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Formerly Solegear Bioplastics, Good Natured products is a
fast-growing company that specialize in bio-plastics. Supported by strong macroeconomic tailwinds and an active management, the company saw is revenues grow from Cdn $2m in 2017 to $60m in 2021. Through acquisitions and organic growth, Good Natured Products has been building a strong product portfolio ranging from take-out containers to pallet stretch wrap and sustainable food packaging. With over 400 products manufactured and sourced through nine North American facilities, the company is actively increasing its customer base. 


Recent highlights

  • Acquisition of IPF in December 2020 and Ex-Tech in May 2021.
     

  • A high-speed extruder is expected to be installed, since August 2021, and be operational in the fourth quarter of 2021. The new high-speed production line has an output of 1,800 to 2,000 pounds per hour versus the existing production line output of 800 pounds per hour, with similar operational costs levels. The new line will add approximately 9 million pounds of net new production capacity.

Analysts price targets

  • Ahmad Shaath, Beacon securities, buy rating with price target of Cdn $2.15.

  • Yuri Link, Canaccord Genuity Corp, Buy rating and a price target of Cdn $1.80.

  • Steve Hansen, Raymond James Ltd, Buy rating, Target 1.50-  High: 1.98- Low: 0.65

More about IPF

Founded in 1997 by the Mechar family, IPF is located in Ayr, Ontario and is a manufacturer of high quality, rigid plastic sheets used to create a variety of products, including thermoformed packaging.
 

" IPF generated trailing twelve-month (“TTM”) revenue ending September 2020 of approximately $17.0 million, adds between $10 and $12 million (unaudited) of total assets to the Company’s balance sheet TTM EBITDA of approximately $3.7 million (2020), the acquisition will be satisfied by payment of $12.5 million in cash, the issuance of $833,467 in common shares of the Company at a deemed price of $0.47  and the issuance of a $3.3 million vendor take-back note."

More about Ex-tech

Founded in 1982, Ex-Tech is located 90 minutes from Chicago in Richmond, Illinois and produces a variety of plastic sheet and film products, including extruded roll stock sheet for thermoformed packaging. Ex-Tech operates seven different extrusion lines in a dedicated 75,000 square foot facility on 9.5 acres of land

"Ex-Tech generated revenue of approximately $25.8 million USD and net income of approximately $1.5 million USD in the calendar year ended December 31, 2020, adds between $11.0 and $13.0 million USD  of total assets to the Company’s balance sheet, Ex-Tech delivered FY2020 adjusted EBITDA2 of approximately $2.6 million USD,  closed the acquisition of all the operating assets of Ex-Tech Plastics Inc. and real estate assets owned by a related company ETP Inc. for cash consideration of approximately USD $14.1 million"

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Burlap's 2 minutes   DDs

 
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  1. Strong revenue growth, 270% yoy, 110%
    5-years CAGR from Cdn $2m in 2017 to $60m in 2021.

     

  2. Management and insiders own 23% of the current float, with decent institutional investments for a Canadian small cap.
     

  3. Analysts buy ratings with price targets offering strong 100%+ upsides. 
     

  4. Strong management with great track records, the team showed commitment and good execution in the last 5 years. 
     

  5. Very strong tailwind from a macroeconomic perspective, especially with the long awaited single-use plastic ban in Canada. 
     

  6. Decent 25% margins, while not being impressive, they are sufficient to grow a sustainable business. 

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  1. Never been profitable since inception.
     

  2. We could see some dilution in the next years as the company try to capitalize on growth opportunities like acquisitions and production capabilities.
     

  3. Past sales growth are not representative of future growth potential, as the company keep getting larger, scaling up will become harder. 
     

Year-end financials are expected before the end of April, we could see 60m in revenues for a 270% yoy growth.

The Catalyst list
 

Where to DD?

 

Last fall, the federal government announced a ban on six single-use plastic items that are set to be phased out across the country by 2022. The list includes plastic grocery bags, straws, stir sticks, plastic cutlery, six-pack rings and food containers made from hard-to-recycle plastics

Burlap's Blog 

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