Hike service

Equity Research | AGTIRA: snowballing with agriculture as a service

It took less than five months to Agtirá convert the letter of intent with Greenfood into a firm order of SEK 80 million, the first of a potential series of ten, and the company’s agriculture-as-a-service (FaaS) model is now gaining traction. With an increasing predominance of the FaaS model, at least in Sweden, positive cash flow is pushed into the future due to lower but recurring revenue that accumulates over time. In addition to a macro discount rate hike, all 14 systems in LOI or under construction, as well as rolling out one full, one green, and three InStores per year now support a fair value range of SEK 22-27 (32-46) per share in 12-24 months.

buzz around Agtirá
Since the letter of intent with Coop was communicated at the end of August, Agtirá got busy. In September, Agtirá appointed product manager Peter Soderbacka garden technician with 35 years of experience, signed a letter of intent with an international blockchain company Hive Blockchain for the use of excess heat from their huge server room in Boden, signed a first firm agreement with Greenfood for the construction of an Agtira Greens, and last but not least, signed a letter of intent with a wholesaler Norwegian national fruit and green vegetable collection. Although few details about the Norwegian agreement, we see this as the start of a potential international breakthrough, where systems can be sold upfront in bulk, rather than individual agreements.

Focus on agriculture as a service
As everything indicates that agriculture as a service will be the main business model, at least in Sweden, we made some adjustments to our model. According to the system, the FaaS will ensure high-margin recurring revenue of approximately 1-8 million SEK per year and system. This is, however, a capital-intensive model, where Agtirá is responsible for the construction and operation of the system, possibly in collaboration with a partner. Additionally, we might see a change in how and where Agtirá will look to build their systems from the direct vicinity of each grocery store to building larger, centrally located systems to reduce as much transportation as possible.

Rising recurring revenue
We now expect 100% (50%) of systems sold to be as FaaS, pushing cash flow positive through 2024 (2023) which, with a focus on delivering the Letter of Intent with Greenfood , now supports our forecast of SEK 72 million recurring revenue by 2024. Norwegian industry colleague Kaleranow double listed in the United States and Germanytrades at 6x T12 sales despite losses and is valued at $33 million (after an 86% drop since the start of the year). With our model’s WACC up to 20% (12%) and a multiple target of 6x sales’24, the 14 systems Agtirá a under LOI today + a deployment of one Complete, one Greens and three InStores per year from 2024 implies a fair value range of 22 SEK – 27 (32-46) per share in 12-24 months. We note however another advantage, should Agtirá find a financing solution that can accelerate the pace of deployment, where a deployment of three Complete and Greens per year from 2025 implies a fair value of SEK 42 per share, and an international breakthrough would further boost the upside.

Read the full report here: https://www.emergers.se/agtira_j/