LON:EDEN | Organic Wines Boom! - And A British Company With Pesticide Free Solutions

7th Apr '17 by ishareinfotv

18 comments 10542 reads

FURTHER UPDATE 25/05/2017

This article from 2015, "The Pesticide Problem" tells us that the volume market for pesticides for the French grape industry was 60,000 tonnes per annum. I am assuming therefore, that this is 60 million litres per annum. I am happy to be clarified on this.

France is Europe's greatest user of pesticides by volume.

Sumi-Agro France has specifically contracted with Eden Research(EDEN.L) to resolve this problem.

Last year, Sipcam in their first use of the award winning 3AEY achieved 20% market share in some geographies, as RNS'd by Eden. So, in time, if Sumi-Agro could reach up to 20% market share in France, this would imply product sales of 12 million litres.

Back to last year's AGM example of a changed pricing model., Slide 11 which is based on 1 million litres sold. In this example, Eden could receive net income of 12 x 1 x 2.5 million euros, namely 30 million euros, some £26 million per annum.

Even if the litres conversion is slightly out and Eden doesn't achieve 20% market share and the exchange rate fluctuates a bit, it is clear to see that potential future income generated from France alone is substantial. Add in Italy and Spain and 3AEY is a very healthy revenue and profit line in Eden's accounts.

On this basis, the shares do look cheap with still a market capitalisation of around £20 million and this takes nothing else into account in Eden's current commercial and development portfolio.

END OF UPDATE

UPDATE 10/05/2017

The British innovation that is rejuvenating the wine industry

http://www.bbc.co.uk/programmes/b08p5l79

Eden on BBC Radio 4 today

UPDATE:

Further evidence that pesticides are not favoured by the EU. It is early days, but clearly there is a move to reduce the chemical element within pesticides and in due course, one imagines, replace them with more natural solutions that are less harmful.

END OF UPDATE

It has been fascinating to see articles in the British press this week in regards to booming sales of organic wines and Aldi launching a new range of organic wines to complement this demand.

Pesticide free, the global pesticide market is soon to be worth $81 billion per annum. That is an astronomical figure that affects…

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Tortoise investor

7th Apr '17

Thanks for your note. Stockopedia doesn't have any projected earnings for Eden Research (LON:EDEN) . Have you done any calculations about revenue, forward PE etc? On what basis does the share price look attractive to you?

My scepticism with "organic wine" is that I can't taste any difference and I think revenues would ultimately be driven by a difference in taste or maybe something that was very well marketed.

ishareinfotv

If you can get a copy of the Shore Capital November 2015 broker Note this will provide you some direction. I am hoping that a full update will be published in the not too distant future, but we will have to see.

The purpose of the article is not so much whether you like organic wine, it is about the regulatory bodies and how they are clamping down on pesticides. Eden has a natural solution, literally, that offers wine growers and farmers an alternative to the use of pesticides, but delivering equal of better protection from disease, botrytis in the case of grapes. This is why, I am sure, a global major has entered into commercial arrangements via its subsidiaries with Eden. Revenues will be driven by the need to comply with regulation and to be seen to be farming/wine growing more effectively.

Botrytis is a major value killer that wine growers can ill afford http://www.edenresearch.com/html/news/press_releases/2017/23-01-17.asp

http://www.edenresearch.com/archives/presentation/Eden_AGM_2016.pdf Take a look at slides 20 and 21

Eden is a tech company. I'm hopeful and confident that value will follow

GrahamF

Hello ishareinfotv

Thank you for your post. First of all it is only polite to disclose your position in regard to the company you are talking about. Or, if you have no position as you are not an investor to declare what your interest is, are you receiving payment for your commentary in any way?

With regard to the company, the technology looks interesting, however it takes more than just a switch to a "natural" pesticide for a wine to be organic. Consider the presence of additives. The website is very light on case study materials.

The Stockreport shows that the company is yet to make a profit. However, the company has been around in various forms for quite a long time according to the website.

It is great to have the IP and regulatory approvals coming through. But until the company can show credibility with successful commercial trials/case studies and some profitable growth there is a danger this is a great story but one that doesn't live up to the narrative.

I am a shareholder in the Company.

