Input Capital Corp (INP.V)

Agriculture streaming company, dealing only in canola. A very seasonal business deploying capital to farmers to increase their crop yield, and then getting some return on capital, over 20%, with some bonus return on the canola crop. We are in a timeframe now where there is going to be very little news, so the stock naturally pulls back at this time of year. Buying it in the low $2 would be the right thing to do. Thinks it has huge potential to apply the same business model to other crops as well.

They finance a farmer's input costs. For example, they might fund them on their seed or fertilizer and in return they would take a portion of their crop. It is a new business. He likes the owners and thinks they are smart. However, there are many things affecting it, like grain prices and weather. He thinks it is interesting, but he doesn't own it. He would like to see several more quarters of results.

He likes the model. It is quite a unique company. Where farmers need capital, they provide it in exchange for future revenue streams. They are meeting a market need, diversifying their business, starting to deploy capital pretty aggressively and was starting to look quite good. This was followed by the big drought in Saskatchewan and things went on Pause. The company will grow over time. It is well-managed and they have the capital. You may have to sit out a season, but nothing has really changed on the fundamentals.

Were never able to generate what they said they were going to generate in cash flows on canola crops. That is the nature of a commodity type business like this. Expects the drought is not helping. If he were in it, he would probably move elsewhere.

This company finances canola crops. There is a new bull cycle in rapeseed. He likes the grains in general and thinks this company is going to be a beneficiary of a recovery in the grain market.

Loves the management team and the business model. They finance farmers to increase canola crops in Western Canada. It is the world’s first streaming company in the agricultural world. He expects them to generate strong cash flow going forward. Keep in mind it is a seasonal business so you can’t go quarter to quarter in watching results. There is a growing market for this type of service.

This company funds canola farmers. Very capital-intensive business, so instead of a farmer having to go to a bank, they lock in their canola prices and let this company sell it for them. A very solid business model to fund farming. Have been issuing a lot of equity to fund their growth. He hasn’t been very impressed with their business model over the years, but it is looking a little more interesting now. Hopefully they get some operating efficiencies so they can generate cash. As they get larger, make sure they are actually generating free cash flow, so that they can fund further growth and grow organically. Pays a nice dividend.

Provide capital to Canola famers upfront. It trades at a huge discount. As they get going there is potential from multiple expansion. If Canola comes down in price and the stock drops then he would get in.

He would like to see a quarter or two of no collections issues. Momentum has been taken out a little a bit. He also believes they could grow their earnings 30%. They had loans to 55 farmers and 2 of the farmers defaulted.

They were not deploying capital fast enough, but they indicated this problem will go away this quarter. They report tomorrow. He likes the management team. A half position is okay now and then see what they report.

The management is extremely competent. Have hands on the grain company to whom they apportion a certain amount of the canola product, which is given to them in part payment for financing the farmers. They are doing a greater job than the banks. He can see the stock price, over the years, improving and moving into they $10-$20 range. He expects to be a long-term holder of this one.

Provides financing to farmers and then they get the contract to the stream of canola. Just came out recently with their quarter, and earnings were much less than expected. Primarily because they didn’t sell the product at the right time. They are signing lots of contracts with farmers, and the deals are increasing quite nicely, but it is just a timing issue. A solid company with a very niche market. Like a royalty company, but in the agricultural space. Pretty early stages still, but it is a good model. They’ll make a lot of money eventually.

He decided not to get into it. You have weather risk, commodity price risk, and last quarter was disappointing because the crop was not that big. He would rather buy with more confidence.

They purchase revenue streams from farmers of Canola seed. He likes it. They are supposed to come out with numbers in early April. He thinks there is a chance for it to become quite large and if they get enough size they can start charging premiums and have better pricing power in the marketplace than an individual farmer could have.

(A Top Pick Jan 13/14. Up 18.18%.) Dealing with farmers in canola in Western Canada. Had a lumpy kind of start, but it is important to note that you are dealing with a commodity, weather and farmers. It has been doing a little bit better lately as he thinks it is getting more recognition. The people running it are very clever. If you own, continue to Hold.