According to Investopedia, a bottom fisher is an investor who looks for bargains among stocks whose prices have recently dropped dramatically. A bottom fisher is optimistic about buying these low-priced stocks because they believe that a price drop is temporary and a recovery is soon to follow.

That seems a bit like the case here for Greenbriar Capital Corp., a company that I’ve been following since 2017.

The stock price is indeed quite low if you look at the chart below compared to its highs. Yet, the number of positive catalysts to expect in the near term is relatively high. A positive catalyst is a revelation or event that propels the price of a stock dramatically up. If you’re unfamiliar with Greenbriar and its hidden values and possible risks, have a look at this article.

 

 

Spaarvarkens.be did a live webinar with the CEO and investors from all around the world. We received plenty of questions and Mr. Ciachurski took a lot of time for us to answer them while giving explanations and insights about the processes behind the 3 large projects this tiny company has been working on.

Greenbriar Capital is active in the businesses of real estate and solar farms. It trades on the TSX Venture Exchange under the symbol GRB and is planning to uplist to Nasdaq.

A January 2022 analysis from Altus Group shows a pro forma valuation for one of their three main projects alone (Sage Ranch in Southern California) at US$124 million dollars:

Slide 14 from the May 2022 investor presentation.

That fact (GRB has a much lower market cap: US$27 million) still has not yet been translated anywhere near to the matching price point of almost C$5 on the stock chart above.

Hope you enjoy the interview!

May Webinar – Part 1

 

Below are some of the key takeaways for investors, discussed during part 1 of the webinar:

On August 17th, 2021, the Tehachapi City Council in Southern California approved the Sage Ranch real estate project to construct 995 housing units under the principles of new urbanism.

Sage Ranch is one of the three major projects on which Greenbriar Capital Corp. is working: https://greenbriarcapitalcorp.ca/projects/our-portfolio/

Mr. Ciachurski explains in great detail the current status of the precise development plan that will allow the company to obtain the permits to start construction.

He also describes the process to obtain yellow slips that would allow the company to accept deposits from the project, how the 40 million dollars line of credit from Voya’s green fund works, and how Altus arrived at US$124 million of profit over the 6-year life of the project (after having applied a 6% discount) in their recent valuation report of the real estate project.

Currently, the value of Sage Ranch is only reflected on the balance sheet of Greenbriar Capital Corp at the project cost (of C1.6 million dollars). Meanwhile, the net present value of Sage is US$124 million US.

Mr. Ciachurski details this topic with how infrastructure projects work and compares them with his previous company Western Wind Energy Corp. (which was taken over by Brookfield Renewable Energy Partners in 2013 for 420 million dollars).

He also explains the pros and cons of having the company book the NPV of Sage Ranch of US$124 million on the balance sheet rather than booking the project cost of C$1.6 million. Two of the pros are that it helps for uplisting to Nasdaq and that it makes it easier for investors to quickly see the true value of the project. First revenues from Sage Ranch are expected to hit the P&L statements during the fiscal year of 2023 as the first 40 houses will be constructed. After that, revenues are expected to ramp up as on average 165 houses can be built per year for approximately 6 years.

 

May Webinar – Part 2

 

In the second part of the webinar, Mr. Ciachurski details why he believes the rising interest rates will not have a large impact on the Sage Ranch housing project.

There’s a shortage of 2.4 million houses in California in the price range between 500,000 to 750,000 dollars. Sage Ranch houses are slightly below that range and cheaper to buy than the equivalent you have to pay when you’re renting a similar house in Tehachapi. So the delta between buying or renting a Sage Ranch home is in favor of buying.

Also, potential Sage Ranch homeowners can get a loan through the USDA (United States Department of Agriculture) at a lower interest rate than the current, rising rates on the market for a period of up to 38 years.

