I will not debate this,just throw out info--which you can reject or not reject as you wish---but I think is just sad that people work so hard to make something happen ---honest and good men---and all you want to do is destroy---here is Piper Jaffrey most recent analysis ABTX but I seriously doubt you will read it---I actually don't think you give a damn vestor (5211 )
From: TC5187
Tuesday, Sep 29 1998 9:07AM ET
Reply # of 5284
Piper issues Strong Buy - $35 target
Fiscal 1998 Revenues Exceed Expectations But So Do Operating Expenses;
Strong Buy, Aggressive (#)
Highlights:* From Our Perspective, The Company's Fourth Quarter Came in Long On
Revenues and Long On Operating Expenses
* Clearly, Operating Expenses Came In Higher Than Our Expectations
*Management Has Long Held A "Go-Slow" Discipline For Fully Integrating
Acquisitions-Impacting Near-Term Earnings
*AgriBioTech Forms A Research And Commercialization Alliance With FFR
Cooperative.
* Fiscal 1998 Has Been Busy With Acquisitions-More Anticipated In Fiscal1999.
*The Integration Process Is Moving Along In Earnest.
*We Believe The Company's Biotechnology Opportunities Have Been Underestimated.
*We Are Maintaining Our Strong Buy Opinion--And Our Twelve-Month Target Price
Of $35
From Our Perspective, The Company's Fourth Quarter Came in Long On Revenues
and Long On Operating Expenses. The long awaited fiscal 1998 year-end financial
results included revenues of $205 million versus $65.9 million and earnings of $0.01 per
share versus a loss of $0.38 per share. Although details of the fourth quarter will be
forthcoming with the 10K, revenues were $65.4 million (our expectations--$60 million),
the gross margin was
25.7% of sales or $16.8 million (our expectations-25.5% or $15.3 million).
The net loss for the fourth quarter came in at $4.0 million or $0.10 per share (our
expectations-a loss of $1.3 million or $0.04 per share (fully diluted).While fiscal 1998
revenues came in modestly ahead of expectations, they were impacted by previously
discussed El Nino effects in some of the Company's acquired operations and were
reduced by approximately $35 million, as the Company shifted from "effective date" to
"purchase date" accounting, for acquisitions in the fourth quarter.
Clearly, Operating Expenses Came In Higher Than Our Expectations.
Conversations with management identified three areas, including the costs and time for
unifying all the acquisitions under one comprehensive accounting system. A second is the
ramp of administrative expenses as the corporate management staff is enlarged to
accommodate the rapidly growing operations and marketing base that includes more
than fifteen acquisitions since the beginning of 1998.
Management Has Long Held A "Go-Slow" Discipline For Fully Integrating
Acquisitions. Desiring to ensure little impact on the customer base for each of the
acquisitions, there have been as few changes as possible on the local front (including a
multitude of local brands and accompanying inventories). Under the leadership of Kent
Schulz, policies are not being "crammed down" to the operating subsidiaries, but rather
are being drafted by a series of task forces including the Culture Committee, Forage
Committee, Turf Grass Committee, and Strategy Committee. These committees, made
up of employees of acquired companies, have developed industry advertising,
emphasizing AgriBioTech's widening presence in the forage and turf grass sectors, have
developed brand and technical literature emphasizing the broadening AgriBioTech
product line, and have initiated plans for improved seed processing and distribution.
These groups have
largely completed their initial plans and we would expect changes, even if difficult to
financially measure, will be rolled out during fiscal 1999.
Meanwhile, AgriBioTech Continues To Build Its "Distribution Equity" Base, Forming A
Research And Commercialization Alliance With FFR Cooperative. FFR Cooperative
was founded and is owned by a group of regional farmer- owned cooperatives that
develop improved varieties of crop seed. The agreement with AgriBioTech will include
forage species such as orchard grass, red clover, tall fescue, and timothy. New and
improved varieties will be marketed only through AgriBioTech's distribution system and
FFR members/affiliates.
