Managing Partner, VRS (Valuation & Research Specialists)

VRS (Valuation & Research Specialists)

Financial analyst specializing on corporate valuation. Long-term experience in analyzing and valuing listed and non listed companies in a wide range of business sectors in Europe, North America and internationally. Some of the sectors covered are financial services, industrials, high technology and real estate. Certified Equity Analyst by the Hellenic Capital Market Commission, Greece. Member of the Hellenic Association of Certified Securities Analysts (HACSA), Greece. Associate Member of the Chartered Institute for Securities & Investment (CISI), UK.

Specialties: Applying methods in corporate valuation, developing valuation models and writing equity research and valuation reports. Consulting services to companies with regard to their valuation drivers and potential corporate value, utilized in corporate deals such as mergers, acquisitions and sale of businesses. Specialized financial translations.

Managing Partner

Valuation & Research Specialists (VRS) is a boutique financial advisor with more than 17 years of experience in Corporate Valuation and Finance, and a diversified client base including some of the largest Companies in Greece.

Since 2002, VRS has completed more than 200 engagements in the areas of business valuation and financial analysis for more than 100 clients in a wide range of industries.

VRS has been honored to work with small and large private and publicly traded companies in Europe and overseas.

Boutique Financial Advisor

Equity Bottom-Up

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<h2>MAPLE LEAF FOODS Inc.</h2>
<h3>Equity Research Flash Note</h3>
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<p><strong>Corporate &amp; Investment Highlights</strong></p>
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<li>Maple Leaf Foods recorded a gross profit of CA$703 mn for 2020, representing a 19% increase from 2019. The company has therefore, successfully adapted to supply and other issues that it faced during the Covid-19 pan- demic. However, the very nature of the almost essential industry that the company operates in, means the com- pany was less impacted in demand shortages than other industries, for example those in consumer discretionary. The estimates for 2021’s annual gross profit ranges around CA$787 mn and CA$910 mn for 2022. This shift is also evident when comparing annual sales between the two fiscal years, with 2020 sales (CA$4,304 mn) being significantly higher from 2019 (CA$3,942 mn) by 9%. As for the sales, our projection for the next two fiscal years is CA$4,549 mn and CA$4,790 mn for 2021 and 2022, respectively. Following this upward trend, in 2020, EBITDA increased by 24% from CA$321 mn to CA$398 mn, EBT increased from CA$87 mn to CA$160 mn and EATAM increased from CA$75 mn to CA$113 mn.</li>
<li>Both the Gross Profit, EBITDA, EBT and EATAM margins are set to increase in 2021 and 2022 as a result of the requirement for greater safety measures and sanitation in the manufacturing processes reducing, as the compa- ny is becoming more used to dealing with the new requirements imposed on them from the pandemic. However, it is expected that the EBT and EATAM margins will increase at a lower rate due to higher depreciation and amor- tization and interest expenses of the company.</li>
<li>Maple Leaf Foods operate on two main revenue sources: Meat Protein and Plant Protein. These represent 95% and 5% of the gross revenue, respectively. The company conducts most of its business operations in Canada, the country in which it is listed; this accounted for 72% of its revenue in 2020. Nonetheless, Maple Leaf Foods do have operations in other countries too, most notably the United States, Japan and China, which accounted for 12%, 10% and 3% of its revenue respectively in 2020. The final 3% of the company’s revenue in 2020 came from a number of other countries across the globe.</li>
<li>Capital expenditure increased dramatically in 2020 at CA$491 mn, compared to CA$271 mn in 2019. Maple Leaf Foods has stated that Capital Expenditure is expected to increase in 2021 to a figure between the region of CA$550 mn and CA$ 650 mn.</li>
<li>Debt amounted to CA$906 mn as of December 31st 2020, compared to CA$742 mn in 2019. The company’s debt was comprised of long-term debt, which amounted to CA$745 mn and CA$538 respectively. However, the com- pany did take on lease obligations in 2019. The long-term payable aspect of the leases reduced from CA$204 mn in 2019 to CA$161 mn in 2020. The increase in debt helped to fund the additions to capital expenditures of the company between these two years. We believe that the company will generate an increased amount of cash from operating activities (US$274 mn and US$395 mn) for the next two fiscal years, but we still expect debt to in- crease to CA$1,500 mn in 2021 and CA$1,580 mn in 2022 to continue to fund the growing capital expenditures.</li>
<li>Dividends have been consistently paid by Maple Leaf Foods over the last nine years. We expect the dividend payout ratio to remain the same and thus, dividends to increase with EATAM from the current CA$79 mn in 2020 to CA$90 mn in 2021 and rise further, to CA$100 mn by 2022. Nonetheless, it is important to note the rise in debt that the company has taken on, including its lease obligations. As a result of this, the management may be reluc- tant to increase dividend payments to ensure the company has sufficient cash to fulfil its obligations over the next few years.</li>
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MAPLE LEAF FOODS Inc.
Equity Research Flash Note




