NTRZ.OB

[gabillh]

Please read my [post on July 11, 2000005....sticking with it, Its now on a breakout but dont chase this one....I will retest over next couple of months the   .75-.85  area and then I would take a stake then..............happy trading   bill the bull

[Livana]

Anyone still watching NTRZ?
It seems to have been on a downtrend August.  It caught my eyes today because of a little insider buy: (http://www.secform4.com/insider/viewform4.php?cik=1063537&dir=000106188106000001&form=primary_doc.xml)

They should be releasing earning announcement soon... I want to wait and see what they have before making a decision.

Anyone as any input?

[guitarman]

This one's coming alive again.
Recently tripled their capacity to meet demand for their products.
All the Best
GMan

[setravis]

Strong indications of market ability of their rice bran products.
NutraCea has unlimited potential to become a ground-floor power in the rice bran-based nutraceuticals marketplace, with their patented bran stabilization technology, and their products and their supply chain initiatives. 2006 will tell what their long termfuture should be.

Volume: 1,071,456
Avg Vol (3m): 252,809

52wk Range: 0.60 - 1.45 

Technicals
13-day EMA Cross Above 50-day EMA

Last Price Quote is:
25.02%above 13-day EMA
26.77%above 50-day EMA
RS Rating: N/A 

Fundamentals
Key Data:
Market Cap (M): $71.12 
P/E Ratio: NA 
PEG Ratio: N/A 
Next Earnings: 11/13/2006
Last Analyst Rating: N/A


Record 2nd Quarter Results

Total revenues for the three months ended June 30, 2006 were $4,166,182, compared to total revenues of $299,237 for the second quarter of 2005, an increase of over 1,290%. The improved revenues and financial performance on a quarterly comparative basis have primarily resulted from the merger with RiceX and the continued success of the sale of its nutraceutical through direct to consumer marketing during quarter ended December 31, 2005. Approximately 62% of revenues in the quarter were from infomercial sales and 38% from the Company's expanded product lines and increased demand of it value added ingredients for the functional food industry and animal markets.

Total revenues for the six months ended June 30, 2006 were $7,947,726, compared to total revenues of $758,545 for the six months ended June 30, 2005, an increase of over 948%. The significant improvement in improved revenues and financial performance on a quarterly comparative basis are a culmination of the merger with RiceX, direct marketing of its expanding proprietary patented product line and sales of its core products into the functional food industry and animal markets during the quarter ended December 31, 2005.

NutraCea reported net income of $399,434 or $0.01 per share for the second quarter of 2006 based on weighted average shares outstanding of 71,791,913, compared to a net loss of $(1,800,084), or $(0.05) per share in 2005 based on 36,793,254 weighted average shares outstanding.

NutraCea had a net income of $165,860 or $0.00 per share for the six months ended June 30, 2006 based on weighted average shares outstanding of 68,808,345, compared to a net loss of $(2,664,777), or $(0.07) per share in 2005 based on 36,355,262 weighted average shares outstanding.

NutraCea reported positive earnings before interest, taxes, depreciation and amortization (EBITDA)* of $684,559 in the second quarter of 2006 compared to a negative EBITDA of $1,540,175 in the second quarter of 2005, an improvement of $2,224,734. In addition, EBITDA* for the six month period was a positive $717,452 compared to a negative EBITDA of $2,153,530 in the first six months of 2005, an improvement of $2,870,982.

[Michael]

Nick sent a mail last week and asked for my opinion on NutraCea.

This could have ended with a quick look at the chart and a reply back to Nick that the stock looked good but I decided to dig a little deeper after all the stock had some pretty interesting fundamentals:

• The company converts the world largest food waste into a very nutritious food
• Demand outstripping capacity
• Very strong balance sheet
• Profitable and cash flow positive
• Product backed by strong patents
• Expansion into mass-market retail (supermarkets and chain retail stores)
• Expansion not expected to be dilutive
• Strong pricing power
• Heavy insider buying
• Factories running 24/7
• Plan to list on national exchange (already Compliant from a regulatory standpoint)

So here are some weekend reading on this little penny gem 

[Michael]

Background

NutraCea, a health science company, engages in the development and distribution of stabilized rice bran and rice bran-based products for the consumer food and animal feed sectors.

NutraCea merged RiceX on October 4, 2005. The benefits of the merger to NutraCea are substantial. Specifically, the financial position of NutraCea has been strengthened as a result of the elimination of $2.4 million of debt and an infusion of $7.85 million of cash that exceeded the requirements of the merger agreement by $2.4 million. Also, NutraCea will no longer be dependent on a major competitor, RiceX, as the sole source supplier of stabilized rice bran, its principle raw material. Finally, the ambiguity of ownership of intellectual property related to stabilized rice bran between NutraCea and RiceX is resolved with the merger.

Rice is the world largest human food source and the world's rice mills produce 60 million metric tons of rice bran. The usage of Rice bran was previously limited to feeding animals, burned as fuel or wholly discarded each year. Once considered too perishable and unable to be processed for human consumption, NutraCea's scientifically stabilized rice bran is poised to become one of the world's leading and truly affordable combatants of malnutrition, and a universally available, all-natural ingredient for better health.

NutraCea build their factories in close proximity to the Rice mills under long-term supply agreements. The factories are either producing Stabilized Rice Bran to food processors or further refined to Soluble or Insoluble Fiber.



Because Rice bran is basically a waste product without NRTZ's technology the raw material is very cheap:



The cost of a factory that produces Stabilized Rice Bran is $3 million and the annual revenue potential is $10.5 million. The cost of a factory that produces Soluble or Insoluble Fiber is $7 million and the annual revenue potential is $21.6 million:



The business model is simple:



So as long as there is still demand for the product (when will the world run out of demand for food?) and there are still Rice Bran to be processed (60 million ton) it seems like NurtraCea will prosper.

