CAF - Canaf Group Inc.

Discussion in 'Stock picks and trading strategies' started by goldismyfriend, Jan 3, 2018.

  1. Canaf Group Inc Q1 2018 Financial Results + Management Highlights
    (All Information Taken From SEDAR)


    Tickers: CAF(CAD) & CAFZF(US)
    Price: $0.11
    Common Shares: 47,426,195

    Options/Warrants: Nil

    Insider Holdings: 15,391,328 or 32.5% as per www.Sedi.ca

    Website: www.canafgroup.com


    Financials (All in US Dollars)


    ASSETS
    Cash: $394,520
    Trade Receivables: $2,678,248
    Sales Tax Receivable: $17,942
    Inventories: $895,361
    Prepaid Expenses: $31,114
    Property & Equipment: $1,172,010
    Intangible: $1
    Total Assets: $5,189,196 USD

    LIABILITIES
    Trade & Other Payables: $2,211,185
    Income Tax Payable: $119,979
    Current Portion Of Bank Loan: $310,819
    Remaining Portion Of Bank Loan: $85,760
    Total Liabilities: $2,727,743

    Asset/Debt Ratio: 1.9:1

    Q1 2018 Sales
    Revenue: $3,273,213
    Quarterly Net Income: 552,815 USD - $707,440 CAD

    Q1-Q4 2017 Sales
    Revenue: $10,699,117
    Yearly Net Income: $439,664 USD - $562,640 CAD

    Management Discussion Highlights From Q1 2018


    OVERALL PERFORMANCE AND OUTLOOK


    The results above shows the sale recovery and demand of the Corporation’s product which started in Q3, 2016. Sales for the three month period ended January 31, 2018 increased by 45% in comparison to the previous quarter and is expected to increase by a further 40% in Q2, as more confidence returns to the markets. (Page 5)


    The outlook and profitability of the Corporation remains strong and the Corporation expects to continue to generate positive free cash flow during the fiscal year-end 2018 and, as it accumulates cash and reduces its gearing and increases its efficiencies, will continue to look at investment in related business opportunities in South Africa, a country which many now regard with a very positive outlook


    The three month period ended 31 January 2018 saw the Corporation continue to recover from significantly reduced sales between mid-2015 to mid-2016, when depressed global commodity prices affected the Corporation’s customers negatively.


    Revenue for the three month period was $3,273,213 (2017 - $2,991,706) a $281,507, 9% increase, and the Corporation returned to profitability with net comprehensive income for three month period ended January 31, 2018 of $552,815 (2017 - $198,221) a $354,594, 179% favourable variance. The results reflect the previously reported turnaround from increased demand with sales remaining strong.


    During the quarter, Southern Coal experienced a further increase in demand from its customers, in comparison to that of Q4, 2017 and the Corporation can confirm that Q2, 2018 will reflect a further increase to Southern Coal’s maximum capacity.


    The Corporation also remains focused on completing a Broad-Based Black Economic Empowerment (“B-BBEE”) transaction for Southern Coal, by mid-June 2018. The B-BBEE is a form of economic empowerment initiated by the South African government with the goal to distribute wealth across as broad a spectrum of previously disadvantaged South African society as possible. A new partner has been identified and initial terms of the agreement, which will remain much the same as the previously agreed transaction, will most probably be announced by the end of April 2018. The Corporation remains confident that it will achieve its B-BBEE goals during the current fiscal year and we remain optimistic of the opportunities that will arise from such a transaction.


    The Corporation reported net income o f $187,126 (2017 - $197,691) a $10,565 unfavourable variance of over the previous period. The reduction in GM and profit are due to increased feedstock costs in Q1 and a one month delay in the corresponding sale price increase, a general increase in maintenance cost and investment into B-BBEE training projects in Q1 which represent approximately 75% of the projected annual spend for B-BBEE


    The Corporation has an agreement to lease premises for its coal processing plant in South Africa for a term of ten years, expiring on December 31, 2020. The agreement offers the Corporation, in lieu of rent, feedstock coal to be delivered to its adjacent premises, which it purchases at market price. Should the Corporation decide to purchase feedstock coal from an alternative supplier which the lessor is otherwise able to provide, then a monthly rent of Rand 200,000 ($16,819) is payable. To date, the Corporation has not been required to pay any rent for the premises as it has continued to purchase feedstock coal from the landlord.


    The bank loan bears interest at 10.25% per annum, matures on January 7, 2019, and is secured by the Company’s furnace acquired with the proceeds from the loan. The bank loan is repayable in blended monthly payments of Rand 391,624 ($32,934 translated at January 31, 2018 exchange rate)). During the three month period ended January 31, 2018, the Company incurred interest expense totaling $Nil (January 31, 2017 – $15,322).
     
  2. Looks as if the CEO of CAF has already established himself in South Africa's realm of black empowerment. He started a company a few years ago called Sewa Coti, as per his LinkedIn: Sewa Coti is an African-focused consultancy specialising in due diligence, project management, strategy, as well as B-BBEE legislation in South Africa.

    So what that tells me is that with pretty much 100% certainty we will get a deal done, established Canaf with government contracts and shouldn't have any issue diversifying. This guy is smart, he has paved the road to growing this company far beyond where it's currently at.

    From CAF's last MD&A:

    The Corporation also remains focused on completing a Broad-Based Black Economic Empowerment (“B-BBEE”) transaction for Southern Coal, by mid-June 2018. The B-BBEE is a form of economic empowerment initiated by the South African government with the goal to distribute wealth across as broad a spectrum of previously disadvantaged South African society as possible. A new partner has been identified and initial terms of the agreement, which will remain much the same as the previously agreed transaction, will most probably be announced by the end of April 2018. The Corporation remains confident that it will achieve its B-BBEE goals during the current fiscal year and we remain optimistic of the opportunities that will arise from such a transaction.
     
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