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Streaming Canola across Western Canada TSX.V: INP Corporate - - PowerPoint PPT Presentation
Streaming Canola across Western Canada TSX.V: INP Corporate - - PowerPoint PPT Presentation
Streaming Canola across Western Canada TSX.V: INP Corporate Presentation January 2, 2019 1 Important notice concerning this document including forward looking statements This Presentation discloses management policies, investment strategies and
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Corporate Presentation
April 2017 TSX.V: INP
Important notice concerning this document including forward looking statements This Presentation discloses management policies, investment strategies and courses of conduct that may constitute “forward-looking information” within the meaning of applicable Canadian securities legislation. All statements, other than statements of historical fact, included herein may be forward-looking
- information. Generally, forward-looking information may be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”,
“proposed”, “is expected”, “budgets”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases, or by the use of words or phrases which state that certain actions, events or results may, could, would, or might occur or be achieved. This forward-looking information reflects the Company’s current beliefs and is based on information currently available to the Company and on assumptions the Company believes are reasonable at the time of preparation. These assumptions include, but are not limited to, the actual results of investee’s being equivalent to or better than estimated results by the Company. Forward-looking information is subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking information. Such risks and
- ther factors may include, but are not limited to: general business, economic, competitive, political and social uncertainties; commodity prices; cyclical nature of
the agricultural industry; weather; the early stage development of the farming operations or dishonesty of the streaming partners; reliance on management, uncertainty in identifying and structuring streaming agreements, liquidity of investments, potential conflicts of interest, failure of the Company to meet targeted returns, limited transferability of Shares, defaulting streaming partners, competition; changes in project parameters as plans continue to be refined; delay or failure to receive board or regulatory approvals; changes in legislation, including environmental legislation affecting the Company and its streaming partners; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; and lack of qualified, skilled labour or loss of key
- individuals. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in
forward-looking information, there maybe other factors that cause results not to be as anticipated, estimated or intended. Accordingly, readers should not place undue reliance on forward-looking information. The Company does not undertake to update any forward-looking information, except in accordance with applicable securities laws. As a result of these risks and uncertainties, actual events or results and the actual performance of the Company or its business may be materially different from those reflected or contemplated in the forward looking statements or information. Likewise, in considering the prior performance information contained herein, prospective investors should bear in mind that past performance and experience is not necessarily indicative of future results, and there can be no assurance that the Company will achieve comparable results. The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended (the “1933 Act”), or any state securities laws. Accordingly, these securities may not be offered or sold within the United States of America or to a U.S. Person (as such term is defined in Regulation S under the 1933 Act) unless registered under the 1933 Act and applicable state securities laws or an exemption from such registration is available.
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Direct exposure to the growing global canola market
- CTTPP trade agreement set to open new markets to Canadian canola – see https://www.canolacouncil.org/cptpp/
- Global population expected to rise 30% by 2050 primarily in developing nations
- Global food output, including consistent growing demand for canola, will need to outpace population growth due to
emerging middle classes in countries such as China, India and Brazil
- 90% of Canadian canola production is destined for export markets accounting for 70% of global exports + agronomic limits
to greater Canadian production = strong canola price dynamics
- Current market share of ~85,000 MT1 in 20 million MT market (388 farmers in 50,000 farmer market)
Summary
Investments into streaming contracts provide attractive returns
- Capital Stream product solves working capital issues; generates gross IRRs in the mid-teens; capital is fully secured
against farm assets (land, equipment, buildings)
- Marketing Streams added in January 2017; higher cash returns at lower risk, and significantly larger addressable market;
signed up over 270 farmers in first nine months
- Mortgage Streams added in January 2018; highly suitable for land financing; lends itself to third party funding to
significantly increase ROE; rock solid security; already accounts for >50% of invested assets.
A dividend-paying growth story led by experienced owner-management team
- Management estimates it could grow a very significant mortgage book within 5 years, generating significant growth in
earnings per share and distributable cash; any debt to be secured against mortgages – no operating debt
- Currently paying quarterly dividend yielding ~5.0% annually
- Over the last 20 months, insiders have increased share ownership by 6.85 million shares (from 14.9% to 22.3% basic and
from 22.3% to 26.7% FD)
- Renewed share buyback launched in December 2018 to buy back up to ~10% of the public float
1. 85,672 MT of canola equivalent sold from streaming for the fiscal year ended September 30, 2018.
