Wondering what you think of “Cubic Farm Systems”

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I was wondering what you can see in the future of this hydroponic/indoor farming system. I’ve seen documentaries and news reports about this being the future, or at least a serious alternative to growing food. They just announced a new VP “Tom Liston” (no idea who he is) today, I don’t know if this is a good thing. Yesterday they announced a 1.5M $ private placement, don’t know what that means. I’ve looked at their financials, but to be honest this is still gibberish to me and have a hard time making heads or tails of it. The stock price did jump roughly 25% since yesterdays news.
I know this is still a small company, and therefore very speculative play. I’m wondering if all this is positive news and a good time to buy in, albeit a very small portion. Any thoughts or suggestions would be greatly appreciated, oh great Guru.

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Asked on April 6, 2021 1:45 pm
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HI Oscar,

I just answered a question on this a few weeks ago - here was my answer:
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I agree that the company's products seem quite interesting. There is however very little else to go off here. The company generated $5.3M in 2019 and $5.1M in 2020 - which was likely impacted by the pandemic. It is also trading at 23 times sales, which is quite expensive. No analysts cover the company and it does not issue guidance, so not sure where it stands on forward revenue.

That being said, it claims to have C$31mn in sales orders with deposits which equals 175 machines pending installation. Since it is unclear what their manufacturing capabilities are, it is unclear if these are expected to be delivered in 2021 or beyond. Let's assume for minute that the 31M is delivered over the next year, that would give it a much more reasonable P/S ratio of 5.4 times on a forward basis. Not bad - not super cheap either.

The other question is - can it increase that backlog from 31M to 50M or 100M moving forward. This is still a brand new company which only entered into commercial operations in 2018. Last year's revenue was flat, but not a real good indicator of demand given the pandemic.

Overall it looks like an interesting company and one that may be poised for rapid growth. It is just tough to truly value as there is no history of execution, so be mindful it does come with risk.

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Not much has changed since i gave that answer outside of the capital raise ($1.5M PP @$1.29 per share). That in of itself was relatively small, and was made to a strategic partner Burnett Land & Livestock. I view this as a positive development for them.

As for Tom Liston - the name is familiar as he was previously with WELL Health Technologies (one of our Bull List picks). Looks like he is still a board member there and helped launched shell company which took over Tantalus systems (GRID). A few big names were involved with that shell company including WELL and BBTV's CEOs. He appears to be a pretty smart guy and has been involved in several success stories. Once again, I think this is a positive.

Mat

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Posted by Mathieu Litalien
Answered on April 6, 2021 6:15 pm