$RBIZ Verus Foods (fka RealBiz Media Group) Finds Lucrative Niche Wholesaling Foods in the Middle East and Northern Africa

  • Awaiting name and ticker change to Verus Foods
  • Securing non-dilutive Financing to fulfill their $109m backlog
  • Received $78m contract in January of 2017
  • Announced a monthly agreement of up to $1 million of goods to a Dubai-based food seller

 

RealBiz Media Group, Inc. (soon to be known as Verus Foods) recently completed the spinoff of Nestbuilder (the real estate side of the business) and now can focus on their niche food distribution business. First orders of business will be a name/ticker change along with securing non-dilutive trade financing for their $109m backlog.

 

The company has finally turned the corner after a sluggish 2017 in which its first 12 months of operations were clouded with lingering lawsuits connected back to the former RealBiz business. However, even under this unexpected environment, the Verus Foods Division was able to make significant headway in positioning itself for the future.

 

All notes are finished and share structure is maxed out. IR has communicated to numerous shareholders via email that there will be no r/s until revenues meet big board standards and they are ready to uplist.  

 

A few institutions (Penbrook Management LLC and F Berdon & Co.,LLC) have shown interest in the sub-penny stock to the tune of more than 42 million shares bought in June and July.

 

The opening of the Dubai office is starting to show dividends as the company announced a deal yesterday that can generate up to $1 million in sales a month. Also in the announcement, the company confirmed the spinoff completion of NestBuilder.com.

The Spinoff of NestBuilder

 

RBIZ investors got to take part in a recent spinoff of NestBuilder.com, the real estate assets of RealBiz Media Group, in which shareholders of record as of July 2nd, 2018 were to receive 1 share of NestBuilder for every 900 shares of RBIZ they held. The company announced the distribution completion on August 16th via press release that everything concluded on August 10th. Initially, shareholders were going to receive 1 share for every 300 shares of RBIZ held back in March, but FINRA asking for additional information caused a minor delay. The difference of 300 shares to 900 shares is unimportant in the large scheme of things as the importance of shedding NestBuilder.com so that Verus Foods could become a pure Food distribution play and have the ability to secure trade financing and Letters of Credit (LOC) to work the $109 million backlog.

 

This transaction was important for NestBuilder’s future growth also, as previously mentioned, the share structure created limitations. Now that they are fully independent, they finally have the freedom to create their own identity and become more active in pursuing growth opportunities.

 

The completion of the NestBuilder distribution will now enable Verus to file for a name and symbol change, which is expected as early as next week. Due to the significant number of strategic initiatives in various stages of development, the Company has also elected to discuss topics such as capital structure, additional financing, and potential new business lines in follow-on updates.

 

Will NestBuilder.com stay private or go public seems to be the question at hand. In an email response from IR representative Mark Forney, he addressed and emphasized that the company is now independent and only they know what their plans are in regards to going public. They are DTC compliant and only makes sense in our opinion to go public in order to utilize their available company stock to facilitate new growth opportunities for the companies rather than seeking bank loans from lending institutions. Mark closed his reply in that shareholders need to be patient and wait as they will update everyone as developments progress.

 

What’s the BEEF with the Infamous Disney Deal

 

I have seen information flowing around RealBiz on social media for weeks and enthusiastic shareholders keep mentioning a Disney deal. Also, a number of $78 million dollars was often associated with the Disney deal, but after digging deeper we found that both the Disney agreement and the $78 million deal were 2 very different on-going agreements.

 

To provide clarity for those that may be confused as we were, RBIZ signed an agreement with The Walt Disney Company (Disney) to become the exclusive distributor of Disney-branded juice products in the United Arab Emirates (UAE) and Oman.

 

Under the terms of the deal, Verus (RBIZ’s sole subsidiary) became the exclusive distributor of juice products bearing Disney and Pixar characters and other Disney labels in these important Gulf Cooperation Council (GCC) countries. This region has been one of the fastest growing juice markets in the world over the last decade, with per capita consumption of 100% fruit juice in the UAE expected to top North American averages by 2018.

 

Verus will handle the distribution of a range of juice products bearing popular characters from Disney films such as Frozen and Cars, along with traditional Disney characters and images. The agreement is inclusive of the entire Disney library for licensing in the juice category. Juice is often consumed at more than one meal per day in many households, creating excellent markets for retailers in the region. The first purchase order was said to be issued in December of last year.

 

The $78 million deal was a contract to supply beef to the GCC (Gulf Coast Countries) which happened in January of 2017. First orders were shipped in February of 2017. These are just 2 stellar deals the company has in place, not to mention August 16th’s news of Verus supplying a Dubai food seller with up to $1 million(USD)/month in multiple vegetable, fruit and meat categories. Initial products are expected to include mangos, onions, potatoes, eggs, mutton, beef and poultry sourced from suppliers in several countries.

 

According to the release, financing is being finalized and will utilize a Letter of Credit (LOC) and non-dilutive European and U.S. sources.  Shipments will vary in terms of mix, but will generally consist of 1-4 containers of each product per week and will commence in September 2018.

 

The Significance of Dubai and Singapore

 

RBIZ shareholders have had limited information in regards to the creation of a Singapore-based Division that will address lucrative opportunities in the Asian markets. Unlike Singapore, there have been some key details emerging about Dubai. Word on the street is the CEO has just come back from traveling there.  They’ve established a regional headquarters there along with enough cold-storage and other infrastructure to support significant growth in the region which is indicative of the August 16th news release which expands on an up to $1 million per month agreement.

