FIJ 4.76% 11.0¢ fiji kava limited

The Benzo Killer - FIJ ($25M MC) ($75M ST Target)

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    Welcome all! As we are in a trading halt to obtain the last piece of the FIJ puzzle required to complete their aggressive growth plan ($3M in cash capital raising) I thought I would create a well updated post for prospective and old holders alike!

    I'll keep this brief:

    INTRODUCTION:

    Fiji Kava is an Australian/Fijian biotech company that sells Kava products for the indication of Anxiety and Insomnia. Kava is a pacific islander plant, which when harvested and the roots crushed, an active element called Kavalactones is extracted. When consumed, the user feels a strong sense of anxiety relief/relaxation effect for 4-5 hours, without any cognitive sedation. As Kava is considered a nutraceutical, it does not required the traditional, expensive FDA process, and is currently being sold under FIJ in Coles. FIJ own a complete vertical integrated process of farm -> pill, resulting in greater margins and a competitive edge in the market.

    Does it work? Short answer yes, very effectively. FIJ have signed an agreement with Blackmores owned Bioceuticals for FIJ noble kava extract to use for their anxiety medication for context on efficacy. Long answer, view this thread on HC regarding posters on experiences in using Kava: https://hotcopper.com.au/threads/have-you-actually-tried-it.5571761/#post-46813957

    The effectiveness has lead people to call Kava the 'Natural Xanax" and what I imagine FIJ BOD want it known as: The Benzo Killer. As illuminated as an issue as the opiate pandemic is, the brewing benzo pandemic is almost as destructive. The amount of people who take benzos for anxiety and report depression as a side effect is astounding, resulting in an additional prescription or commonly found "change of medication until we find something that suits you" type of circus - users reporting "a feeling of numbess both to the bad and good in life". This NEEDS to change. You can not risk a side affect of depression that can risk the possibility in those vulnerable to suicide in attempt to solve another mental illness. It is inhumane and unethical, yet scarily an overprescribed trial and error approach.

    The FIJ BOD regard Kava as the saviour to Western Societies modern day stresses. It has minor side effects that the large majority of users do not feel while remaining a very effective supplement for mild anxiety and stress. Those side effects being: nausea, grogginess (when combined with alcohol especially before sleep), liver damage (early accounts of this from the late 90s/early 2000s are now seen as far more safe with modern trials). It does not have any addictive property or intoxicating effect. It is recommended to avoid mixing use with alcohol to avoid these side effects.

    Now for the juicy stuff that we like as investors:

    ASTOUNDING REVENUE GROWTH AHEAD + THE CURRENT CONTRACTS:

    In the below graph, we can see the contracts to date and the actual revenue that has been reported in quarterly announcements. For further clarification follow the below dot points: NOTE: Much of the revenue from these contracts have yet to be recognised in quarterly reportings -> Q3/Q4 will be the catalyst for this to occur and a point for SP rerate)
    • Minimum $3.5M agreement with Pathway International (AUS) (3 year duration, currently 1.5 years through with the majority of revenue being recognized in years 2/3 : This means ~$2.8M remaining revenue to be recognized over the next 6 quarters. Blackmores agreement falls under this contract)
    • Minimum $8M agreement with Pumate Ltd (China) (SHARE INCENTIVE if they reach $10M sales in a single FY) Revenue likely to start in Q4 2020.
    • Coles Distribution Agreement (AUS) : Dispatched in June, the majority of Coles Revenue will start being recognised in Q3/Q4 this year and beyond.
    • Green Cross Pharmacies (NZ): Dispatched 2019 November, this is an exclusive agreement that has Fiji Kava in over 300 stores, which has its exclusivity clause ending in 2 months.
    • Oborne Heath Supplies Ltd Agreement (AUS): Undisclosed minimum revenue figure, using Oborne to supply to smaller ecommerce distributors in the health and supplement sector.
    • FIJ Ecommerce Site and Amazon (US & International): Has received very strong MD&A commentary regarding their Q/Q grow
    The table and graph below shows a basic revenue analysis of these contracts. The blue graph and table represents the current contracts and the estimated revenue recognition from each contract going forward. This is shown as a quarterly totals and annual totals at the top of the table in blue text.

    At the bottom of the appendix we have a green table, representing potential market penetration of speculative unsigned agreements that do not currently exist, these have been assumed due to previous management contacts having gone through the distribution process with these companies previously (Nicholas Simms, a Non-Executive FIJ Director, Ex-CEO of BUBS) as elaborated later in the thread.

    https://hotcopper.com.au/data/attachments/2433/2433469-2354236ea6b5c5795290af84e8abbc00.jpg
    https://hotcopper.com.au/data/attachments/2433/2433471-2ec57812e3f58db9bcc12c6346a6a06c.jpg
    This leaves us with a current contract projection of 2020 year being $2.55M and a 2021 projection of $5.44M. This follows a similar growth rate % wise from the actual figures shown in black in the above table. These figures are only if FIJ do not sign any more contracts - which goes against all MD&A commentary to date, although its best to show a conservative case. Its also important to note a major revenue assumption in the Coles/Amazon and Ecommerce figures, as we do not know enough about the revenue from these as yet. NOTE: These are assumptions and not certain revenue figures.

    Now lets see what happens if they do sign more contracts and penetrate the market further, especially with USA being the largest international consumer of Kava products and them not being penetrated by FIJ to date. Lets suggest that a similar contract is signed in the US as the China contract, of $8M over three years. That leaves us with a speculative projection in 2021 year being $9M.

    LETS NOT FORGET:
    The PuMate Ltd deal have a share incentive if they reach $10M in a single year. So this growth prediction could absolutely be blown out of the water.

    OTHER FUTURE CONTRACT POTENTIAL:
    • Whole Foods (USA): The CEO Zane Yoshida in 2016 successfully got Kava products into Wholefood stores, unfortunately product and manufacturing processes were damaged in a FIJI Cyclone resulting in this contract to cease. Although this remains as a natural progession into the US market as he knows the process.
    • Woolworths (AUS) is the next logical AUS step (Nicholas Simms knows the process into Woolworths from his Ex-CEO role at BUBS.
    • Chemist Warehouse (AUS) (In a similar token, Nicholas Simms also knows the Chemist Warehouse Process which could translate to a similar distribution contract for FIJ)
    • Countdown (NZ) The Greencross chemist exclusivity clause ends in 2 months for FIJ, following MD&A commentary of wanting to penetrate AUS and NZ retail markets more heavily in the short term, this makes sense as a logical step.
    CONCLUSION:I remain an extremely convicted holder of FIJ, at the stock price of 22.5c given this unfolding growth story. It is not normal for me to want to wait and then sit through a CR such as this at present, although given the continued undervalued nature of FIJ to date, it felt like a no brainer to hold longer term. Now with having $3M in the bank following CR, it marks the perfect time for entry into FIJ before all these contracts revenue start being recognized in Q3/Q4 quarterly's this year, resulting in a catalyst for a SP rerate.

    I am setting a short to medium term target of $75M market cap (65-75c target), representing a further 3-4 bags from current prices at time of posting, given the fruition of the unfolding growth of FIJ to date
    . THIS IS NOT FINANCIAL ADVICE, IT IS MERELY A TARGET I WILL BE LOOKING FOR.

    I have not mentioned all that is gold with FIJ in this post, I strongly recommend reading @Stockholms post history in FIJ and other threads on HC as there is a lot more characteristics that make FIJ a great short to medium term play.

    GLTAH, please DYOR, not financial advice.
 
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