KeyStone’s Stock Talk Show, Episode 224.


We have a great show for you this week. Fresh from his visit to Mickey’s Magical Kingdom, Aaron reviews The Walt Disney Company (DIS:NYSE) after the company’s shares touched 9-year lows this week. Does Disney now offer good value or are would be investors catching a falling knife near-term – Aaron gives you his take. In our YSOT segment, I will answer a question on Premium Brands Holdings Corporation (PBH:TSX), a leading  producer, marketer and distributor of branded specialty food products. The listener notes that the stock, which pays a 3% dividend has had a strong move in 2023, up 24%, and wants to know if we recommend it in its current range. Back by popular demand, Brennan revisits Graphene Manufacturing Group (GMG:TSX-V), is an Australian based company involved in the production of graphene used primarily in paints, coolants, and lubricants targeting to improve energy

efficiency and additionally in next-generation battery technology. Brennan reviewed the stock early in 2023, and viewed it as overhyped and the price not justified by the underlying fundamentals. It has since dropped 40% and a listener asks us our take on the company after the drop. Last, but certainly not least, Brett takes a look at the ever topical NVIDIA Corporation (NVDA:NASDAQ), a pioneer of GPU-accelerated computing. The company released its fiscal Q2 2024 results mid-last week which it beat expectations – Brett let’s you know if this high flyer could continue to have wings or if it is in for a clipping.

Let’s get to the show – we welcome my cohost, Mr. Aaron Dunn and as always, the killer B’s, Brett, and Brennan.

Speaking of property sector woes: US housing affordability is sitting at four-decade lows. According to Freddie Mac, the average rate on a 30-year fixed mortgage jumped to 7.09% last week. That’s the highest in over 21 years. That means would-be-homebuyers can afford a lot less home. Three years ago, a $2,500 monthly mortgage combined with a 20% downpayment could get you a $758k home. Today, the same monthly payment and 20% down are only enough for a $443k home (shown above). With yields on the 10-year Treasury—which is closely correlated to mortgage rates—now hellbent on rising, affordability is at risk of getting even worse.


The housing market is a tale of two cities. Toronto is a tale of woe, where existing home sales dropped by 8.8% from June to July. (Turns out, buying a $1.1M one-bedroom is even less attractive with 6% interest!) Then there’s Calgary, where the market can only be described as hot hot hot. Sales are up 11% YoY, mostly thanks to out-of-province buyers fleeing places like Toronto. If you’re one of them, here’s some advice from Catherine Chow, a Calgary realtor, about buying in this market: “The cleaner the offer, the fewer the conditions, the shorter the timeline, the higher the chance yours will be accepted.”


China’s sleeping giant hits the snooze button. The world’s second-biggest economy is in a rut. Industrial production, real-estate investment, retail sales — they’re all growing far more slowly than they were before the pandemic, and analysts worry that more trouble lies ahead. Western media has wrongly predicted financial doom in China before, but the situation is worrisome enough that last week China’s central bank announced that it will stop sharing some key economic data (not that anyone believes its data anyway). One thing to note: China’s slowdown matters a lot to China, but economists doubt it’ll inflict serious pain on the global economy. Fingers crossed.

Premium Brands Holdings Corp. (PBH – TSX)

Price: $104.35

Market Cap: $4.657 Billion

Company Description: Premium Brands is focused on acquiring and building value-added food businesses/brands that all benefit from being part of the PBH ecosystem. The platforms and brands are active in Canadian and U.S. retail/club and foodservice channels.

Second Quarter 2023 Highlights

  • Record second quarter revenue of $1.63 billion representing a 7.3% increase as compared to the second quarter of 2022
  • Record second quarter adjusted EBITDA1 of $152.4 million representing a 16.5%, or $21.6 million, increase as compared to the second quarter of 2022
  • A 9.3% adjusted EBITDA margin, up from 8.6% in the second quarter of 2022
  • Second quarter adjusted EPS of $1.27 per share representing an 8.0% decrease as compared to the second quarter of 2022.

Valuations: Trailing EV/EBITDA in the range of 15.89, based on its current year’s expected adjusted EBITDA the company trades at with an EV/EBITDA in the range of 12.

Premium Brands has significant leverage with net debt of approximately $2 billion. To put this in perspective, the market cap is in the range of $4.6 billion and its estimated adjusted EBITDA for the current year is just under $600 million. On a trailing basis, net debt to EBITDA is in the range of 5.6 or 4.55 on a forward looking basis based on this years estimated adjusted EBITDA – both are high. There are those that will adjust out the company’s convertible debt and arrive at a figure of roughly 3.6, but the convertible debt is debt, so we will keep it.

Our Take:

Premium Brands has been a solid Canadian food services consolidator, but as it has acquired more and more businesses, debt has mounted and in a higher interest rate environment, capital is now more expensive and the cost of is carrying debt is squeezing profitability. Additionally, the company’s ability to continue to acquire to growth (which has been part of its lifeblood) has been impeded.  We have liked the business in the past, but the revenue growth rate continues to slow – coming in at 7.3% in the last quarter and adjusted earnings were lower in the period. Valuations are ok, but with a lack of growth it appears the share rebound year-to-date in 2023 has the company trading closer to fair value than undervalued at present.