I am not a spokesperson for the Company or paid by them in any shape or form.

Their offering is not to make wines organic as I previously responded, it is about treating disease know as Botrytis. It happens to be a natural solution and pesticide free.

The Company's website and my direction to the same clearly shows absolute credibility and successful commercial trials which have not turned in commercial contracts with global majors.

One would hope for profitable growth in 2017 after a full years revenues have been collected. This of course, we will know, less than a year from now.

iwright7

I agree with the skepticism. The Eden Research (LON:EDEN) sales and financial metrics are terrible.

I have been involved in the Ag industry and have seen dozens of natural "Patented formulas" come and go - Largely because they do not live up to the sales hype and because do they do not work well. Most are little more than "Snake Oil" with all manner of claimed benefits.

I would steer well clear of Eden for at least 3 years and see if/how these products develop commercially.

JakNife

I would go so far as to suggest that at a £21.2m market cap (11.5p close tonight) Eden Research (LON:EDEN) is an outright short.

The company last placed in March 2016 to raise £2.6m (at 10.25p). It has a track record, going back many years, of regular placings, loan conversions and other "unusual transactions" of which I would highlight this one as an example of "creative accounting" at its worst:

http://www.investegate.co.uk/eden-research-plc--eden-/rns/terpenetech-licence-agreement-and-investment/201508240700128014W/

The RNS highlights how, in August 2015, a connected party (TerpeneTech) paid Eden Research £0.6m for certain intellectual property. In return, Eden invested £0.923m into TerpeneTech for a 29.9% equity stake. Crucially, Eden didn't pay for that investment with cash, instead Eden gave TerpeneTech 4.6m shares of Eden itself.

This deal had two major consequences for Eden's accounts:

1. This was a disguised placing, TerpeneTech has since sold those shares in the market, which raised the funds for the £0.6m fee that was paid to Eden.

2. This inflated each of Eden's Revenue, P&L and cash flow for the period by £0.6m

The flip-side of this is that Eden's balance sheet shows "Investments in associates" of £0.923m, which should be impaired to zero.

Eden burns about £1.5m of cash per annum. It shouldn't take too much effort to produce its accounts but it has a track record of publishing them at the latest date possible - 24th May lat year. I would expect to see the 2016 accounts in late May and that they will impair the investment to nil after which (and noting that Eden's only other assets are intangibles) Eden will have cash of about £1.4m and not much more.

On those numbers (a) I make the current market cap about 10 times what it should be, and (b) it should be obvious that Eden will soon have to place again in order to make sure that it has at least one years' worth of working capital (aka "cash to pay the directors and other important bills").

STRONG SELL

JakNife

BlueFrew

It's also worth pointing out that Sauternes is made from grapes deliberately infected with botrytis. Even so production of Sauternes can vary greatly from year to year. Is it really such a massive problem if growers who are trying to encourage fungus infection can't depend on it? I think revenues of £400K last year give you the answer.

(Small short position)

AnonymousUser252054

9th Apr '17

Sound similar to a company I almost invested in nearly 20 years ago, who were using a pesticide based on pine bark, I think, but turned out the flavour of the wine was affected. They always seemed to be hinting that wide-scale take up and vast profits were imminent. I can't remember the company's name. Eden's website refers to terpenes, which sounds famliar.

As for the word 'natural' - it's a pretty meaningless expression. Uranium and arsenic are both perfectly natural.

Cuthbert C

16th Apr '17

This reads like financial PR to me rather than investment analysis. The OP has previously posted similar/related stuff but has not responded to concerns raised so there seems no point doing that again here.

I have a small wine business. I do not recognise the picture painted by the OP's comments. It sounds to me like a solution searching for a problem.

Supersonico

17th Apr '17

It would be very unwise to short this Stock and I fear those advocating this approach are part of Tom Winnifriths 10 year old vendetta against Ken Brookes.

TW has done as much as possible to damage EDEN including a campaign on Shareprophets and letter to the FRC. The FRC threw out his allegations but Tom only publicises FRC decisions that go his way, when they don't agree he keeps quiet. Interestingly he holds the FRC in high regard and also he has great respect for the Nomad Shore Capital. Both of them along with VC firm Livingbridge disagree with TW but this his campaign is a Vendetta and no matter how many respected parties reject his accusations, the Vendetta continues.