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$33.025 $36.794 $25.825 SEP 18 SEP 17 SEP 16
Total Capital Deployed
(CAD Millions)
$41.336 $42.052 $36.385 SEP 18 SEP 17 SEP 16
Adjusted Crop Revenue
(CAD Millions)
$0.05 $0.08 $0.05 SEP 18 SEP 17 SEP 16
Adjusted Net Income Per Share
$0.17 $0.28 $0.23 SEP 18 SEP 17 SEP 16
Adjusted EBITDA Per Share
85,672 88,535 53,949 SEP 18 SEP 17 SEP 16
Adjusted Crop Volume
(canola equivalent MT)
388 301 94 SEP 18 SEP 17 SEP 16
Active Streaming Clients
Historical Multi-Year Results
Previous periods restated for the twelve month periods ended September 30 to reflect trailing twelve month comparisons.
A significant volume of deliveries expected in September 2018 were delayed into Q1 of FY2019 due to heavy unseasonal snow across Alberta and Saskatchewan. As a result, adj. crop revenue, volume, EBITDA and net income were reduced for FY2018. This revenue, cash flow & earnings will be recorded in Q1 of FY2019.
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Growing Global Demand for Canadian Canola
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- 5,000
10,000 15,000 20,000 25,000 30,000 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Thousands MT
Canadian Canola Production and Exports
Ontario Manitoba Saskatchewan Alberta British Columbia Exports
- 90% of Canadian canola production is destined for export markets, accounting for 70% of annual
global exports.
- Annual canola production accounts for $26.7 billion of economic activity in Canada per year and
250,000 Canadian jobs and $11.2 billion in wages.
- Canola is the largest, most profitable crop in Canadian agriculture, generating more than one quarter
- f all farm receipts across 43,000 farms.
- Domestic production and export markets have shown consistent growth.
- 1. Assumes 23.1M acres planted to canola representing the upper limit of rotational capacity
Sources: Canola Council of Canada, Statistics Canada
$26.7B Growth Industry in Canada
40 bpa yield = 20.9M MT total production1 30 bpa yield = 15.6M MT total production1 50 bpa yield = 26.0M MT total production1
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5,000 10,000 15,000 20,000 $0 $100 $200 $300 $400 $500 $600 $700 $800 Jan 2010 Jul 2010 Jan 2011 Jul 2011 Jan 2012 Jul 2012 Jan 2013 Jul 2013 Jan 2014 Jul 2014 Jan 2015 Jul 2015 Jan 2016 Jul 2016 Jan 2017 Jul 2017 Jan 2018 Jul 2018
Exports (thousands MT)
- No. 1 Canada Canola Par Region Best Bid (CAD)
Max: $669.80 Min: $359.00
Cash Prices Supported by Growing Export Market
- Cash prices are supported by strong export market.
- Export markets show continued strength; a bullish indicator for future prices.
- As exports continue to grow, Canadian canola production is reaching its physical and
agronomic limits using existing farming practices.
Source: Intercontinental Exchange and the Canola Council of Canada Exports: 19.2 million MT
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Input Capital – A Virtual Grain Company
1. www.grainscanada.gc.ca
- There are hundreds of elevators and crush plants spread across the
prairie provinces.1 Input Capital can deliver grain anywhere across Western Canada leveraging the infrastructure from other organizations which reduces
- verhead costs.
- Western Canadian grain elevators and crush plants have capacity for
millions of metric tonnes. Input Capital currently moves volume equating to just over 1% of the total capacity of all the delivery locations available across the Western Canadian provinces.
- We source canola from Canadian farmers in exchange by providing
working capital financing and farmland mortgages. Province Number of delivery points Capacity (million MT) Alberta 89 2.242 Saskatchewan 202 4.358 Manitoba 96 1.844 Total: 387 8.444
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Canadian Farm Balance Sheets Are Strong and Under-Levered
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Farm Real Estate In Canada
1. www.statcan.gc.ca
Alberta Saskatchewan Manitoba
50 million acres $2,635/acre $132 billion market 62 million acres $1,388/acre $86 billion market 18 million acres $2,000/acre $36 billion market
Canadian farm real estate is worth over $480 billion
- Western Canada accounts for over 80% of the farmed acres in Canada and just over 50% of the total value of farm real
estate.