These forage species are important components of the 61 million acres of hay harvested
(plus a significant level of pastureland) in the United States. While alfalfa is the single
most important species (24 million acres), there are an additional 37 million acres of hay
other than alfalfa. In 1997, the estimated value of hay harvested was $13.4 billion,
comprised of $8.3 billion of alfalfa hay and $5.1 billion of "all other" hay. Hence, if
AgriBioTech is to have a balanced and complete forage seed product line, alfalfa
varieties need to be supplemented by varieties of other forage
crops such as those included in the anticipated FFR Cooperative alliance.
We Would Not Be Surprised To See Another Wave Of Acquisition Announcements.
There were six acquisitions announced with effective dates in January 1998, after only
one with an effective date between July 1997 and December 1997. Then another group
of eight acquisitions came in with effective dates of April 1998. A year ago at this time,
management expected that its opportunities for acquisitions would slow as other
"would-be" players in the forage and turf seed sector began to emerge and create a
more competitive bidding environment. These expectations have not come through, and
AgriBioTech has continued to build its distribution and market share base for both the
forage and turf seed sectors. The current revenue base appears to put AgriBioTech on a
pace to exceed $500 million in revenues for
fiscal 1999 (one to two years ahead of stated goals). We would not be
surprised if fiscal 2000 revenues approach $650 to $700 million.
Management was clearly disappointed that its second agricultural
biotechnology agreement (following the March announcement with The Noble
Foundation) came in July instead of June. We believe there are still as many as 20
potential such agreements in some stage of discussion, with at least a handful having a
reasonable chance of consummation over the next year. Our list still includes parties
such as Michigan State University, Rutgers University, AgrEvo, and several other
European firms.
We Believe The Company's Biotechnology Opportunities Have Been
Underestimated. In terms of dollar value, hay ranks third in the U.S.
behind corn and soybeans. Yields per acre for major crops such as corn, wheat, and
cotton have been generally rising over the past ten years, except for hay. Acreage for
major crops have been rising gradually, except for hay. While hay prices have risen at a
pace similar to other crops, the lack of growth in harvested acreage, and virtually no
change in yields per acre, have held back the total value of the U.S. hay crop.
Considering the forage sector alone, seed sales average around $500 million annually;
however, the value of hay harvested has averaged over $12 billion over the past three
years. Thus, a modest 5% improvement in the value of the hay crop ($600 million)
would exceed annual seed revenues. A 10% improvement in the alfalfa crop alone, a
50% market share for AgriBioTech, and a 50/50 "sharing" between the Company and
producers would result in
incremental revenues of $190 million for the Company or more than $3.00 per
share.We Are Maintaining Our Strong Buy Opinion. While near-term earnings will be
impacted by acquisitions, the Company's strategy is to build for long- term growth.
Based on 45 million shares outstanding, we can envision revenues of $650 to $700
million by fiscal 2000, and earnings (fully taxed)
approaching $1.00 per share. With opportunities to invest in pure seed plays
diminishing, we believe ABTX shares will eventually trade at 2x revenues and believe
ABTX shares will reach $35 per share over the next 12 months.Acquisitions Are A
Continuation Of AgriBioTech Following A Classic Consolidation Strategy In An
Industry Ripe For Consolidation. The $1.1 billion forage and turfgrass seed industry is
highly fragmented with literally hundreds of seed suppliers. Alfalfa (primarily grown for
livestock feed) is grown on approximately 24 million acres in the United
States, with another 36 million acres planted for other forage crops.
Turfgrass seed has a wide variety of end-uses, including lawns, golf
courses, parks, and recreational areas. With its latest acquisitions,
AgriBioTech can claim the number one position in the industry, and with consolidation,
comes the opportunity to rationalize research programs, distribution systems, and
product offerings. Expanded research programs should fill the pipeline with new
products and opportunities for higher margins, while providing growers with better
performance. Although AgriBioTech has, to date, had a focus on the domestic markets,
we would expect it to begin to expand distribution on the international front, where
we believe the market (also highly fragmented) is at least as large as the U.S. market. |
