July 3, 2020
Now is the time to Buy Highliner Foods
Highliner Foods is a well known fish processing and marketing company which sells products to consumers under brands such as Highliner, Mirabel, and Sea Cuisine. Currently trading near 52 week lows at $5.56, Highliner offers a compelling buy at its current price.
Highliner has been around for ages which can attest to its resiliency to survive diverse market conditions. COVID-19 has rattled countries globally causing businesses to shutter doors and forcing workers into unemployment as demand for business stall. During the first quarter sales were minimally impacted for Highliner and gross profit increased 170 basis points. While the company saw a decrease in institutional food service demand there was an increase in retail as consumers stocked up.
The company now has a market capitalization under $200M and completes close to $1 Billion in revenue annually. Keep in mind revenue is reported in USD while the market capitalization of the company is based in CAD. This means the company is valued at only $200M CAD and has revenue equivalent of $1.263B CAD. Furthermore at today’s current value the stock yields a dividend of 3.45%.
It is worth noting the company has over $300M in debt. Over the past few years Highliner has been able to reduce debt outstanding. It looks like net debt may remain at current levels or increase due to operational costs associated with COVID19. There is sufficient working capital for Highliner to draw from to help get through these uncertain times.
Over the past 6 months the stock has decreased more than 32% which is unjustified considering the company is fairing this COVID pandemic better than most businesses. Highliner remains profitable and continues to pay a dividend. It is able to adapt to changing economic conditions while minimally impacting sales.
Given the fact Highliner has strong brand recognition and a history of stable revenue there is a possibility larger companies may acquire the business. Offering a 20-30% premium from today’s price would allow a company to acquire all assets and brands of the company for around $600M, debt inclusive. That is a cheap price to pay for a company which already produces more than $1 Billion revenue annually.
All things considered my price target on Highliner is $10+ per share within the next 12 months. At the time of writing this article I do not own any shares in Higherliner but may initiate purchases at any time.