Drone Delivery Canada Corp

Drone Delivery Canada Corp (TSXV: FLT) is a developmental technology company. It focuses on designing, developing, and implementing a commercially viable drone delivery system within Canada.

Key highlights

• Product Development: Last year, the company launched "the Condor," the largest cargo delivery drone with a payload size of 180 kilograms and a range of up to 200 kilometers. Based on the results of its current trials, the company expects to deploy the Condor in commercial consumer pilot applications quickly. Additionally, Condor work is scheduled to begin in fiscal 2021 to improve commercial implementations and use cases.

• Making a commercial entry into the United States:The company is in talks with many prospective US-based partners who have shown an interest in collaborating with them to include its proprietary platforms to enable drone distribution applications for various vertical markets and use cases across multiple geographies. Furthermore, it has already begun applying for an aircraft Type Design Approval, which is the first step. If the organization gets a license, it will have a great chance to expand in the United States.

• Rise in advertising and promotion cost: As a result of improved publicity and new media offerings, as well as investor relations services, advertisement and promotion increased by CAD 420,580, or 53%, to CAD 1.2 million in the recorded period, compared to 0.79 million in FY2019.

Financial overview of FY2020 (Expressed in Canadian dollars)

Source: Company

• In FY2020, the company posted revenue of CAD 0.26 million, against nil revenue in the previous corresponding period. An increase in revenue was attributable to the fact that the Company began commercial operations with its first contract in March 2020.
• The Company has many line items under its operating expenses however it managed to curb its operating expenses and posted the figures of CAD 14.5 million, against CAD 15.8 million in the previous corresponding period.
• Operating loss stood at CAD 14.2 million, against CAD 15.8 million in pcp.
• The Company posted a net loss of CAD 14.1 million compared to CAD 15.5 million in 2019. 

Risks associated with investment

The operation of the Company requires licenses and permits from various local, provincial, and federal governmental authorities. There can be no assurance that the Company would obtain all necessary licenses and permits needed to develop its business or operations. 

Stock recommendation

The Company provides a turnkey logistics solution for the delivery of goods in hard to access locations, where time is of the essence, and to limit person-to-person contact. Furthermore, it has an impressive product pipeline and is conducting flight tests following the approvals provided by Transport Canada for many of its products. The Company’s future performance profoundly depends on the licenses and permits. As of now, it is operating on only two routes. On the valuation front, the stock is available at a forward EV to Sales multiples of 20.1x, which is significantly higher than the industry (Aerospace & Defense) average of 7.1x. Hence, considering the above rationale, we recommend an “Avoid” rating on the stock at the closing price of CAD 1.22 on April 22, 2021, and prefer to remain on the sideline.

Price Chart (as on April 22, 2021). Source: Refinitiv (Thomson Reuters)

PlantX Life Inc.

PlantX Life Inc. (CSE: VEGA) is a plant-based company which offers more than 10,000 plant-based products ranging from a meal to indoor plant deliveries.

Key Updates:

• Decent Monthly Revenue Numbers: PlantX continues to experience month-over-month revenue increases. For the month of March 2021, the Company achieved a new record gross revenue of CAD 1.56 million, reflecting a 15.6% increase from February 2021 and a 43.7% increase from January 2021. These accomplishments are a reflection of the Company's dynamic expansion and its unwavering commitment to delivering the best quality products and services to its loyal customer base. The monthly revenue increase also builds confidence in PlantX's capabilities to continue on a growth trajectory for the rest of 2021.

• Management Updates: On April 13, 2021, the company announced the joining of Matthew Kenney for the post of Chief Culinary Oficer.

• Acquisition of Bloombox Club UK: On November 06, 2020, the company acquired Bloomboxclub Limited, which sells and delivers indoor plants to the established wellness community through online portal and has a subscription-based revenue model. Notably, the Bloombox has delivered over 55,000 plants to over 24,000 customers across the UK.

9MFY21 Financial Highlights:

• For the nine months ended December 31, 2020, VEGA posted revenue of CAD 2.292 million.
• The company’s total operating expenses were recorded at CAD 10.113 million, which includes CAD 3.277 million for consulting and management expenses and CAD 3.442 million of share-based compensation expense. Advertising and promotion expense stood at CAD 1.777 million during the period.
• Net loss for the period was recorded at CAD 12.030 million.
• At the end of December 2020, the company reported its cash balance of CAD 7.924 million, while total assets were recorded at CAD 14.755 million.

9MFY21 Income Statement Highlights (Source: Company Report)

Risks:  The company is an early stage of operations, and the business model is comparatively new.  The company’s success depends on the acceptability of its product and consumer preference. Any change in consumer preference or failure of the product in meeting the customer’s requirement would affect the business prospect.

Stock Recommendation:

VEGA caters to a unique segment of plant-based food, and the industry has delivered impressive performance during the pandemic due to the change in consumer preferences towards plant-based diets. The company is the pioneer in the plant-based e-commerce segment and might witness first mover’s advantage. Moreover, the recent acquisition of Bloombox is expected to add improved prospects for the company’s business. However, the company is planning to grow through new collaborations and through brick-and-mortar model with additional product verticals which are capital intensive in nature. Hence, the unavailability of funds might lead to a liquidity crunch and might dampen or delay the company’s upcoming performance. Moreover, the stock of VEGA tumbled ~64% and ~69% in the last three months and six months respectively and closed below the simple moving average (SMA) of 50-days, 100-days and 200-days, respectively, indicating a bearish trend. Hence, considering the above facts, we prefer to remain on the sideline and suggest an ‘Avoid’ recommendation on the stock at the last closing price of CAD 0.56 on April 22, 2021.

One-Year Price Chart (as on April 22, 2021). Source: Refinitiv (Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.