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Western Canadian Farmland Values
$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 Dollars per Acre Year
Value of Farmland on the Canadian Prairies (per acre)
AB SK MB
- Per acre values have been on the rise for 30
years
- Saskatchewan land prices have typically lagged
Alberta and Manitoba
- The national average annual increase in
farmland values over the past 10 years is 12.1%
- Over the last 10 years, farmland values across
Canada have increased at an annual rate of 5% (2010) to 22% (2013)
0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Annual Change in Land Value by Province
AB SK MB 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% AB SK MB
10 Year average change in land value
National Average 7.0% CAGR 6.5% CAGR 5.4% CAGR
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Agricultural Balance Sheets In Canada
1. www.statcan.gc.ca
- Canadian farm real estate makes up over 75% of total farm assets.
Consistent growth in land values has increased the proportion of farm land values on Canadian farmers’ balance sheets while long-term debt levels grow at a similar rate, but remaining under 17% of the value of farm real estate.
- Historical long-term debt levels make up less than 13% of a farm’s capital
- structure. Unique opportunity to finance income producing real assets in an under-financialized
sector worth over $480 billion and growing.
Select Canadian Agricultural Sector Balance Sheet Items (in Billions)1 2015 2016 2017 Farm real estate 417.3 445.4 480.1 Long-term Liabilities 68.2 73.6 78.3 Total assets 562.9 591.5 632.2 Farm real estate as a % of total farm assets 74.1% 75.3% 75.9% Long-term debt as a % of farm real estate 16.3% 16.5% 16.3% Long-term debt as a % of assets 12.1% 12.4% 12.4% Debt to Equity 0.18 0.18 0.18 Current Ratio 2.53 2.33 2.27 YoY Increase in farm real estate value 8.5% 6.8% 7.8%
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Farmland Mortgage Risk Profile
Commercial and residential real estate
- Almost always involve a depreciable asset
- Principal repayment on a mortgage helps improve LTV levels over time
Western Canadian agricultural real estate
- Typically valued based on a bare land valuation, or cultivated acres, meaning no depreciable assets
- Farmland has a very long track record of capital appreciation offering strong inflation protection
- Very low default and foreclosure rates
- The LTV and overall risk profile improves with capital appreciation regardless of principal repayment, gets even better with
principal payments
Steady long-term capital appreciation combined with principal repayments rapidly decreases LTV ratios.
Since 2010, insolvency rates have been less than 1 per every 1,000 businesses in the agriculture, forestry, fishing and hunting sector.1
- There are approximately 400 applications to the Farm Debt Mediation Service annually out of 193,000 farms across
Canada (rate of 0.21%). Of those applications over 60% develop an arrangement to resolve any unpaid debts without the necessity of proceeding to collection, reducing collection action rates to 0.08%.(1)
1. www.agr.gc.ca
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Owner-Management Leadership Team
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Founded and Sold Assiniboia Farmland to CPPIB for $128M
Management has built and profitably exited deals in the Canadian ag space; NAV per unit growth from $18 in 2005 to ~$64
1 in 2013, ~19% IRR 2 from inception.
Entry Exit
- 1. Before performance fees
Source: Assiniboia Farmland Limited Partnership MD&A
- 2. Net of performance fees
Launched first farmland private equity fund in Canada in 2005; raised $53M in equity through eight private and public offerings. In January 2014, closed the sale of its ~115,000 acre portfolio of Saskatchewan farmland to the Canada Pension Plan Investment Board (CPPIB) for $128M.
LP Gross NAV per Unit
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Doug Emsley
Co-Founder, Chairman, President & CEO
- Co-Founder of Assiniboia Farmland LP
and Assiniboia Capital Corp.
- President of Emsley & Associates
(2002) Inc., Chairman of Security Resource Group Inc. and Sabre West Oil & Gas Ltd.
- Board Member, Greenfield Carbon
Offsetters Inc., Information Services Corporation (TSX: ISV)
- Former Board Member –
Saskatchewan Roughriders Football Club, Bank of Canada, Royal Utilities Income Fund (TSX), Public Policy Forum, IRPP
Brad Farquhar
Co-Founder, Director, Executive VP & CFO
- Co-Founder of Assiniboia Farmland LP
and Assiniboia Capital Corp.
