We have a busy show for you this week – in Our Case For / Case Against debate we take a look at unknown, high-growth small-cap, Apollo Healthcare Corp. (AHC: TSX). Apollo is one of the largest private label personal care product manufacturers which saw its sales and profitability skyrocket in 2020 as one of the 3 largest producers of hand sanitizer and private label cleaning products sold at most of the big box retailers including Costco. Aaron argues the bear case, Uncle Brennan is on the bull case and I sit in as judge, jury, and executioner.
In our Your Stock, Our Take Segment, we answer a listener question on Gran Colombia Gold Corp. (GCM: TSX), which engages in the acquisition, exploration, development, and operation of gold and silver properties primarily in Colombia.
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Apollo Healthcare Corp. (AHC: TSX)
Price: $4.29.
Market Cap: $314.154 Million.
Apollo is one of the largest private label personal care product manufacturers which saw its sales and profitability skyrocket in 2020 as one of the 3 largest producers of hand sanitizer and private label cleaning products sold at most of the big box retailers including Costco.
Case For:
FOR & AGAINST
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Apollo Healthcare Corp. (AHC: TSX)
Current Price: $4.26
Market Cap: $312.7 Million
Apollo is one of the largest private label personal care product manufacturers in North America, developing and manufacturing retailer branded and private label products for major North American retailers. Apollo’s products are sold in tens of thousands of stores across North America and its customer base spans across major North American grocery, drug, and mass merchandise retailers, users as well as wholesale clubs.
Against Case:
- Great growth in revenue with 92% growth in fiscal 2020, compared to fiscal 2019. And although sales were accelerated by the COVID-19 pandemic for its hand sanitizer products. I believe hand sanitizer will remain a hot product for the next 1-2 years.
- Healthy balance sheet – with a cash balance of $31 million and zero debt on its balance sheet, the company is well-positioned for future growth. This time last year the company had over $60 million in debt which was all paid down from cash flow.
- Trading at just 3.3x EV/EBITDA or with a P/S multiple of under 1x, even if growth does begin to decelerate, Apollo offers growth at a reasonable price going forward.
- On top of this, Apollo is working on growth opportunities. In which the company was granted an R&D license by Health Canada in late 2019 to begin developing cosmetics containing CBD. If the company is able to release topical CBD products – this could further support growth into the future.
Case Against:
Your Stock Our Take
Gran Colombia Gold Corp. (GCM: TSX)
Current Price: $5.51
Market Cap: $337.207 Million
What does the company do?
Gran Colombia Gold Corp. engages in the acquisition, exploration, development, and operation of gold and silver properties primarily in Colombia.
Key Points:
Fourth Quarter and Full Year 2020 Highlights
2020 annual production was down 9% to 220,194 ounces, compared with 239,991 ounces of gold in 2019.
Q4 totaled 57,265 ounces compared with 65,237 ounces in the fourth quarter of 2019.
Guidance for the coming year and expects to produce between 200,000 and 220,000 ounces of gold at Segovia – guidance of production to be down up to 9% to flat.
Revenue was up 13% to $99.7 million, reflecting an increase in the Company’s realized gold price to an average of $1,875 per ounce sold from $1,480 in the fourth quarter of 2019.
Adjusted EBITDA (1) amounted to $43.1 million for the fourth quarter of 2020, up 6%.
Relatively good balance sheet – $140 million in debt.
Recent Financial Results (Q4, 2020)
Conclusion:
On March 15, 2021, the Company announced that it has entered into a definitive arrangement agreement pursuant to which it proposes to acquire all of the issued and outstanding common shares of Gold X, which owns the Toroparu Project in the western Guyana gold district. The total consideration of approximately CA$315.
Gran Colombia believes that the combined company will consist of a complementary asset portfolio including the world-class, Free Cash Flow generating Segovia Operations located in Colombia, as well as the large, high-growth, and substantially de-risked Toroparu Project in Guyana that boasts 4.5 million ounces of LOM gold production over 24-year mine life.
In the end, any investment in a gold producer is highly correlated to the price of gold itself. If gold increases in value this year (which it has not year-to-date) gold-related stocks, Gran Columbia included, will perform well. The opposite is also true. Gran Columbia is interesting and valuations may be attractive, but given the near-term lack of production growth, we see better ways to be exposed to gold.
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