 

Verus is happy to report that its newly-reorganized subsidiary in Dubai (Verus Middle East General Trading, LLC) has already begun to successfully penetrate the important retail channels in the region. For the first time, the Company is set to launch its own beverage brands, with three separate products covering the juice, coconut water and vitamin C drink categories. Packaging, formulation and branding are nearly complete and initial shipments are planned to begin in the next 60 days into 2,800 grocery store and similar retail outlets in Dubai. The company will start with nine SKUs between the three products and will eventually extend these brands into other Gulf Cooperation Council (GCC) countries after completing the initial roll-out.

 

The new beverage lines will be followed by the announcement of additional food categories (which are under development) targeting these same retail channels. The goal is to increase the number Verus branded products, which have better margins, in its sales mix by the end of 2018.

 

Graphic by author

Share Structure

 

Rumors have circulated that RBIZ’s management had mentioned an upcoming reverse split, something that shareholders frown upon.  A quoted email (see graphic above) states that this was a mere misconception circulating around the message boards or social media. A reverse split would only be a means to qualifying for an up-listing to a lager exchange.

 

For instance, qualifying for the OTCQB, one requirement is trading above .01 (minimum bid price) for 30 days. Financials would also need to be in order. Being that RBIZ is around the $0.0025 -0.003 range, they are a ways away but its not a major stretch based on it already trading at a penny earlier last month. To qualify for NASDAQ is a different story. Expectations of shareholder counts, particular revenue numbers and a minimum of a $3 bid price is a whole different ball game than reaching a penny, and ultimately would need a significant share restructuring via a reverse split to satisfy NASDAQ’s requirements.

 

As of July 24, 2018, Ken Robinson of the Correspondence Department at AST Financial.com confirmed the outstanding share count via an email reply that 1.477B shares were indeed outstanding of the 1.5B authorized. Subsequently, in an email response from Ken, the outstanding share count had reached its max at 1.5B.

 

In this event, it means the company no longer has the ability to use their shares as a means of capital. This predicament is a double-edged sword. In one respect, dilution can no longer happen unless a shareholder vote is initiated to raise the authorized share count. The other side of this situation is company now must rely on using proceeds from incoming revenues to keep the company afloat. It also limits the company from growing quickly through acquiring related businesses unless again its a cash deal. On a positive note, with a $109M backlog, RBIZ should be well positioned to survive in the immediate future.

 

The float count is unknown at this time.

Competitive Landscape

 

Verus Foods is in a league of their own with their unique food distribution niche in the GCC, Middle East and Northern Africa territories. The diagram above takes a look at the large companies in the food distribution industry that trade on the larger indexes such as AMEX, NASDAQ and NYSE.

 

We found the average multiple to sales ratio ranged from as low as .0566 AMCON Distributors (DIT), .126 with Core Mark (CORE) and as high as 1.757 with Nomad Foods (NOMD).

 

Even though their customer base is overseas, if one had to compare, I would say that Verus is a baby Sysco Corp (SYY) or US foods (USFD), now that they are focusing solely on the food distribution business and are out of real estate.

 

If you are asking yourself if RBIZ is over priced being its at a multiple of 1.924, please remember 2018’s numbers will be much higher than $3.274 million it generated in 2017, not to mention they were also 50% real estate. The agreement made yesterday with the Dubai reseller could bring in as much as $12 million over the next year alone if they order $1 million in food each month. Don’t forget the backlog of $109 million, I am sure this amount will be spread over multiple years, but 2018 and 2019’s sales numbers should look very healthy and bring that ratio down comparable to their industry peers.

 

Investment Summary

 

RBIZ traded as low as 0.0025 this week, only to close Thursday at 0.0046. The company has savvy management and an Investor Relations firm with an amazing success rate at bringing companies to big board. Revenues increased 277% for the year ended October 2017. Final sales numbers for 2018 end year vs  prior end year should not disappoint once again. With the company looking to retire all convertible debt it means they are serious about the survival and growth of the company moving forward. Shareholders do not have to fear the drip due to the share structure being maxed out, so no more shares can be diluted into the market. Operating expenses are decreasing, which mean higher profit margins. Upcoming name and ticker symbol change will be an event shareholders can look forward to. Backlog of $109M will increase future revenues as the company secures no dilutive financing. The Disney licensing deal for their juice line, $78 million beef deal, now Dubai starting to pick up along with their very own beverage lines…and potentially Singapore? Things are heating up and uplisting to the QB is the next step, so without throwing price targets out there, getting back above a penny and holding is where we can see this one going. At that point, the company can weigh its options and have more flexibility taking it to a bigger board, which ultimately would require a reverse split, which is not necessarily a bad thing if it means qualifying for a bigger exchange.

 

Disclaimer/Disclosure: The staff at PSInvestor has NOT been compensated by the company or a third party for the mentioning of any companies listed in this article. We are LONG on the company and reserve the right to trade in and out of it as necessary.  Please read our full disclaimer here.

3 Comments

  1. Excellent in depth article, very informative, provides a seriously comprehensive view of Verus Foods. Thank you

  2. All investors should take a in-depth look at this company! You don’t find many investments at this share price with this kind of potential.

  3. In terms of valuation, I think you have to keep in mind that Verus will be a combination of distributor and branded consumer products company. So the multiple will have to be a blend of the two aspects of the business. Moreover, the growth rate will be significantly faster than this peer group. I believe a 1.5-2x sales multiple will be easily justified. That said, we need management to give more clarity on FY 2019 and FY 2020 revenues, gross margins and operating margins to properly value this company.

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