Wide Open Agriculture Ltd

WOA Details
 
Final Market Testing for Western Australian Oat Milk: Wide Open Agriculture Ltd (ASX: WOA) is engaged in the development of the farmland portfolio and food brand. The company has recently opened its online sales portal for direct sales of grass-fed, regenerative beef and lamb to the consumer. As on 2 April 2020, the market capitalization of the company stood at $9.53 million. The company has announced that it has completed an industrial trial of 5,000L to produce regenerative oat milk. The company projects that consumer intolerance to dairy, environmental concerns and potential health benefits of plant-based products will drive the worth of the oat milk to ~US$1.6 billion in 2024. WOA is currently conducting the final test and is focusing on the taste, color and texture of the product.

Growth of 46% in Quarterly Revenue: WOA delivered quarter on quarter revenue growth, with Q2 revenue increasing by 46% to $290k. These results are the highest in the company’s history, bringing the total sales for H120 to $490k and reported a gross profit of $96.2k. In the same time span, it reported a growth of 64% in restaurant customers sales with over 50 regular customers from premium restaurants and food service outlets. The company has also launched its flagship regenerative food brand, Dirty Clean Food in more than ten retail locations and is focusing on building long-term relationships with retailers.


1H20 Financial Highlights (Source: Company Reports)

Future Expectations and Growth Opportunities: Over the second quarter, Wide Open Agriculture Ltd has established multiple sales channels that present an ideal pathway to enter new markets in Australia and South-East Asia. The company has also stated that the outbreak of COVID-19 has not significantly impacted the business operations, and WOA is experiencing continued sales push. It stated that monthly online sales orders have witnessed an increase from 51 in February to 388 in March 2020 and hence expects Q3 FY2020 revenue to exceed Q2 FY2020.

Food service orders from restaurants and cafes have witnessed a fall, but the decline is likely to be compensated by the growth in the retail and online sales channels. This positions the company for sustained sales. The company is aiming at improving its operational efficiencies, diversifying product lines and growing distribution channels. WOA is also looking at initiatives that will enable increased sales and marketing activity in WA and other states, domestically.

Stock Recommendation: As per ASX, the stock of WOA gave a negative return of 25% in the past one year but a positive return of 12.5% in the last one month. The stock is inclined towards its 52-weeks’ high level of $0.190. During 1H20, Debt/Equity ratio of the company stood at 0.39x, higher than the industry median of 0.19x. In the same time span, EBITDA and net margin of the company witnessed a substantial improvement over the corresponding period in last year. On TTM basis, the stock is trading at a price to book value multiple of 2.5x, lower than the industry median (Consumer Non-Cyclicals) 1.3x. Considering the volatility in stock price, lower trading volumes and current trading levels, higher price to book value multiple, decent growth in revenue despite softer market conditions and modest outlook, we have a watch stance on the stock at the current market price of $0.135, on 2 April 2020. 
 
 
WOA Daily Technical Chart (Source: Thomson Reuters)

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