KeyStone’s Your Stock Our Take is Partner Jet Corp. (PJT:TSX-V) and Namaste Technologies Inc. (N:TSX-V) and Our Star is Goeasy Ltd. (GSY:TSX).
This week, due to the volume of questions for our Your Stock, Our Take segment, we picked two stocks to look at Partner Jet Corp. (PJT:TSX-V) and Namaste Technologies Inc. (N:TSX-V). Partner Jet is a full service flight management and aircraft sales company capable of operating a wide range of corporate aircraft. The true micro-cap has had a volatile year trading as high as the $0.40 range to a low of just under $0.20. It has taken a hit lately following weaker Q2 2018 financial results. Is it a BUY, SELL, or HOLD? Namaste brands itself as the “Your Everything Cannabis Store™.” Namaste operates the largest global cannabis e-commerce platform with over 30 websites in 20+ countries under various brands. Product offerings include vaporizers, glassware, accessories, CBD products, and the company will soon be selling medical cannabis in the Canadian market, subject to approval by Health Canada. Is it a BUY, SELL, or HOLD? Our Star of the week is Goeasy Ltd. (GSY:TSX), a full-service provider of goods and alternative financial services. The stock is up 10% in the past week – what is driving the surge. And is it an opportunity?
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Now, let’s dig into the show.
I welcome back my co-host, KeyStone’s VP and Senior Analyst, Aaron Dunn.
Brands itself as the “Your Everything Cannabis Store™ – literally putting a trademark beside the phrase.
Your Stock, Our Take
Been following you for quite a while and I attended your seminar in Vancouver. Would love your take on Namaste Technologies?
- Ram in Vancouver.
Namaste Technologies Inc. (N:TSX-V)
Current Price: $1.35
Market Cap: $371.6 million
What does the company do?
Namaste Technologies operates the largest global cannabis e-commerce platform with over 30 websites found in over 20 countries under various brands. Namaste’s product offering through its subsidiaries includes vaporizers, glassware, accessories, CBD products, and the company will soon be selling medical cannabis in the Canadian market, subject to approval by Health Canada.
Key Points:
The stock has been somewhat volatile, with overnight jumps between 5% and 15% happening multiple times in the last month. Since July 18th, over the span of 1 week, it has dropped 10% from $1.50 to $1.35. In the last few months, Namaste has been busy making various agreements and acquisitions. So far in July, Namaste has made an agreement with Indigenous Canadian Medical Dispensaries to provide consultations to over 1.5 million indigenous community members as well as an e-commerce and technology services agreement with BlissCo to provide access to technology platforms. The Company has also, on May 12th, acquired Findify, an A.I. and machine learning company. They have since used the technology gained from this acquisition to power their very recently launched “Uppy Cannabis Journal”, a mobile strain recommendation app.
Recent Quarterly Financials:
- Revenue for the quarter ended May 31, 2018 was $4.1 million, an increase of 31% over $3.1 million in the prior year period.
- Net loss was $8.1 million in the quarter ended May 31st 2018, compared to $3.3 million in the same quarter of 2017.
- Adjusted EBITDA was a loss of $3.8 million in the quarter ended May 31st 2018 compared to a loss of $2.1 million in the same quarter of 2017.
From MD&A:
“The increase in net revenues during the third quarter of 2018 was primarily due to organic growth in the company.”
Our Take:
Current Ratio: 23.06
Cash Ratio: 20.07
Net Cash: $43.9 million
- Very large cash reserves
- Little debt in comparison.
The company has negative earnings, so no P/E or P/EBITDA ratio is possible. The company is seeing growth, but along with the growing revenues are growing losses. The company does have a very liquid looking balance sheet going for it, with over $40 million in cash and little debt in comparison. Growth potential for the Company is there, as is huge impending growth potential for the cannabis industry as a whole. However, with the potential for growth may come volatility and uncertainty, as seen in the volatile nature of Namaste’s share price.
Namaste:
The company is actively engaged with Health Canada in relation to Namaste’s wholly owned subsidiary and Access to Cannabis for Medical Purposes Regulations (ACMPR) Licensed Producer, Cannmart, which awaits its medical cannabis “sales-only” license.
Namaste acquired Findify AB during its third quarter. Findify is a leading artificial intelligence (“AI”) software company, which uses machine learning algorithms to track users’ behavior online in real-time, and provide a more personalized buying experience. Findify’s technology works to provide better recommendations to consumers and to optimize search results that are customized to the user’s choice patterns. The company is working with Findify’s management team to develop a marketing and roll-out strategy that will introduce the technology across Namaste’s e-commerce platform and offer it to other companies in the industry.