YSOT Graphene Manufacturing Group (GMG:TSX-V)

We have been getting a lot of questions on Graphene Manufacturing Group so I thought that I would update the stock since I last covered it in early 2023 when the stock was trading at about $2.30.

And the stock is now down around 40% since I covered it last on the podcast.

Price: $1.34

Market Cap: $112M


Graphene Manufacturing Group is an Australian based company involved in the production of graphene used primarily in paints, coolants, and lubricants targeting to improve energy efficiency and additionally in next-generation battery technology. It’s clean-technology solutions and energy storage products are enabled by Graphene manufactured in-house via a proprietary production process which essentially decomposes natural gas into its elements, and produces high quality, low cost, scalable, tuneable, and low/no contaminant graphene.


They have two segments:

  • In the energy savings segment, GMG has focused on:
    • THERMAL-XR®, a graphene enhanced HVAC-R coating (or energy-saving paint).
    • G Lubricant, a graphene enhanced lubricant additive that seeks to reduce fuel consumption and carbon emissions by reducing internal friction in engines.
    • G Coolant, a graphene enhanced engine coolant that seeks to improve the thermal efficiency of engines.
  • In the energy storage segment, GMG and the University of Queensland (in Australia) are working collaboratively with financial support from the Australian Government and now Rio Tinto to progress further R&D and commercialization of graphene aluminium-ion batteries (G+AI Batteries) including a coin cell and pouch cell battery.


Operational Updates:

On August 28th, the company provided an update to its commercialisation progress of Thermal-XR, having commissioned its graphene enhanced coating blending plant with expected capacity to produce up to 500,000 litres of THERMAL-XR® RESTORE® coating per annum, subject to graphene production.

On August 17th, the company announced the closing of CAD$3.45M equity offering, issuing a total of 2.0M shares at a price of $1.70. And each share comes with a half warrant with an exercise price of $2.20. I believe that after this offering the company has about 84 million shares outstanding along with 4.3M options and about 5M warrants.

On May 29th, they announced a Battery Update – indicating that it became clear to them that pouch cell, rather than coin cell, batteries were of greatest interest to potential key customers. GMG is currently making single layer pouch cells to proceed to a 5 layer pouch cell testing and expects to have a >25 Layer Pouch Cell Prototype by H1 2024.

On May 18th, announced Joint Development Agreement with Rio Tinto on its battery technology, Rio Tinto will contribute technical and operational performance criteria and AUD$6 million, in exchange for preferential access rights to the battery technology. And it is expected to last 2 years with payments spread over the term of the agreement. The JDA aims to co-develop GMG’s Graphene Aluminium-Ion battery pouch cell into an initial battery pack/module proof of concept.

GMG continues to be focused on four critical objectives:

  1. Produce Graphene & Improve/Scale Production Process.
  2. Build Revenue from Energy Savings Products.
  3. Develop Next-Generation Battery.
  4. Develop Supply Chain, Partners & Project Execution Capability.


Just for visual representation for those watching on Youtube, here is a slide directly from their investor presentation showing their path forward and where they are at on their battery technology.


Recent Financials (Q3 2023) all in Australian Dollars:

  • Revenue was essentially Nil in the quarter.
  • While Adj. EPS was a loss of $(5.04) per share compared to a loss of $(2.45) per share for Q3 2022.
  • Balance sheet had $8.8M, with no debt. (But this does not include the most recent equity raise of $3.45M).


As I conclude here I wanted to pull up on the screen a few comments which ripped into me for my “low quality research”…. Telling me to “do some real work next time”.

Well first off, this is a free podcast that we do weekly and I am not going to spend hours upon hours researching company’s which are speculative, produce essentially no revenue, continue to lose gobs of money, and continue to issue shares to keep the lights on. I spend my time researching quality companies for our clients who pay us to fund them quality businesses – opposed to what GMG is, simply a concept stock. I have no idea whether the business will ever be able to make money. So as it stands, the business is a concept…

Now yes, it is working to sell its Thermal XR products at scale, but even when it does start generating meaningful revenue… we still do not know if it will make money or not. Second off, yes, it is positive that they are working in unison with the University of Queensland and Rio Tinto to develop their battery. But no… I did not waste my time to call Rio Tinto or the University of Queensland for them to explain to me what prototypes they are working to develop.

Again, as I said last time, there is speculative potential, but the business is still a concept and far from meeting our investment criteria… and to me, its not a surprise that the stock is down 40% in 7-months, while it remains a concept.

If they can commercialize their battery and begin to ramp up their thermal coatings and lubricants, yes there is a case to be made that the stock has upside potential. But this is a huge bet on management and a technology which I do not claim to understand.

Like this last comment from Blue_Beephang-glider, who says, “I will put money into this because of this potential bonanza, BUT only what I can afford to lose with a shrug”…. I see no problem taking a speculative bet with a teeny tiny portion of your overall portfolio which you are willing to lose, but as we say time and time again, if you build a 15-25 stock portfolio comprised of stocks like GMG… over the long run you are bound to do poorly.





