$BOMH 1/25/21 - Highlights from Boomer Holdings -B
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Posted On: 01/27/2021 11:23:56 AM
$BOMH 1/25/21 - Highlights from Boomer Holdings -BOMH management's business update call/webcast from Monday after the close
- Within Boomer's medical/PPE segment, management is seeing even further ability to leverage successful Vietnam based manufacturing/sourcing/US sell through of nano-silver technology infused masks/PPE into other product categories including apparel (silver infused) and Vietnamese coffee, which is a top seller across the APAC region. In light of this, discussions appear to be heating up with CVS and Coremark among others, which could broaden the scope of these major accounts and accelerate revenue over the next 6 months on top of what is already anticipated to be another high double digit y/y growth year for masks/PPE. Boomer Coffee could become a reality in the not too distant future and we could hear something in the near-term on this topic.
- Importantly, it was also noted on the call that gross margins across the non-botanical/CB5 segment should remain well above 65%, which leaves potential upside of at least 200bp/year to gross margin should Boomer botanics/CB5 begin contributing north of 10% of revenue and yield the 75%+ gross margin these products can generate. Our current fiscal 2021 and 2022 projections reflect these improvements. Post-covid normalization and regulatory hurdles continue to bode well for botanicals (over 80 skus) as a viable alternative to struggling hemp derived CBD wholesalers, particularly as Tommy Bahama re-opens and politicians drag their feet while hanging traditional CBD players out to dry.
- As an aside, a recent Harris poll commissioned by Boomer showed that up to 60% of the thousands queried would upgrade their mask standards to a nano-silver infused product even if it meant paying 10% or more. It helps that Boomer's masks and gaiters are touted by customers to be more comfortable, breathable and safer, which is why they're one of the most popular and more recognizable choices across the US thanks to aggressive PR and marketing spend. Interestingly, roughly 40% of those polled made clear that they would continue to wear a mask for the next several years as a precautionary measure even if there were to be conclusive evidence of vaccine efficacy and semblence of pre-covid normalization.
- Management remains confident - and as a result I remain confident that the company could continue to put up high double digit y/y top and bottom line growth over the next couple quarters (on easy y/y comp) and reaffirmed fiscal 2021 revenue and operating income guidance of up to $100-110 million and $25-30 million, respectively. Beginning from the current 2Q21 ending January 31, management will also be conducting regular earnings conference calls as they strive to meet all requirements for a National uplist within the next 6 months.
- BOMH stock is currently trading at roughly 1x NTM revenue and less than 4x EBITDA, when in our view it should be trading at minimum 3x this based on comps, GARP and virtually every other valuation metric applicable. Our 12-month target price remains $5/share.
- Within Boomer's medical/PPE segment, management is seeing even further ability to leverage successful Vietnam based manufacturing/sourcing/US sell through of nano-silver technology infused masks/PPE into other product categories including apparel (silver infused) and Vietnamese coffee, which is a top seller across the APAC region. In light of this, discussions appear to be heating up with CVS and Coremark among others, which could broaden the scope of these major accounts and accelerate revenue over the next 6 months on top of what is already anticipated to be another high double digit y/y growth year for masks/PPE. Boomer Coffee could become a reality in the not too distant future and we could hear something in the near-term on this topic.
- Importantly, it was also noted on the call that gross margins across the non-botanical/CB5 segment should remain well above 65%, which leaves potential upside of at least 200bp/year to gross margin should Boomer botanics/CB5 begin contributing north of 10% of revenue and yield the 75%+ gross margin these products can generate. Our current fiscal 2021 and 2022 projections reflect these improvements. Post-covid normalization and regulatory hurdles continue to bode well for botanicals (over 80 skus) as a viable alternative to struggling hemp derived CBD wholesalers, particularly as Tommy Bahama re-opens and politicians drag their feet while hanging traditional CBD players out to dry.
- As an aside, a recent Harris poll commissioned by Boomer showed that up to 60% of the thousands queried would upgrade their mask standards to a nano-silver infused product even if it meant paying 10% or more. It helps that Boomer's masks and gaiters are touted by customers to be more comfortable, breathable and safer, which is why they're one of the most popular and more recognizable choices across the US thanks to aggressive PR and marketing spend. Interestingly, roughly 40% of those polled made clear that they would continue to wear a mask for the next several years as a precautionary measure even if there were to be conclusive evidence of vaccine efficacy and semblence of pre-covid normalization.
- Management remains confident - and as a result I remain confident that the company could continue to put up high double digit y/y top and bottom line growth over the next couple quarters (on easy y/y comp) and reaffirmed fiscal 2021 revenue and operating income guidance of up to $100-110 million and $25-30 million, respectively. Beginning from the current 2Q21 ending January 31, management will also be conducting regular earnings conference calls as they strive to meet all requirements for a National uplist within the next 6 months.
- BOMH stock is currently trading at roughly 1x NTM revenue and less than 4x EBITDA, when in our view it should be trading at minimum 3x this based on comps, GARP and virtually every other valuation metric applicable. Our 12-month target price remains $5/share.
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