In answer to some points raised above;

Cash burn and further dilution are always a worry for a company at this stage of it's development as well as Take over.

The Trading Update told us they had Â£1.4m in cash.
with a EBITDA of Â£1.1m at the end of 2016.

There was an upfront Fee and annual milestone payments from Eastman a $5bn NYSE company who have spent years testing Eden tech and plan to roll it out. They along with global giants Sipcam, Sumo-agri, and Bayer have all looked at this technology, tested it and validated it themselves and have signed commercial agreements with EDEN. 2016 saw Sipcam achieve a 20% market share in Italy in it's first year, which is impressive with other sales 'above forecast'. 2017 Eden hope that that very positive start will be further exploited as it's reputation spreads amongst growers on the ground.

Non of this included the recently approved French market, which is bringing in legislation to reduce harmful pesticides clearly signalling to distributors and growers a change in the status quo away from traditional pesticides and towards safer bio-controls which is where Eden excels in a area of high barrier to entry products.

so yes we may require further funding but this years sales should continue to signal increased uptake and growing market share which will offset cash burn and likely mean any funds raised will be like LivingBridge 'pari passu' and with a picture of increasing profitability, achieved at a higher SP one would hope.

Other changes which may effect profitability is;

the intention from 2017 onwards Eden itself will supply its partners with product in most if not all of the above territories, as well as other countries where 3AEY is to be marketed in the future.

Also we are yet to see how the ' evolution of Eden's business model in 2016 from technology licensing to product sales which has resulted in lower upfront payments' but books higher returns medium/long term.

These strategies intended to increase medium term profitability but in the near term will result in lower income.

We are also expecting some news from Bayer in the Pet care market soon I believe which again will only serve to demonstrate further the numerous application this technology has.

So a mixed picture , one that includes growing sales with changes in payment and delivery models.

You'll also remember that the last Fund raise was a strategic investment which should give investors confidence not the Bucket shop that TW predicted.

So go short if you wish but those advocating that action as well as those dismissing the technology efficacy are part of TW vendetta. TW has described the tech as 'Fraudulent technology' despite global giants validating it and signing deals with Eden. Their dismissive attitude is not based on research but is part of a SP campaign that TW and his multiple aliases have waged on Eden for years on varies Bulletin boards.

Unfortunately for them the Tech is validated and commercialised by multi national global companies (unlike most of the other companies which he targets) and with ongoing regulatory change where many pesticides are being phased out Edens products forms part of the answer to the global over use of toxic pesticides and has the wind of regulatory change in it's sails.

"These strategies intended to increase medium term profitability but in the near term will result in lower income."

That's a very charitable reading of what is happening. A bear might conclude however that their revenues are extremely poor (this company and it's forerunners have been going for over 20 years) and they have to spin a yarn to keep the directors in the style to which they have become accustomed.

"TW has described the tech as 'Fraudulent technology' despite global giants validating it and signing deals with Eden."

If people are going to go putting words into people's mouths then they ought to make at least a cursory effort to make sure they are the right words.

http://www.investegate.co.uk/eden-research-plc--eden-/rns/terpenetech-licence-agreement-and-investment/201508240700128014W/

Tom Winnifrith claims that the deal described in the above RNS is a Panama Pump. The technology is irrelevant. Either Tom is correct and it is a case of securities fraud or it is a perfectly legitimate business transaction. The proof of the pudding will be the publication of the 2016 TerpeneTech accounts, which are due by the end of this month.

Personally, I make no claims either way. I have 2 observations though. TerpeneTech are taking a long time to publish their 2016 accounts, considering their year end was July 2016. Secondly this transaction occurred close to the start of their 2015/16 accounting year. We will only find out about a transaction that happened in August 2015 towards the end of April 2017. I'd suggest TerpeneTech need far better financial controls to get their accounts out in a more timely manner.

(Short EDEN)

Regarding the Right words..TW has used those words 'fraudulent Technology' during Bearcasts

He made his case about Terpene Tech to the FRC 425 days ago and they kicked out his case soon after.

