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I've researched these guys quite a bit and can't find anything bad except that it's a BORING business (however, you know what Peter Lynch says about boring businesses)
Anyway, anbody else know anything? Dow Jones obviously sees something. check out the article, it gets better at the end
NEW YORK (Dow Jones)--In January 1995, with $29,000 in sales to its credit from
the
previous year, Agribiotech Inc. (ABTX) went after its first acquisition - an Arizona
company with
$8 million in annual sales.
''They laughed at me and threw me out,'' President and Chief Executive Johnny Thomas
told Dow
Jones. But six months later, when Agribiotech had completed three other acquisitions,
''they called
asking if we would buy the company.''
Just as that Arizona company had underestimated Agribiotech's financial strength and
determination, the market undervalues the Las Vegas forage and turf seed concern
because it
doesn't understand how the company operates, Thomas said.
But that should change in fiscal 1997, Thomas said, when the company expects to finally
post a
profit, become vertically integrated and move to the Nasdaq National Market from the
SmallCap
Market.
Agribiotech has pursued an aggressive acquisition strategy, swallowing up 10 regional
seed
companies with operations in such states as Texas, Kentucky, Indiana and New York.
Seven
acquisitions alone were made in 1996, with those companies having total annual sales of
$24
million, Thomas said.
Mom-and-pop seed companies, with aging owners who don't have family to take over
the
businesses, have been Agribiotech's main targets in this fragmented industry, Thomas
said.
Corporate owners seeking to get out of forage and turf products to focus on
higher-margin corn
seed, have also been sellers, said Agribiotech Director John Francis.
Forage seeds, primarily alfalfa, are sold to livestock and dairy producers. Turf grass is
the kind
found at parks and golf courses.
The companies' depreciated assets are purchased at close to book value for a
combination of cash
and stock.
The strategy has been a boon to sales, with revenue expected to rise in fiscal 1996 to
$25.8
million, Thomas said, compared with $4.7 million reported last year, when the company
switched
to a year ending in June from September.
Revenue could increase to $52 million in fiscal 1997, Thomas said, adding that sales
might reach
$80 million with additional acquisitions. He said he has a goal for fiscal 1997 of
purchasing seed
companies with total sales of $60 million.
The losses Agribiotech has racked up should end in fiscal 1997, said Thomas. He
predicted that
net income as a percentage of revenues will be 1% to 5%, rising to 19.5% in five years.
The synergies from previous acquisitions plus the completion of its largest purchase to
date - a
seed research company with $20 million in revenues - will help Agribiotech get into the
black in
fiscal 1997, he said.
With the seed research facilities it acquired, Agribiotech can develop value-added,
proprietary
high-yield insect and disease resistant forage seed. Its production operations clean and
package
the seed for consumers. And its distribution network - which extends through 43 states
and six
countries - delivers seed to wholesalers and farmers.
Agribiotech President and Chief Executive Thomas, who declined to reveal the research
company's name, said it should boost Agribiotech's asset base to $40 million in fiscal
1997 from
the $8.6 million projected for fiscal 1996.
Equity should increase to a range of $20 million to $25 million in fiscal 1997, compared
with $14
million in the third quarter, said company director, Francis. The company's goal is to
keep its
debt-to-equity ratio below 2, Francis said.
Thomas, estimating that the market for forage and turf grass seed is about $1.1 billion
annually,
expects to capture 50% of the market, or about $500 million in sales, by fiscal 2000.
Despite its strong fundamentals, Agribiotech remains undervalued by an inattentive
market,
Thomas said. He said the company's stock, which hit a 52-week high of 5 1/6 in April,
should
trade near the levels of Mycogen Corp. (MYCO), a research-oriented biotechnology
company
that has not posted profits and trades near 15.
Francis conceded that Mycogen markets higher-margin corn seed and has a strong
proprietary
position in genetic research.
Agribiotech's shares were trading at 2 3/4 recently, up 1/8 or 4.8%. More than 101,000
shares
have changed hands, compared with average daily volume of 87,400.
Now that Agribiotech's book value has reached about $13 million, Thomas predicted
that it would
receive approval to switch to the Nasdaq National Market from the SmallCap Market
before
calendar 1996 is over. Such a move could bring the company more attention from
investors,
analysts and other market players. |
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