NEW YORK CITY, June 2, 2004 (PRIMEZONE) -- The following is an investment opinion issued by Investrend Research Syndicate:
Investrend Research affiliate Fundamental Research Corp. maintained its ratings of Bevo Agro Inc. (TSX Venture Exchange:BVO) at "Buy -- 3 (Average Risk)" and fair value of C$0.95 after a review of its Q3 2004 results, and industry fundamentals.
The following are investment highlights mentioned in the full report which is available free at www.fundamentalresearchcorp.com and http://www.investrendresearch.com
Q3 2004 sales declined 33.6% compared to the same period last year due to competition and order timing. The analyst's discussions with management indicate the decline in sales was due to a new entrant who undercut prices. Management has indicated that some customers that initially switched to the new entrant are starting to come back due to BVO's competitive advantage in providing higher quality plants. The analyst also notes that due to the capital intensity of the greenhouse business, sustained low pricing is not economically feasible.
The research note provides a review of the vegetable industry's fundamentals and cites a B.C. Vegetable Marketing Commission report saying "The B.C. vegetable industry generates in excess of $300 MM in farm gate sales annually. Based on current growth projections for the greenhouse vegetable sector, (this figure) could exceed $400 MM in 2005 making it equal to or larger than any of the supply managed categories."
Since industry fundamentals appear solid, the report concludes that "We have no doubt that the market exists and will grow for Bevo. The question becomes can they capture it?" The analyst views the next two quarters as crucial for BVO investors as they will give further insight into the extent of competition in the industry, and benefits of the company's recent expansion. Fundamental also revised downward their 2004 and 2005 EPS estimates as well as 2004 EBITDA estimates. Ratings and fair value were maintained as the company is still trading at a discount based on comparable multiples. Risk factors mentioned in the report include increased competition and high debt levels.
Fundamental Research Corp. is an affiliate of Investrend Research and a member of the FIRST Research Consortium listed at http://www.firstresearchconsortium.com, and both subscribe to the "Standards for Independent Research Providers."
The company has paid Fundamental a fee of $5,000 to conduct research.
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