To be continued...

[Michael]

Demand

As said the world will most likely not have an abundance of food anytime soon but what I especially like about NutraCea is that it appeals to all segments of the market (including Cats and off course Dogs )

Lets start with the choosiest first: the typical American male  struggling with overweight and enjoying a few too many beers. Don't worry after a late night drinking NutraCea is there to make you feel better in the morning when you eat your nutritious breakfast cereals. In case you are more to Egg and Bacon (who isn't?) then you can eat fiber products based on NRTZ's trechnology that are focused on alleviating gastrointestinal disorders. Like a cake in the afternoon? No problem. NutraCeu will soon provide ingredients for nutritious cakes. Till now this demand has been met through partners and by using TV informercials but NutraCea will soon start distributing through some of the largest Retail Chains and Supermarkets.

If you happen to have a pet you might feed it with Purina pet food, which contains NutraCea's stabilized rice bran to its equine feed formulations. You would probably be choked if you knew how much the western world is spending on Pet food (At least if you live in Africa  )

And NTRZ is partnering with some major companies:



But that is not all they are also partnering with governments around the world to solve one of the largest global issues. Hunger!

The main food source in the third world is Rice and to use Rice Bran which otherwise would have been burned to feed the masses. NutraCea have signed agreements to build production facilities in the Dominican Republic, Guatemala, El Salvador and Jamaica.  The potential of this business area (and I am not shy to call this a business because if NTRZ hadn't invested in the intellectual property Rice Bran would have been continued to be burned for decades) is mind bubbling. This is probably the cheapest and healthiest food source available for the third world.

[Michael]

Production capacity

Who cares about demand if there is enough supply to meet it?

Well that is the point. You have a very cheap raw material and nobody except NRTZ is able to transform it into a very nutritious food source. In fact there have been several unsuccessful attempts to copy NRTZ's technology during the last several years but NutraCea has protected their intellectual property with several patents:



As they sign up and increasing number of food processors, distribution channels and governments they are not able to meet demand, The result is that their existing factories has been running on 3 shifts 24 hours per day 7 days per week. At the same time they have used the opportunity to increase prices with between 30% and 300%. That sounds like something that might create very good returns for the shareholders so lets look into the financials.

To be continued....

[Michael]

Financials

So who cares about demand and supply if the company is not able to transform it into some solid earnings?

Well let's have a look at the P&L:



Revenue increased 1,290% in Q2 year over year. This is partly due to the merger with RiceX. But if you compare to the results from both companies in Q1 2005 the revenue still increased with 300% year over year.

As can be seen the company turned a corner last quarter with the fist ever profitable quarter but that is already history. The real issue is how earnings will look in the future. The company doesn't provide guidance but they do tell about the expansion of capacity. With the planned capacity increase for the rest of this year they should end the year with an annual production capacity of $35 million with a gross margin of 40%.

My estimate for 2006 revenue and earnings are $26 million and EPS of 0.06. This will increase very significant in 2007 and 2008 due to further capacity increases and economy of scale. 

I expect NRTZ to earn 0.25 in 2007 and around $1 in 2008. This earnings forecast is obviously depending on the expansion of capacity. EPS of $1 would require revenue of around $150 million. A quite significant increase from the 35 million capacity by the end of this year but not unrealistic. The company expect to have capacity in place by October 2007 to generate 58 million in revenue annually:


Stabilized Rice Bran



Fiber



A 300% increase in capacity from 2007 to 2008 might seem ambitious but it is not unrealistic compared to their execution till date.



With 14.7 million in cash and no debt NRTZ has a very strong balance sheet. Combine this with a positive cash flow and the company should be able to finance part of the expansion through loans. The management is negotiating with several large partners who have expressed their willingness to finance new factories in order to secure the supply. The management does therefore not expect to have to issue additional shares to finance the build out the capacity.  (always nice to know when we talk pennies!)

Talk is cheap so is the management walking the talking? Well based on the insider buying it seems like the management believes in the company. They have been buying shares all the way up to $1.2!



So how to trade the stock?

To be continued....

[Michael]

Technicals 

At the last earnings call UBS' main question was: Why is the potential of the business not reflected in the stock price? Very good question and the answer was a combination of lack of awareness, too small market cap and the OTC status. Well for me that sounds like a good investment opportunity!



As can be seen the stock has already had a nice run. There were some profit taking on Friday after it crossed 1.35 (the company has issued more than 10 million warrants at 1.35.so you would expect some resistance here.

We do however have strong support at 1.2, which happens to be just around the price insiders bought for in August.

Short term I would expect the stock to consolidate between 1.2 and 1.35. Long term I could see this stock much higher!

[nicknite20]

Michael,
Thanks for taking out time & posting so much valuable info. I've done a lot of DD myself & pretty much agree with everything you've documented here..

Any idea on when they would shoot for a listing on a national exchange?
Thanks,
Nick

[Michael]

Hi Nick,

It seems our little gem is finally getting the attention it deserves! 52 week high under record volume!

[Terliso]

This is a good one mike

Breakout!! Symmetrical Triangle....

[Se7en]

I just bought some NTRZ!

[fous]

Great Analysis Mike. I always enjoy when you back a stock with fundamentals that i love technically (applauds)

Today was a very bullish move for NTRZ with a huge volume spike on todays breakout which serves as an indicator that this is a legit breakout. The chart looks great too as we broke out of multiple patterns today. One being a large double bottom and the other a cup & Handle pattern.

I hopped in near the close at 1.49 after se7 tipped me in a chat session thanks again buddy.(applauds)

Looking foward to see what kind of $$ we can pull out of this sucker