The beyond belief success of Beyond Meat (Beyond Meat News, Stock Quote, Chart Nasdaq:BYND) could have a spillover effect that would benefit Canadian junior Burcon Nutrascience (Burcon Nutrascience News, Stock Quote, Chart TSX:BU), says Beacon Securities analyst Spencer Churchill.
Churchill notes that following its better than expects second quarter results, Beyond Meat’s management expressed a desire to diversify its protein supply and increase the amino acid score for its products. He says Burcon, which has more than two decades of experience deriving protein from crops such as canola, soy and peas, would be a natural fit. He notes that BU’s mix of pea and canola protein (branded as (Puratein®) would be a natural fit.
Beyond Meat and Burcon Nutrascience a fit?
“Outside of the obvious continued robust growth and end customer demand for pea protein related products, we are encouraged to hear Beyond Meat not only actively looking for alternative sources of pea protein supply (BU is a candidate for scale and diversity of geography) and the fact management is cognizant of the amino acid score of its products (where BU can help as well with their pea/canola blend, Puratein® product). Burcon remains one of only a very few public vehicles to play the plant-based food alternative market and we believe there is significant room for upside to our valuation as Burcon/Merit layout expansion plans and if Burcon is able to sign up a major co-development partner. The macro trends remain firmly in the company’s favour as the results thus far reported by related companies we’ve mentioned highlights.”
In a research update to clients today, Churchill maintained his “Buy” rating and one-year price target of $2.00 on BU, implying a return of 87 per cent at the time of publication.
The analyst thinks Burcon will post EBITDA of negative $4.56-million on revenue of $100,000 in fiscal 2020. He expects those numbers will improve to EBITDA of negative $3.1-million on a topline of $1.64-million the following year.