- Advisory Board, AgFunder.com
- Director of Mongolia Growth Group Ltd.
(TSXV: YAK), Greenfield Carbon Offsetters Inc., and SIM Canada
- Former member of the Saskatchewan
Chamber of Commerce Investment & Growth Committee
Gord Nystuen
Co-Founder, VP Market Development
- Former Deputy Minister of Agriculture
and Chairman of Saskatchewan Crop Insurance Corporation
- Former Chief of Staff to the Premier of
Saskatchewan
- Previously served as VP of Corporate
Affairs at SaskPower
- Partner, Golden Acres Seed Farm
David Laidley, FCPA, FCA
Independent Director
- Chairman Emeritus, Deloitte LLP (Canada)
- Former Lead Director, Bank of Canada
- Chairman, CT REIT
- Director, EMCOR Group Inc.
- Former Director – Aimia, Inc., Aviva Canada Inc.
Lorne Hepworth
Independent Director
- Chair of Global Institute for Food Security
- Member of CARE Canada
- Advisor, Assiniboia Farmland Holdings LP
- Member, Canadian International Food Security
Research Fund Scientific Advisory Committee
- Past President of CropLife Canada and Former
Saskatchewan Minister of Agriculture, Finance, Education, and Energy & Mines
- Member of the Canadian Agriculture Hall of Fame
David A. Brown, C.M., Q.C.
Independent Director
- Counsel, Davies Ward Phillips & Vineberg LLP
- Former Chairman & CEO, Ontario Securities
Commission (OSC)
- Former Chair, Board of Directors, Canadian
Employment Insurance Financing Board
- Director, Canada Health Infoway
- Director & Member, Funds Advisory Board,
Invesco Trimark Group of mutual funds
John Budreski
Independent Director
- Executive Chairman, Morien Resources
- Executive Chairman, EnWave Corp.
- Director, Sandstorm Gold Ltd.
- Former Vice-Chairman, Cormark Securities,
President & CEO of Orion Securities Inc., and Head of Investment Banking, Scotia Capital Inc.
- Former Director, Alaris Royalty Corp.
Experienced Leadership
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The Benefits of Canola Streaming
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Capital Stream
- Multi-year canola marketing
arrangement.
- Access to better canola pricing
- pportunities by joining Input
Capital’s canola marketing program.
- “We are the only grain company
that will write you a cheque today for the right to market your canola tomorrow.”
- Input Capital buys and sells canola via streaming contracts with
producers across western Canada.
- Streaming contracts are a new way for producers to market canola
production and access financial solutions that meet their needs. Input Capital offers three types of streams to meet different needs among western Canadian canola farmers.
Marketing Stream
- Multi-year canola purchase
contract – upfront payment/deposit paid to producers secures future production.
- Upfront payment/deposit used by
producer as working capital.
- Geared towards farmers looking
for a cash injection for expansion, succession planning, on-farm projects or as an alternative to expensive trade credit.
Expanded Product Line
- Multi-year canola purchase
contract combined with first lien conventional mortgage. Unique features:
- Single annual payment
- Payable in canola instead of
cash – cash-flow friendly
- 5 year guaranteed canola
price
- Input picks up the canola
- n-farm and manages all
logistics & marketing
Mortgage Stream
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Capital Stream
Capital Streams generate highly seasonal results:
- Revenue is almost entirely recorded during the September to December period;
- Virtually no revenue recognized during the rest of the year;
- Contract is subject to IFRS derivative accounting – high MTM volatility;
- After 5 years, the contract ends with no further obligation by either party.
Example Features:
- An interest-free form of working capital financing.
- Input takes all commodity price risk and manages trucking, logistics & grain marketing.
- The price per metric tonne a farmer receives is broken down into:
- Significant fixed upfront deposit per metric tonne, paid to the farmer at contract initiation for all metric tonnes in the contract; and
- Fixed crop payments per metric tonne, paid upon the delivery of annually contracted tonnes of canola.
