instacart is indicative as this is more a tech business than a food distributor), which would make this division alone worth more than the current market cap before even considering Buntine. I think a more conservative assumption would be 1x revenue, but he mentioned they’re doing a strategic review to unlock the value of this business which is consultant’s speak for a sale so he would likely be in discussions with investment bankers who would understand the market value better than us and probably indicated something around this level.

As for Buntine, even before any local production deal, if they can get the Prolupin factory up to 1000tpa by next FY and achieve even 60-80% of the pricing they indicated in the interview that Prolupin were previously selling for (I think Jay mentioned 15-20k Euros per tonne), we’re talking circa $20m of revenue there alone on relatively high margins given the low input prices of circa $600 per tonne for Lupin.

So if you trust Jay’s hint at a valuation for DCF, a buy at this price is effectively a free option on the Buntine division but even if you’re being conservative, you’re valuing their new Buntine division at less than circa $5-10m which feels way too low despite all the clear implementation risks.

Seems like a no brainer to me but keen to hear alternate views on the above.