“SunOpta, Inc. (STKL, $7) is known primarily as an organic and specialty foods company. It specializes in sourcing, processing and packaging organic and natural food products. ... SunOpta also works in two other fields through its 66% ownership in Opta Minerals and its minority ownership in Mascoma Corporation. Opta Minerals is a provider of industrial minerals used in blast cleaning abrasives, blast cleaning equipment, construction products, foundry products, magnesium products, recycling products, steel mill products, waterjet cutting products and water filtration products. The company serves a number of industries including steel construction, off-shore oil rigs, water filtration and road construction.
“For Q3, Opta Minerals’ net earnings increased 130.9% compared to the previous year, with its abrasives segment growing by 48.5%. Although SunOpta only has a minority stake in Mascoma, this is actually a pretty groundbreaking company that’s a leader in the development of a cellulosic ethanol technology that uses yeast and bacteria to produce the biofuel from non-food agricultural and forestry materials, such as switchgrass, wood and agricultural waste. Among Mascoma’s other investors, you will find some pretty heavy hitters, including Khosla Ventures, Blackrock, Vantage Point Venture Partners, Kleiner Perkins Caufield & Byers, General Motors Ventures, Marathon Oil and Valero. That’s some pretty good company to keep.
“Of course, SunOpta still generates the majority of its revenue through its organic and natural food operations. And that’s the main reason we’re covering it. You see, although the recession has slowed the growth of the organic and natural food market, it’s still growing much faster than the total U.S. food market. In 2009, organic and natural food sales grew 5%. In 2010, 8%. But compare that to the $630 billion total U.S. food market, which in 2010 grew less than 1%. Bottom line: Even in lean times, organic and natural food markets continue to flourish.
“In Q3, SunOpta reported an 8.7% increase in revenues to $279.3 million. Operating income increased 72% to $12.7 million and EBITDA increased 50% to $17.8 million. SunOpta is currently trading around $6.40. I don’t think it’s out of the question to put an $8 price target on this one.”
- Jeff Siegel, Power Portfolio, January 17, 2013