Despite invitations from myself for TW to describe Shore capital as 'Wilfully Blind' he has avoided using this legal term despite SC being the Nomad now for over 18 months. I contend that if he really was confident of his case then he would not shy away from making a strong and confident legal statement but despite 20 plus articles he serially avoids doing so.

The picture the FRC rejection of his allegation and his unwillingness to use legal terms strongly suggests to me he considers his position to be weak despite all the bluster otherwise why the uncharacteristic sheepishness about calling the Nomad out.

Another fact inconvenient to TW is that Livingbridge made their strategic investment with the full knowledge of the accusations TW was making about TT . They completely rejected his argument and invested £2.6m

Regarding your Short advice..is this something you are doing yourself?
You may have noticed it's stubborn resistance at around 11p along with the MM's regularly filling large buy orders..

18th Apr '17

For the avoidance of doubt, I'm short here with a variety of trades at under 14 1/2p to just over 13p and my comments should be looked at with this in mind. I would never advise anybody else what to do with their money.

That is a lot of straw men that you are attacking. There are more than enough articles on ShareProphets which allege that Eden/TerpeneTech have carried out a Panama Pump. The company should be proactively sending information to Tom Winnifrith and ShareProphets which show what did occur. That would allow ShareProphets to correct the articles or face legal sanction.

What Tom Winnifrith does or does not say about Shore Capital is frankly irrelevant. Livingbridge and other market movements are of no concern either. The accounts due for Eden and TerpeneTech are what are of interest to me.

Supersonico,

With apologies for pedantry/clarity, you wrote:

"The Trading Update told us they had Â£1.4m in cash.
with a EBITDA of Â£1.1m at the end of 2016."

The trading update can be read here:

http://www.investegate.co.uk/eden-research-plc/rns/trading-update/201612210701034124S/

And to be clear it's a £1.4m cash at the end of 2016 and an EBITDA *loss* of £1.1m.

regards,

Au contraire I consider the lack of confidence on the Shore Capital point very revealing as well as the absence of any comment on the FRC rejection of his allegation. These are made more relevant as they are both organisations he holds in high esteem, at least they were until they don't agree with him. He should at least have the integrity to publically acknowledge on his site that they did not up hold his complaint.

With the lack of integrity shown by not publically conceding the FRC rejection why on earth would EDEN (with whom he has had a vendetta against for 10 years) expect any degree of balance from him. After all his compliant was made 425 days ago. If TW want's transparency let him show some leadership here rather than for him to move the goal posts when it suits and not discuss the gritty inconvenience of the FRC an arbiter of his own choosing rejected his claims.

Why would anyone in their right mind with knowledge of his vendetta track record on EDEN as well as an awareness of all the recent allegations around him make any effort to be proactive.

19th Apr '17

Top of the list of New products again.

2085 0 0 Edit

hTTp://www.microsofttranslator.com/bv.aspx?ref=SER...

9.45 hours focus on fungicides:
Eugenol + Thymol + geraniol (3Logy): effectiveness in defending the botrytis grapes, Addelita – Italy Sipcam

3rd Jul '17

http://www.stockopedia.com/content/sipcam-spa-makes-strategic-investment-in-eden-research-edenl-197123/

4th Jul '17

Supersonico

You appear to be conflating consumption of specific anti-botrytis pesticides with all pesticides in general.

Your header article refers to total annual consumption of 60k tonnes of pesticide by French grape growers and goes on to treat that figure as if all of it could be replaced by Eden Research's anti-botrytis product.

That seems to me to be mistaken. Different pests are treated with different pesticides. Insect pests are treated with insecticides. Fungal pests are treated with fungicides. Weeds are treated with herbicides. Rodents with rodenticides. Bacteria with bactericides. Larvae with larvicides. Etc etc.

A pesticide that targets botrytis cannot replace an insecticide or a herbicide.

The article that you cite as a source refers to the totality of pesticide use. It does not separate out the amount of pesticide that is used to control botrytis. It follows that your calculations are incorrect.

I suggest you revisit them and make appropriate adjustments.

Organic Wines Boom! - And A British Company with Pesticide Free Solutions

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Ishareinfotv

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