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• Organto has effectively transitioned its business to an asset-light model, growing revenue from $1.5M in 2018 to $49M in 2023E
• OGO now has a diversified platform covering 170 customers using its global supply chain that can provide year-round supply to its customers
• Organto’s management team and board contain various executives that grew SunOpta to >US$1B in sales using a similar business model
Organto Foods Inc. (OGO:TSXV) operates as a marketer and distributor of organic and non-GMO fruits and vegetables to end-consumers in Europe. OGO acts as a value-added bridge between farmers and consumers while contributing to its products through light processing, packaging, and branding. OGO shares have been beaten down significantly over the last year due to gross margin compression, but with global supply chain issues largely in the rear-view and a transformative acquisition being integrated, we believe 2023 will be a transitional year for the Company. We are initiating coverage on Organto Foods Inc. with a BUY rating and target price of $0.20/share.
Investment Thesis Summary
Diversified Platform & Building Brand Power. Organto currently serves 21 countries in Europe and has a global supply base across five continents, allowing OGO to become a year-round supplier to a mix of customers. While the product mix is currently mostly bulk, OGO’s branded and private label products are gaining traction, shifting the mix to the higher gross margin segment (15% vs. US$1B in sales and >US$1B market cap using a similar roll-up model. This includes Co-CEO Steve Bromley, Director Jeremy Kendall, and Director Joe Riz. The Board is also comprised of industry executives with experience in marketing, growing, and managing supply chains.
Discounted Valuation. OGO trades at 0.5x 2024E sales, one of the lowest in our peer group that averages 1.0x 2024E sales, despite OGO having the highest sales CAGR in the group. We derivate our $0.20/share target based on 1.0x 2024E sales, with room to revise higher if OGO can prove out gross margin expansion.
OGO: Recreating SunOpta's Success
What you need to know:• Organto has effectively transitioned its business to an asset-light model, growing revenue from $1.5M in 2018 to $49M in 2023E
• OGO now has a diversified platform covering 170 customers using its global supply chain that can provide year-round supply to its customers
• Organto’s management team and board contain various executives that grew SunOpta to >US$1B in sales using a similar business model
Organto Foods Inc. (OGO:TSXV) operates as a marketer and distributor of organic and non-GMO fruits and vegetables to end-consumers in Europe. OGO acts as a value-added bridge between farmers and consumers while contributing to its products through light processing, packaging, and branding. OGO shares have been beaten down significantly over the last year due to gross margin compression, but with global supply chain issues largely in the rear-view and a transformative acquisition being integrated, we believe 2023 will be a transitional year for the Company. We are initiating coverage on Organto Foods Inc. with a BUY rating and target price of $0.20/share.
Investment Thesis Summary
Diversified Platform & Building Brand Power. Organto currently serves 21 countries in Europe and has a global supply base across five continents, allowing OGO to become a year-round supplier to a mix of customers. While the product mix is currently mostly bulk, OGO’s branded and private label products are gaining traction, shifting the mix to the higher gross margin segment (15% vs. US$1B in sales and >US$1B market cap using a similar roll-up model. This includes Co-CEO Steve Bromley, Director Jeremy Kendall, and Director Joe Riz. The Board is also comprised of industry executives with experience in marketing, growing, and managing supply chains.
Discounted Valuation. OGO trades at 0.5x 2024E sales, one of the lowest in our peer group that averages 1.0x 2024E sales, despite OGO having the highest sales CAGR in the group. We derivate our $0.20/share target based on 1.0x 2024E sales, with room to revise higher if OGO can prove out gross margin expansion.
Underlying
Organto Foods Inc
Provider
Atrium Research Corporation
Atrium Research provides institutional quality issuer paid research on North American public equities using deep fundamental analysis. Our research reports are disseminated through Bloomberg, FactSet, Capital IQ, Reuters and many more, as well as through our social media and email distribution lists.
Nicholas Cortellucci, CFA
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