Corporate &amp; Investment Highlights

Maple Leaf Foods recorded a gross profit of CA$703 mn for 2020, representing a 19% increase from 2019. The company has therefore, successfully adapted to supply and other issues that it faced during the Covid-19 pan- demic. However, the very nature of the almost essential industry that the company operates in, means the com- pany was less impacted in demand shortages than other industries, for example those in consumer discretionary. The estimates for 2021’s annual gross profit ranges around CA$787 mn and CA$910 mn for 2022. This shift is also evident when comparing annual sales between the two fiscal years, with 2020 sales (CA$4,304 mn) being significantly higher from 2019 (CA$3,942 mn) by 9%. As for the sales, our projection for the next two fiscal years is CA$4,549 mn and CA$4,790 mn for 2021 and 2022, respectively. Following this upward trend, in 2020, EBITDA increased by 24% from CA$321 mn to CA$398 mn, EBT increased from CA$87 mn to CA$160 mn and EATAM increased from CA$75 mn to CA$113 mn.
Both the Gross Profit, EBITDA, EBT and EATAM margins are set to increase in 2021 and 2022 as a result of the requirement for greater safety measures and sanitation in the manufacturing processes reducing, as the compa- ny is becoming more used to dealing with the new requirements imposed on them from the pandemic. However, it is expected that the EBT and EATAM margins will increase at a lower rate due to higher depreciation and amor- tization and interest expenses of the company.
Maple Leaf Foods operate on two main revenue sources: Meat Protein and Plant Protein. These represent 95% and 5% of the gross revenue, respectively. The company conducts most of its business operations in Canada, the country in which it is listed; this accounted for 72% of its revenue in 2020. Nonetheless, Maple Leaf Foods do have operations in other countries too, most notably the United States, Japan and China, which accounted for 12%, 10% and 3% of its revenue respectively in 2020. The final 3% of the company’s revenue in 2020 came from a number of other countries across the globe.
Capital expenditure increased dramatically in 2020 at CA$491 mn, compared to CA$271 mn in 2019. Maple Leaf Foods has stated that Capital Expenditure is expected to increase in 2021 to a figure between the region of CA$550 mn and CA$ 650 mn.
Debt amounted to CA$906 mn as of December 31st 2020, compared to CA$742 mn in 2019. The company’s debt was comprised of long-term debt, which amounted to CA$745 mn and CA$538 respectively. However, the com- pany did take on lease obligations in 2019. The long-term payable aspect of the leases reduced from CA$204 mn in 2019 to CA$161 mn in 2020. The increase in debt helped to fund the additions to capital expenditures of the company between these two years. We believe that the company will generate an increased amount of cash from operating activities (US$274 mn and US$395 mn) for the next two fiscal years, but we still expect debt to in- crease to CA$1,500 mn in 2021 and CA$1,580 mn in 2022 to continue to fund the growing capital expenditures.
Dividends have been consistently paid by Maple Leaf Foods over the last nine years. We expect the dividend payout ratio to remain the same and thus, dividends to increase with EATAM from the current CA$79 mn in 2020 to CA$90 mn in 2021 and rise further, to CA$100 mn by 2022. Nonetheless, it is important to note the rise in debt that the company has taken on, including its lease obligations. As a result of this, the management may be reluc- tant to increase dividend payments to ensure the company has sufficient cash to fulfil its obligations over the next few years.










MAPLE LEAF FOODS Inc: Equity Research Flash Note