Analyst
Siddharth Rajeev of Fundamental Research Corp. (“FRC”) recently reaffirmed the
firm’s Buy rating on Laguna Blends, Inc. (CSE: LAG) (OTC: LAGBF) (LB6A.F),
citing an increase in the company’s share price as well as improved revenue and
its entrance into the lucrative skin care industry.
Read
the full report here http://nnw.fm/G8XvK
Laguna
Blends is a network marketing company focused on the generation of sales
through a growing base of independent affiliates. In March of 2016, the company
launched sales of its Caffe and Pro369 beverage products, marketing the
products through a base of 135 affiliates in North America.
As
noted in the reports, sales quickly took off, and by March 31, 2016 – Laguna’s
fiscal fourth quarter – the company generated its first revenues of $17,000. As
of its first fiscal quarter ended June 30, 2016, Laguna reported revenues of
$47,000. In addition, the company’s affiliate network grew to 300 active
affiliates.
While
Laguna’s primary focus has centered on its hemp-based functional beverages, the
company recently entered into a two-year, exclusive marketing agreement for the
distribution of seven Swiss-made cannabinol (“CBD”) skin care products.
In
clinical trials, the skin care products reportedly showed visible results within
one week. In the report, Rajeev provides a summary of the skin care line, as
well as results from the clinical trial and several benefits to Laguna’s
decision to diversify its portfolio.
“Laguna’s
focus is on daily consumable products and their strategy is to build a
portfolio of diversified suite of products like larger MLM companies,” reads
the report. “Most of the larger players sell a wide array of products including
cosmetics, personal care, food and beverage, kitchenware and appliances, home
care, wellness, electronics, etc. We believe that moving into skin care
products was an obvious choice for Laguna. … Another reason for Laguna to enter
the skincare market is that unique and niche products tend to do well with
direct sales as they require person-to person product education and higher
levels of customer service.”
After
discussing Laguna’s functional beverage products, the report delves into the
differences between MLM companies and “pyramid schemes,” and how Herbalife
Ltd.’s (NYSE: HLF) $200 million settlement with the Federal Trade Commission
helped influence the call for proper affiliate compensation.
The
report also highlights the “success story” of Immunotec, Inc. (OTC: IMMTF),
which offers nutritional products through independent consultants and whose
performance has bucked the negative stigmas of MLM companies.
Marketing
its products to Mexico, the U.S. and Canada, Immunotec grew annual revenues to
$85 million in 2015, up from $40 million in 2010. For the first half of 2016,
the company reported 28% year-over-year revenue growth.
“We
believe the negative sentiment on MLM companies offers investors attractive
opportunities to invest in well managed and growing MLM companies,” writes
Rajeev.
Based
on Laguna’s new skin care line and growing affiliate network, FRC raised its
long-term forecasts on the company, now projecting that by the year 2020 the
company will turn a profit of $3.3 million, or EPS of $0.12, on revenues of
$38.3 million, and grow its number of affiliates to 30,000, among other
forecasts.
In
conclusion, Rajeev writes that “The average of our Discounted Cash Flow (“DCF”)
and comparables valuation models increased from $0.44 per share to $0.80 per
share. Details of our valuation models are presented in our initiating report,
dated May 5, 2016. We are maintaining our BUY rating and risk rating of 4.”
Shares
of Laguna have increased 83% since FRC initiated coverage on the company on May
5, 2016.
For
more information, visit www.lagunablends.com
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