Date 4/1/2018 10/31/2018 10/31/2019 10/31/2020 10/31/2021 10/31/2022 Delivery Obligation (MT) 1,666.7 1,666.7 1,666.7 1,666.7 1,666.7 Capital Deployed $ (1,000,000) Revenue ($475.00/MT) $ 791,667 $ 791,667 $ 791,667 $ 791,667 $ 791,667 Crop Payments $ (466,667) $ (466,667) $ (466,667) $ (466,667) $ (466,667) Trucking Expense ($12.50/MT) $ (20,833) $ (20,833) $ (20,833) $ (20,833) $ (20,833) Cash Flow to Input $ (1,000,000) $ 304,167 $ 304,167 $ 304,167 $ 304,167 $ 304,167
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Marketing Stream
Example
Date 4/1/2018 10/31/2018 10/31/2019 10/31/2020 10/31/2021 10/31/2022 Delivery Obligation (MT) 20,000.0 20,000.0 20,000.0 20,000.0 20,000.0 Capital Deployed $ (1,000,000) Revenue (DRP of $475.00/MT) $ 9,500,000 $ 9,500,000 $ 9,500,000 $ 9,500,000 $ 9,500,000 Crop Payments (95% of the DRP) $ (9,025,000) $ (9,025,000) $ (9,025,000) $ (9,025,000) $ (9,025,000) Cash Flow $ (1,000,000) $ 475,000 $ 475,000 $ 475,000 $ 475,000 $ 475,000
Features:
- Farmers gain access to Input Capital’s canola marketing expertise.
- Input and farmer share commodity price risk pro-rata.
- The price per metric tonne a farmer receives is broken down into:
- Small fixed upfront deposit per metric tonne, paid to the farmer at contract initiation for all metric tonnes in the contract; and
- Variable crop payments per metric tonne based on the declared regional price (DRP), and paid upon the delivery of annually contracted
tonnes.
Declared Regional Price (DRP)
- Input Capital’s grain marketing team builds this price throughout the year;
- Determined on August 15th each year, for the current year’s pool of
marketing tonnes;
- The DRP is an on-farm picked-up price, including freight or trucking costs –
Input keeps a small percentage (typically 5%) of DRP.
Similar to the Capital Stream, revenue recognition is highly seasonal with deliveries during the September to December window.
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Mortgages on farmland are the most important aspect of the security package. Analysis and valuation of the land and any existing liens are performed to calculate equity. Farmland Mortgage Intent to Carry out Contract Credit behaviour analyzed to determine counterparty track record of meeting
- bligations in a timely
manner.
- Due diligence is supported by a comprehensive security package.
Independent verification of a producer’s intent, ability and capacity to execute on a long-term streaming contract is backed by tangible security via mortgage registration.
- Smaller contracts with less upfront capital adds safety and decreases risk.
Large crop payments give Input the right to offset cash owed to producer against
- utstanding delivery obligations.
Ability to Service Contract Crop records provide insight into historic production ability and trends in farm size and crops grown. Capacity to Thrive Long- Term Balance sheet analysis provides insight into a producer’s capacity to sustainably sell future production to Input. GSA gives Input security on all present and after acquired assets. General Security Agreement (“GSA”) Crop Insurance provides a security blanket for farmers and Input in years of low yields by helping farmers stay current. Assignment of Crop Insurance PMSI provides security over the current year crop. Purchase Money Security Interest (“PMSI”)
Capital Stream & Marketing Stream Due Diligence
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Mortgage Stream
Example 1 – 25 Year Amortization1 Example 2 – Interest Only1 Features:
- Mortgage principal is repaid on a straight line amortization schedule with a renewal (or balloon payment) at the end of a 5-
year term. Some mortgages are interest-only for the right counterparties.
- The principal, the interest rate, and the agreed-upon locked-in canola price determine the number of tonnes required to
service the mortgage payments.
- A stub year in the first and last years of the mortgage align interest payments to the crop season.