Weekly Star
Partner Jet Corp. (PJT:TSX-V)
Current Price: $0.295
Market Cap: $2.7 million
What does the company do?
Through its subsidiary Partner Jet Inc., carries on the business of a full service flight management and aircraft sales company capable of operating a wide range of corporate aircraft. The company’s revenue is generated through aircraft management contracts, charter and sub-charter activities, and aircraft maintenance contracts.
Key Points:
Recent Quarterly Financials:
- Revenue for the quarter ended March 31, 2018 was $3.7 million, a decrease of 11% from the prior year period.
- Net income fell 46% to $79,319 compared to $130,619 in the same quarter of 2017.
- Adjusted EBITDA fell 53% to $90,051 compared to $193,376 in the same quarter of 2017.
Our Take:
Trailing valuations are low – if the company can grow: P/E: 5.57x and P/EBITDA: 3.88x
Balance Sheet is Healthy Current Ratio: 2.04
Current Assets make up 99.5% of Total Assets.
Little to no debt.
Partner Jet has seen falling revenue and earnings since last year. While it has a healthy and highly liquid balance sheet, the company doesn’t describe any specific plans going forward in their MD&A other than a somewhat general statement regarding marketing and expansion.
We also note that the company has done over $2.5 million in Related Party Transactions or business with members of the Board of Directors, shareholders and enterprises which are controlled by these individuals. There is nothing inherently wrong with a related party transaction, but they do raise the Spector of conflicts of interest – something to watch.
The volatility of the stock with no sign of settling in the near-future, combined with the declining revenues and earnings raises red flags as far fitting into our investment criteria.
Weekly Star
Goeasy Ltd. (GSY:TSX)
Current Price: $43.46
Market Cap: $591 million
Star Performance:
The stock was trading for $40.03 on July 11th and rose to $43.80 by July 13th, which was a 9% jump in 2 days. Since then, it has settled at $43.46 (as of 2:02pm July 20th).
What does the company do?
goeasy is a leading full-service provider of goods and alternative financial services and provides everyday Canadians with a chance for a better tomorrow, today. easyfinancial is the Company’s financial services arm, operating in the non-prime consumer lending marketplace and bridging the gap between traditional financial institutions and costly payday lenders. easyhome is Canada’s largest lease-to-own company, offering brand-name household furniture, appliances and electronics to consumers under weekly or monthly leasing agreements through both corporate and franchise stores.
What is driving the stock?
On July 12th, coinciding with the appreciation of the stock, the Company had two announcements.
- The Company announced the pricing of US$150 million of 7.875% senior unsecured notes due 2022. Concurrently with the offering, the Company will enter into a cross currency swap agreement, which after considerations are made, the Canadian dollar equivalent yield to maturity on these notes will be 6.17% per year. The Company intends to use the proceeds to expand its consumer loans receivable portfolio, for general corporate purposes, and for fees/expenses.
- The Company released preliminary unaudited financial results for Q2 ended June 30th. These financial results showed positive momentum.
While the announcement regarding the senior notes points to potential growth, what most likely got investors excited and lead to the appreciation of the stock were the positive preliminary financials.
Financial Results
Q1 2018 compared to Q1 2017
- Revenue was $114.8 million in Q1 2018 compared to $94.2 million in Q1 2017, up 22%
- Net income was $11.1 million compared to $10.3 million, up 8%
- On a diluted per share basis, $0.77 compared to $0.73, up 5%.
- EBITDA of $28.3 million compared to $22.9 million, up 23%.
Q2 2018 select preliminary unaudited financials compared to Q2 2017
- Gross consumer loans receivable portfolio for Q2 2018 was approximately $686.6 million compared to $425.3 million for Q2 2017, up 61%.
- Loan book growth for Q2 2018 was approximately $84.9 million compared to $38.3 million in Q2 2017, up 123%.
- Annualized net charge-offs as a percentage of the average gross consumer loans receivable for Q2 2018 was approximately 12.4% compared to 14.7% in Q2 2017, a decrease of 16%.
“Positive momentum for the business continued in Q2 with record loan book growth and declining loss rates. To reflect this ongoing trend of positive performance, the Company will be revising our three-year targets as previously communicated in our Q1 reporting when we release our Q2 audited results on August 7 2018.”
Conclusion:
P/E: 16.78x (or 14.49x if you adjust out non-recurring and unusual transactions)
P/EBITDA: 6.49x