The Montalva project was approved by the Puerto Rico Electric Power Authority (PREPA) on May 28th, 2020. Next, the project was ranked number one amongst 15 other projects. Then, in September 2020, everyone was shocked that the Federal Oversight and Management Board for Puerto Rico (FOMB) ruled that none of these 15 solar contracts should be approved as they would negatively impact the energy prices in the distant future.

This is ludicrous according to Mr. Ciachurski as Puerto Rico generates 66% of its energy by burning oil which is the most outdated, most expensive, and dirtiest way of electricity generation by using fossil fuels. He also cites a report that shows that PREPA overpaid 18 billion dollars on fuel costs by buying oil among other inefficiencies and explains why Greenbriar, therefore, appealed the FOMB ruling in 2021.

Since the beginning of this year, Greenbriar has moved into settlement negotiations with PREPA.

On the topic of the Alberta Solar Farms, Mr. Ciachurski explains what inside-the-fence renewable energy projects mean and what their advantages are. He also tells us that he has been visiting Alberta recently and tried to push for the end of April for the official ribbon-cutting of the first project but that West Lake Energy was thinking more about the end of May for doing that.

Mr. Ciachurski also said that there are some other projects in the works with West Lake Energy that are on a global scale but are yet to be announced. When they are ready to be announced, people will be happy he says. Greenbriar has a 400 MW pipeline in place that can be filled with solar projects for Westlake and that is a substantial amount when compared to Montalva as that solar project is for 160 MW.

Author’s take

Even with the rising mortgage rates and the declining home sales in the US, I still feel very comfortable here knowing that:

  • The value of Sage Ranch alone is currently worth 4.5 times the market capitalization of the stock (or 5 Canadian dollars/share). It’s fair to say that Greenbriar is deeply undervalued.
  • There’s a major housing crisis in California: too many Californians cannot afford a house. The average price of US$800,000 is way too high. Sage Ranch, residentially located in Tehachapi, can be a small part of the solution here.
  • The stock has a low beta, meaning it doesn’t move one-on-one with the market. During the pandemic, the stock basically stayed in a stable trading range the whole time.
  • The recent stock price drop can be partially explained by misinformation / poor due diligence posted on Stockhouse.
  • There’s a big demand for solar projects due to the decarbonization movement (COP26, CO₂ emission certificates, green energy) and the current geopolitical situation (Russia / Ukraine).
  • Management and other insiders own at least 30% of all the outstanding shares. Mr. Ciachurski has plenty of reasons to make this venture work for all shareholders.
  • The company obtained loan mandates for US$135 million from Voya Investment Management (for Montalva and Sage Ranch) without having to accept toxically high interest rates. Not bad for a US$35 million company.

Catalysts

Several catalysts are lining up to unlock the hidden value, but take these timings with a grain of salt and be patient:

Slide 25 from the May 2022 investor presentation.

Conclusion

It seems that there are a lot of positive things going on for the company:

  • Sage Ranch is moving forward toward the ground-breaking stage.
  • The US$124 million net present value of Sage Ranch will appear on the balance sheet instead of the cost value in Canadian dollars of C$1.6 million.
  • Revenues from Sage Ranch are to be expected in 2023.
  • A ribbon-cutting event is in the works for Alberta Solar Farms.
  • Settlement discussions are ongoing for Montalva Solar Farm.
  • An uplisting to Nasdaq is in the making. GRB posted this SEC filing on May 10, 2022: https://sec.report/Document/0001062993-22-011974/.

For some of these positive catalysts, it appears that it’s not a matter of ‘if’ but ‘when’ they can be announced.

Or as Mr. Ciachurski states about the Alberta ribbon-cutting event: ‘The news will come when the news will come’.

About the author

Sven Vande Broek (44) co-founded Spaarvarkens.be in 2020 together with Pascal Paepen, Jan Reyns and Stefan Willems. Sven has 25 years of experience in the stock market and he holds a long position in Greenbriar Capital Corp.

18 rating(s), gemiddelde: 4.6.