1. Mortgage examples assume an interest rate of 7.49% and a 5 year locked-in canola price of $475/MT
Date 4/1/2018 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 3/31/2023 Beginning Balance $ 1,000,000 $ 960,000 $ 920,000 $ 880,000 $ 840,000 $ 800,000 Principal Repayment $ (40,000) $ (40,000) $ (40,000) $ (40,000) $ (40,000) $ (800,000) Ending Balance $ 1,000,000 $ 960,000 $ 920,000 $ 880,000 $ 840,000 $ 800,000 $ - Interest Payment ($) $ 56,175 $ 71,904 $ 68,908 $ 65,912 $ 62,916 $ 14,980 Interest Payment (MT) 118.3 151.4 145.1 138.8 132.5 31.5 Date 4/1/2018 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 3/31/2023 Beginning Balance $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 Principal Repayment $ - $ - $ - $ - $ - $ (1,000,000) Ending Balance $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ 1,000,000 $ - Interest Payment ($) $ 56,175 $ 74,900 $ 74,900 $ 74,900 $ 74,900 $ 18,725 Interest Payment (MT) 118.3 157.7 157.7 157.7 157.7 39.4
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Mortgages on farmland are the most important aspect of the security package. Input requires a first lien mortgage position on farmland used as security for a mortgage stream. Analysis and valuation of the land and any existing liens
- n the land are performed to calculate equity.
Farmland Mortgage Intent to Carry out Contract Credit behaviour analyzed to determine counterparty track record of meeting
- bligations in a timely
manner. Ability to Service Contract Crop records provide insight into historic production ability and trends in farm size and crops grown. Capacity to Thrive Long- Term Balance sheet analysis provides insight into a producer’s capacity to sustainably sell future production to Input. Input requires an assignment of crop insurance in the amount of the respective interest payments for each crop year. Crop insurance provides a security blanket for farmers and Input in years of low yields. Assignment of Crop Insurance
Mortgage Stream Due Diligence
- Due diligence process based on wide range of third party data, including credit bureau reports,
title & lien searches, land valuation & comparable land sales, tax returns, financial statements, crop insurance historical production & claim data, and more. These provide independent verification of a producer’s intent, ability and capacity to execute on a long-term contract backed by ample tangible security.
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Building a Diversified Portfolio
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2014 Harvest 2015 Harvest 2018 Harvest
- Since the 2014 harvest, tonnes due from currently active files
have been materially diversified. Input’s reliance on any single producer has decreased every year – the portfolio has become much more predictable due to smaller volumes from each farmer and higher crop payments.
Building a Diversified Portfolio
9%
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Streaming is becoming a common tool to finance farm operations and sell canola. Input’s portfolio of active producers is growing in size while mitigating counterparty and geographic risk.
Streaming is Becoming Mainstream
Sept 2015 Sept 2018 Sept 2017 Sept 2016
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Geography of Input’s Mortgage Stream Portfolio1
1. Based on portfolio data to Sept. 30, 2018.
Alberta Saskatchewan Manitoba Over 70% of mortgage clients also have a marketing stream.
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5 9 10 10 15 20 21 42 68 78 79 77 94 107 112 122 181 300 301 325 353 371 388
MAR 13 JUN 13 SEP 13 DEC 13 MAR 14 JUN 14 SEP 14 DEC 14 MAR 15 JUN 15 SEP 15 DEC 15 MAR 16 JUN 16 SEP 16 DEC 16 MAR 17 JUN 17 SEP 17 DEC 17 MAR 18 JUN 18 SEP 18
- 388 client portfolio1. Geographically diversified across the Prairies;
concentrated in Saskatchewan, with continuing growth initiatives into Alberta and Manitoba.
- Decreasing counterparty risk. Portfolio growth diminishes the materiality of
each new contract in the portfolio, reducing concentration risk and enhancing diversification.
Active Streaming Contracts
Launch of Marketing Streams First full quarter selling Marketing Streams
1. Based on the fiscal year ended September 30, 2018.
Streaming is Becoming Mainstream
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- $192.5 million invested to date1 into all types of streaming contracts.
- Platform for growth. Initial investment into canola streaming contracts has built a low-
cost, multi-year, diversified base of canola production from which to grow. $25 million revolving credit facility and provides non-dilutive dry powder to fund continued growth. $10 million term debt facility provides low cost mortgage financing to leverage mortgage streams and provide the liquidity necessary for growth.
- Over $135 million in cumulative adjusted total revenue, which is 70% of total
capital deployed to date, earned to date provides significant capital for reinvestment.
Cumulative Upfront Payments Cumulative Adjusted Total Revenue
- 1. Based on the fiscal year ended September 30, 2018.
- 2. Active canola reserves represent the total contracted volume scheduled to be delivered to Input Capital.