Nvidia symbol NVDA on the NASDAQ needs no introduction, but I will give you one anyway. Nvidia is a pioneer of GPU-accelerated computing. Specializing in products and platforms for the large growing markets of gaming, professional visualization, data center, and automotive. The stock is up over 220% year to date currently trading at roughly $460 and $1.14 trillion market cap making it the 5th largest public company by size at this time.


The company released its fiscal Q2 2024 results mid-last week which it beat expectations of already high revenue growth. The company’s record quarterly revenue of $13.51 billion beating the previous guidance of $11.00 billion, up 88% quarter-over-quarter and 101% year-over-year. Clearly a massive increase in improvement, the growth was a result of both pricing increases and units sold notably the HGX system which is the platform built for AI use.

Notably, we saw an even higher gross margin of 70.1% compared to 64.6% in the last quarter and 43.5% in Q2 last year. GAAP EPS was $2.48 up from only $0.26 last year, while non-GAAP EPS was $2.70 compared to $0.51 last year, again a massive increase fundamentally. The largest non-GAAP adjustment like many companies is stock compensation.

Materially all of the increase in revenue and ultimately income was data center driven, due to the AI gold rush. Revenue from data centers increased to $10.32 billion up 141% from the last quarter and 171% last year. Whereas gaming only rose 22% year-over-year to $2.49 billion.

Just to give an idea the revenue split for fiscal 2023 was  56.6% from data centers 34.2% from gaming with the remainder from visualization and automotive. Now in the last quarter data center revenue was 76.8% of revenue with gaming being only 18.5%. I just want to make clear that the growth is all data center driven which is largely AI driven. The headlines of Nvidia being AI-driven are completely true, the company is entwined with AI at this time. 3)

Further, the company once again released strong guidance for Q3. Revenue is expected to be $16 billion plus or minus 2%, this is the same percentage range they gave last quarter which revenue ended up surpassing significantly, so even though it was obviously beneficial to the upside this last quarter, management guidance and reality can differ materially.

Non-GAAP Gross margin is expected to be 72.5% plus or minus 50 basis points, with non-GAAP operating expenses being $2 billion and other income expected to be $100 million. Resulting in a midpoint non-GAAP net income under management guidance of $8.3 billion which would be up 23% quarter over quarter if the guidance is correct.


So moving the valuation, the company is trading at a trailing non-gaap pe of roughly 88 times, with trailing price to sales of 35 times, quite an expensive valuation looking back but of course, the company has shifted nearly all of its growth to the data center AI market from a mix primarily of consumer graphics and data center. However, going forward the company is trading at roughly 48 times non-GAAP earnings and 21 times sales, using analyst expectations.  If these forward valuations come true the company still isn’t cheap but is more reasonable.


However, I do want to go over a few risks as the valuation is based on the large growth expectations.  So what could derail the Nvidia story?

First off the company has a near monopoly on data center GPUs, especially for large-language model or LLM  AI tasks like chat GPT use. However, AMD the main competitor to Nvidia is expecting to release its MI300 chip by the end of the year. I would by no means expect a market flip to AMD that would be very surprising at this time but it will likely lower Nvidia’s pricing power, which is attributed to some of the recent growth although management did not give specific figures for unit growth vs. price growth.

The second risk is if demand does not only continue to stay high but also rises. We’ve seen previously with Nvidia that it saw significant growth from Ethereum mining in 2017 and then needed to revise earnings once that market fell apart. While AI is by no means crypto currency it clearly has more legs to it supported by larger players, but the point is if the end market changes Nvidia’s growth would suffer. In this case, something similar could occur if end AI products stop seeing significant growth. Right now we’re seeing many of the players panic to get into the market paying heightened prices, but if it’s another 5 or 10 years before we see a Chat GPT-like advancement that warrants more hardware investment, sales would suffer. There is only so much investment the data center players can make in respect to their returns.  Semiconductor investment is cyclical and I could not see the advent of AI changing that and the current heightened demand could cause a larger difference between peak and trough.

Third, is the geopolitical risk specifically with China. In the last quarter, Nvidia had roughly 20% of its revenue come from China, which already has sanctions against it for Nvidia top chip so it needs to sell a cut-down version, if sanctions increase we could see a significant drop in sales overnight that is out of Nvidia’s control. And of course, what has been stated for years Nvidia is reliant on TSMC’s most advanced nodes which are manufactured in Taiwan which of course China has been threatening since the end of the civil war in 1949.



Nvidia clearly has strong operations and growth, but the current tailwinds of AI over the past 2 quarters are already implied in the price. The AI tailwinds need to stay strong while needing to overcome the potential headwinds of impending AMD competition and demand risks.

I would argue at this time Nvidia has become a crowded trade, with the current valuation needing to continue at high growth, but potentially having material risks to demand creating potentially significant downside.  At the core you are investing not just in Nvidia as a company but in the success and growth of AI. At the current prices, I would not be investing.




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