something I wrote up for social media groups.
LRK
Below is a post I made Mid last year. This stock has been one of my best performers and an investment I never lose a nights sleep over due to its Stella and continued performance. So I thought Id do a bit of an update as I still see strong value here. I have been adding shares along the way over the past months and this is now my 2nd largest holding.
-Director recently bought $330k worth of shares on market bringing him to a total of 5.54% of the company.
-Ord Minnett recently put out a large report on the company and gave it a BUY with a price target of $3.18. Normally I take these reports with a grain of salt but I checked the broker data and they have been buying up shares over the past few months and hold over $1million worth at least.
- Mentioned in AFR and the above mentioned report is the strong change of take over by a larger player in the spirits game. I work around this industry and this is the norm and one of the reasons I was drawn to the company, I strongly believe this company will be taken over for at least 100% more than the current value at some stage, at a minimum.
- Company is due to report first profits this year so no more capital raises or risk of going under.
- Company will be holding over $120 million in whisky stock alone this year which is around current market cap. Whisky is an asset class that has exploded over the past decade and is quite liquid...literally haha. This in my opinion gives the company a current EV value of close to $0!!!!
Worth a look guys and happy to send anyone the Ord Minnett report or broker data if requested
Remember this is a long term investment as its super tightly held and illiquid. You wont make 100% in a day, but most likely will make 100% + in a year or two.
Bit of background before I get into this little analysis.
I have collected whisky for around 10 years now, owned a whisky bar and have traded in rare whisky for many years. It all started when a friend mentioned he was trying to import Japanese whisky and how it was becoming popular in Australia. A bit of research and I realised how quickly demand was growing for whisky world wide, in particular Asia, and because of rules surrounding whisky aging supply stood no chance of keeping up. Hundreds of bottles later and filling a large portion of my house, I had stocked up and just had to wait. Today some of the bottles I bought are now worth over 2000% what I paid years ago, hence my interest in lark today.
Worth noting I wrote this prior to the announcement today so may be a little out of wack, sorry for my shit spelling and grammar haha .
Australia's original Whisky brand with the Founder Bill Lark considered the father of Australian whisky.
Share price - $1.34
Market Cap - $73 million approx
Debt - $5m approx
Note: The company underwent a share consolidation and name change hence the random spike in price. This company has only recently begun trading as LRK.
Revenue
2018 - $178,989
2019 - $2,818,802
2020 - $3,818,689
Revenue growth from 2019 to 2020 was a 35% increase in revenue.
Company looking to be cash flow positive by first quarter 2021
Stock on hand worth more than current market cap
Presently making Approx. 4,300 ltrs of whisky per Week @ 63.4% ABV.
Currently $88,033,126 worth of stock on hand in maturation.
Fast growing industry : Whisky market growing at 4% PA with the premium end growing at 8% ( Larks sector)
Strong links to asian market which is the fastest growing whisky market in the world through board member Lauret Ly. Lark’s landscape remains positive with a focus to expand into the Asian market in the coming years once supplies are large enough to enter the market successfully. Lark will be launching Lark Symphony in FY21 which is a blended whisky aimed at the Asian market and is easier to produce, providing a cheaper product and faster ramp up of supply.
Current stockists include all the big names -Dan Murphys, Vintage Cellars, BWS and Liquorland.
Strong management including
Geoff bainbridge CEO (5% holder) - 10+ years at Fosters, Ex-MD Spirits. Ex-founder of Grill’d Burgers and Bounce
David Dearie - Ex-CEO Treasury Wine Estates
Warren Randall (4.4% holder) - Owner and Manager Seppelsfield Wines
Laurent Ly (8.7% holder through Ace Cosmo) - HK Based Fund Manager
Laura McBain - Ex-CEO Bellamy’s Organic
Tier 1 Board with proven track record, contacts that support strong growth opportunities and ties to distribution channels. CEO comes from tight margins industry with strong focus on growth.
Pros -
Product in high demand, demand outstrips supply
Scaling quickly with product on hand increasing quickly compared to peers
Tier 1 Board
Strong Revenue Growth expected 100% growth!
Strong Moat for new entrants into market
Cash flow positive 2021!
CONS -
Illiquid due to tight holding by insiders
Stock takes time to mature so supply can not be ramped up quickly
Past Coup by large shareholders on Board
Small Cap
Only 17.5 % of the shares on issue are available for retail shareholders.
Company essentially run as a private enterprise with insiders and their affiliate companies holding over 80% of the stock.
I rate this stock a buy as it is in a high demand market and is scaling quickly to become profitable. It has also seemingly been run for the sole purpose of making the directors and major holders richer. I would expect them to scale production to move into the asian market asap, get noticed by larger global companies and look to get taken over long term.
This stock is a no brainer for me and is just a game of patience, the longer you wait the more your product is worth