Strong Returns from Initial Investments
$19.2M $42.9M $97.7M $123.5M $160.3M $192.5M $7.3M $25.9M $52.0M $94.0M $136.4M SEPT 13 SEPT 14 SEPT 15 SEPT 16 SEPT 17 SEPT 18
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Trading at Deep Discount to Historical Valuation & BV
Historical average P/BV of 1.54x Currently trading at P/BV of 0.70x
0.00x 0.50x 1.00x 1.50x 2.00x 2.50x 3.00x 3.50x DEC 13 JAN 14 MAR 14 APR 14 MAY 14 JUN 14 JUL 14 AUG 14 SEP 14 OCT 14 NOV 14 DEC 14 JAN 15 FEB 15 MAR 15 APR 15 MAY 15 JUN 15 JUL 15 AUG 15 OCT 15 NOV 15 DEC 15 JAN 16 FEB 16 MAR 16 APR 16 MAY 16 JUN 16 JUL 16 AUG 16 SEP 16 OCT 16 NOV 16 DEC 16 JAN 17 FEB 17 MAR 17 MAY 17 JUN 17 JUL 17 AUG 17 SEP 17 OCT 17 NOV 17 DEC 17 JAN 18 FEB 18 MAR 18 APR 18 MAY 18 JUN 18 JUL 18 AUG 18 SEP 18 OCT 18 NOV 18 DEC 18 Price/Book Value Per Share Average Price/Book Value Per Share
Historical Average P/BV
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TSX Venture Symbol INP Indices S&P/TSX Venture Select Index Shares Outstanding1 83.3M (basic), 89.6M (FD) 52 Week Range1 $0.96 - $1.70 Market Capitalization1 $83.3M Cash Position1 $14.9M Available Credit Facility1 $25M ($3.7M drawn) Long-term Debt1 $9.9M Debt Service Ratio (no worse than 1.5:1)1 Total Liabilities to Tangible Net Worth (not to exceed 1:1) 1 Current Ratio (no worse than 1.2:1) 1
Basic Fully Diluted Insider Ownership 22.3% 26.7% XL Value Offshore LLC2 9.2% Other Institutional2 ~15% Retail ~53% Total 100% Research Analyst Coverage: Stonegate Capital Laura Engel
- 1. Based on the fiscal year ended September 30, 2018.
- 2. Source: Management Estimates
Corporate Profile
$0.00 $0.50 $1.00 $1.50 $2.00 $2.50 $3.00 $3.50 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Sep-18
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Direct exposure to the growing global canola market
- CTTPP trade agreement set to open new markets to Canadian canola – see https://www.canolacouncil.org/cptpp/
- Global population expected to rise 30% by 2050 primarily in developing nations
- Global food output, including consistent growing demand for canola, will need to outpace population growth due to
emerging middle classes in countries such as China, India and Brazil
- 90% of Canadian canola production is destined for export markets accounting for 70% of global exports + agronomic limits
to greater Canadian production = strong canola price dynamics
- Current market share of ~85,000 MT1 in 20 million MT market (388 farmers in 50,000 farmer market)
Summary
Investments into streaming contracts provide attractive returns
- Capital Stream product solves working capital issues; generates gross IRRs in the mid-teens; capital is fully secured
against farm assets (land, equipment, buildings)
- Marketing Streams added in January 2017; higher cash returns at lower risk, and significantly larger addressable market;
signed up over 270 farmers in first nine months
- Mortgage Streams added in January 2018; highly suitable for land financing; lends itself to third party funding to
significantly increase ROE; rock solid security; already accounts for >50% of invested assets.
A dividend-paying growth story led by experienced owner-management team
- Management estimates it could grow a very significant mortgage book within 5 years, generating significant growth in
earnings per share and distributable cash; any debt to be secured against mortgages – no operating debt
- Currently paying quarterly dividend yielding ~5.0% annually
- Over the last 20 months, insiders have increased share ownership by 6.85 million shares (from 14.9% to 22.3% basic and
from 22.3% to 26.7% FD)
- Renewed share buyback launched in December 2018 to buy back up to ~10% of the public float
1. 85,672 MT of canola equivalent sold from streaming for the fiscal year ended September 30, 2018.
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Doug Emsley
President, CEO & Chairman (306) 347-1024 doug@inputcapital.com
Brad Farquhar
Executive VP, CFO & Director (306) 347-7202 brad@inputcapital.com