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  • Writer's pictureMark Watson-Mitchell

Plant Health Care – producing material growth

Producing material growth – that is exactly what Plant Health Care is all about, not only in helping farmers globally to sustainably grow more, but also in building up its own sales and profits.


The Business – Cost-effective products for sustainable agriculture


Established way back in 1995, the Holly Springs, North Carolina-based Plant Health Care (LON:PHC) group is a leading provider of biological products, helping farmers to feed the world sustainably.


The company offers its various products to improve the health, vigour and yield of major field crops, such as corn, soybeans, potatoes and rice, and specialty crops, such as fruits and vegetables.


It operates globally through subsidiaries, distributors and supply agreements with major industry partners.


Its innovative, patent-protected biological products help growers to protect their crops from stress and diseases, and to produce higher quality fruit and vegetables, with a favourable environmental profile.


It offers products to enhance the yield and quality of crops, such as corn, soybeans, citrus, sugar cane, and rice, as well as fruits and vegetables.


The company provides Harpin aß, a recombinant protein, which acts as a bio stimulant to enhance the yield and quality of crops; and Saori, a vaccine for plants that promotes healthy growth of soybeans and helps them fight disease.


It also distributes third-party biological products.


The Products – Strong pipeline


Using environmentally friendly peptides derived from natural proteins, its innovative, patent-protected products help growers to protect their crops from stress and diseases, and to produce higher quality fruit and vegetables, all while being compatible with mainstream agricultural practices.


Plant Health Care’s core patented products act as “vaccines for plants”, making plants healthier, better able to resist disease and stress, thereby improving crop yield and quality.


Harpin ab


Plant Health Care’s Commercial business is driven by sales of Harpin αß, a recombinant protein which acts as a powerful bio-stimulant, promoting the yield and quality of crops.


The group sells Harpin αß through specialist distributors around the world. In Mexico, the group also distributes third-party biological products.


Sales of the group’s Harpin αß product increased by 55% in 2021, as market shares grew in core markets; the Commercial business is profitable and cash generative.


PREtec


Plant Health Care’s PREtec (Plant Response Elicitor Technology) platforms are generating numerous promising products.


The group is currently focusing on three products targeting very large market opportunities with a value of more than $5bn. These products are under current evaluation with six potential commercial partners.


It also continues to evaluate further candidate products from its robust pipeline of development candidates for additional crops and indications.


The PREtec technology platform is proving to be a reliable source for new products. The pipeline is poised to launch one new PREtec product each year going forward.


The first PREtec product, Saori™, was launched in Brazil in 2021, through PHC distribution partner Nutrien, generating a very positive response from growers.


Saori™ promotes healthy growth of soybeans and helps them fight disease; Brazilian soybean growers spent $2.5bn on fungicides to control disease in 2021, so this is a huge opportunity for Saori™.


The Markets


Plant Health Care plc, together with its subsidiaries, provides agricultural biological products and technology solutions in the Americas, Mexico, and internationally.


The group has negotiated and tied-up distribution agreements with major sector players globally.


It recently registered Harpin ab in France, which will enable a more direct route into the European market, considered to be the biggest globally for biological products.


Early in January the company signed an agreement with Novozymes South Asia for the exclusive distribution of Harpin ab for sugar cane production in India, first sales of which are expected in the second half-year of 2023.


Growth Strategy


The PHC group intends to drive revenue in the short term by focusing on distribution of Harpin αβ by aligning with large distributors with broad market access. It plans to expand sales in broad acre crops where Harpin αβ provides the most benefit to farmers, including sugar cane, corn, soy, citrus, rice, almonds and grapes.


With the launch of Saori™ in Brazil, it has gained access to the 99m acre soybean market.


The target is to launch at least one PREtec product in a major market every year. Saori™ in Brazil in 2021 was the first, followed by the launch of PHC279, for control of orange rust in sugar cane and coffee leaf rust, into specialty crops in the USA with PHC distribution partner Wilbur-Ellis.


PHC949, a seed treatment for control of root-lesion nematode in soybean, has recently been submitted for registration approval.


It has made a significant capital investment by building a pilot plant facility in its Seattle location, allowing the production of peptides on a pilot scale and assisting with developing and optimising manufacturing methods.


It has also secured a production facility for PHC279, which led to the achievement of volume cost targets.


There is an extensive library of PREtec peptides, which can be further expanded. PHC is well positioned to take a lead in consolidating this fragmented sector, due to its strong portfolio and market access.


The group has now been granted the first patents for PREtec peptides by the US Patent Centre, while numerous filings are in the process of being reviewed around the world, enabling the building up of its intellectual property portfolio.


PHC has been issued 18 patents and has made more than 50 applications in 11 countries, including the European Patent Office.


The company’s products have been classified as “low toxicity” products and qualify for ‘fast track’ regulatory approval in the USA and Brazil.


The Share Capital


There are 304,662,482 shares in issue.


Larger holders include Ospraie AG Science (17.88% of the equity), Richard Griffiths (13.95%), Janus Henderson (9.92%), Lombard Odier (7.41%), Scobie Ward (5.72%), and Management, Directors and related parties (2.11%).


In addition, there some 33,291,306 Stock Options alive, subject to various performance conditions, such as share price hurdles.


Totally fully diluted, there would be some 337,953,788 shares in issue.


Analyst Opinion – the shares are a Buy, looking for 33p


Ahead of the group issuing a Trading Update and Investor Presentation on 6th February, together with any further guidance being given by the company, analyst John-Marc Bunce at Cenkos Securities is rating the group’s shares as a Buy.


His estimates for the year to end December 2022 are for revenues to have improved nearly 36% to $11.4m ($8.4m), helping to substantially reduce the group’s pre-tax loss by a third from $4.6m to $3.0m.


For the current year Cenkos Securities, the group’s NOMAD and Broker, is looking for sales to rise over 39% to $15.9m, severely reducing the company’s loss to just $0.3m.


It is in the coming year that the broker envisages a significant advance by the business, with expectations of a 56% revenue increase to $24.5m, generating adjusted pre-tax profits of $5.2m, worth 1.6c per share in earnings.


The analyst states that “we see Plant Health Care as well positioned in the agritech industry and highly undervalued compared to its intrinsic value and peers” giving a 33p price target for the group’s shares.


Conclusion – substantially undervalued


Following years of development this group now has massive upside potential.


As this group aids farmers in increasing crop yields in the face of climate change and growing populations, its model of distributing globally its products through major partners will shine through.


Today it is a leading provider of proprietary biological products for agriculture, with its peptides poised to enter large markets.


The group’s Management is highly experienced in agricultural research and development, licensing and sales and is capable of further developing and capitalising upon its growing portfolio of new technology products.


In the meantime, its strong cash reserves and strict control of expenses should be sufficient to enable it to boost global sales over the next year or so, bursting the group into significant profitability in 2024.


By the end of next year this company could well be reporting sales of over $25m, have some $5.5m net cash and making $5.2m profits.


With its shares at around the current 11.5p, the group is substantially undervalued at only £36m.











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