Stockhub

Editing Agronomics Limited

Warning: You are not logged in. Your IP address will be publicly visible if you make any edits. If you log in or create an account, your edits will be attributed to your username, along with other benefits.

The edit can be undone. Please check the comparison below to verify that this is what you want to do, and then publish the changes below to finish undoing the edit.

Latest revision Your text
Line 1: Line 1:
In a world where the consequences of climate change are becoming increasingly evident, Agronomics Limited stands out as a pioneer, leading the way towards a more sustainable future. The founders' vision, rooted in a deep desire to combat climate change through innovative food production, positions the company as not just a profitable investment but also a crucial player in the global movement towards a greener, more sustainable future. Investing in Agronomics Limited is not just about financial returns; it's about being part of a solution that our planet desperately needs.
Agronomics Limited is a principal investment firm specializing in investments in funds, equity and equity related products. The firm invests in quoted and unquoted companies. It prefers to invest in the alternative proteins company with a focus on cellular agriculture, nascent industry of modern foods, biopharma sector and will establish a portfolio of investments in biotechnology and biopharmaceutical companies. The firm may also invest in shares of collective investment schemes with exposure to the biopharma sector and in long-term equity anticipation securities the underlying securities of which will be based on biopharma sector securities and/or indices relating to the biopharma Sector. It may invest in biopharma sector debt, where investments shall not exceed 15 per cent of the net asset value of the company. Agronomics Limited was founded on May 3, 2011 and is based in Ramsey, Isle of Man.


== Operations ==
== Operations ==
ccc
=== How did the idea behind the company come about? ===
=== How did the idea behind the company come about? ===
The inception of Agronomics Limited can be traced back to a profound concern for our planet's future. As the world grapples with the escalating threats of climate change, the founders recognised a pressing need to address one of the most significant contributors to global warming: the food production industry.
ccc


Traditional agriculture, particularly animal farming, has long been identified as a major source of greenhouse gas emissions, deforestation, and water consumption. The environmental footprint of producing meat through conventional means is staggering. For instance, producing one kilogram of beef requires thousands of liters of water, vast tracts of land, and results in considerable CO2 emissions.
=== What's the mission of the company? ===
 
ccc
The founders of Agronomics Limited were not just alarmed by these statistics but were also driven by a vision to revolutionise the way we produce and consume food. They understood that the global population's growing demands for protein couldn't be met sustainably through traditional means. There was a need for innovation, a need to think beyond the conventional.
 
With a deep-rooted desire to combat climate change and its detrimental effects, the founders embarked on a journey to explore alternative, sustainable methods of food production. Their mission was clear: to produce food that is not only nutritious and delicious but also kind to our planet.
 
A Solution for the Future
 
Agronomics Limited emerged as a beacon of hope in this context. The company's focus on alternative proteins, particularly lab-grown meats and plant-based alternatives, offers a solution that can drastically reduce the environmental impact of food production. By harnessing the power of science and technology, Agronomics Limited aims to create foods that require a fraction of the resources compared to traditional farming.
 
The founders' commitment to this cause is evident in every facet of the company. From research and development to partnerships and investments, every decision is guided by the dual objectives of sustainability and innovation.


=== Investing policy ===
=== Investing policy ===
Line 194: Line 187:


=== Total addressable market (TAM) ===
=== Total addressable market (TAM) ===
Here, the total addressable market (TAM) is defined as the global agricultural market, and based on a number of assumptions, it is estimated that the size of the market as of today (14th September 2023), in terms of revenue, is $2.7 trillion.
Here, the total addressable market (TAM) is defined as the global market for environmentally friendly alternatives to the traditional production of meat and plant-based nutrition sources, and based on a number of assumptions, it is estimated that the size of the market as of today (14th September 2023), in terms of revenue, is $ccc billion.


=== Serviceable addressable market (SAM) ===
=== Serviceable addressable market (SAM) ===
Here, the serviceable available market (SAM) is defined as the global cultured agricultural market, and based on a number of assumptions, it is estimated that the size of the market as of today (14th September 2023) is $100 million in terms of revenue.
Here, the serviceable available market (SAM) is defined as the US market for environmentally friendly alternatives to the traditional production of meat and plant-based nutrition sources, and based on a number of assumptions, it is estimated that the size of the market as of today (14th September 2023) is $ccc billion in terms of revenue.


=== Serviceable obtainable market (SOM) ===
=== Serviceable obtainable market (SOM) ===
Here, the serviceable obtainable market (SOM) is defined as the US cultured agricultural market, and based on a number of assumptions, it is estimated that the size of the market as of today (14th September 2023), in terms of revenue, is $30 million.
Here, the serviceable obtainable market (SOM) is defined as the US market for environmentally friendly alternatives to the traditional production of meat and plant-based nutrition sources, and based on a number of assumptions, it is estimated that the size of the market as of today (14th September 2023), in terms of revenue, is $ccc billion.


== Financials ==
== Financials ==
ccc
ccc


=== Most recent ===
Most recent
 
ccc
ccc






=== Interims ===
Interims
 
ccc
ccc
{| class="wikitable"
{| class="wikitable"
Line 445: Line 440:
|}
|}


=== Full-year results ===
Full-year results
 
ccc
ccc
{| class="wikitable"
{| class="wikitable"
Line 686: Line 682:
|-
|-
|Bank deposits not considered cash and cash  equivalents (net)
|Bank deposits not considered cash and cash  equivalents (net)
|
|-
|(20,024,175)
|(20,024,175)
|-
|-
Line 706: Line 702:
|}
|}


==== What are the assumptions used to estimate the financial forecasts?====
== Risks ==
As with any investment, investing in Agronomics carries a level of risk. Overall, based on the Agronomics' adjusted beta (i.e. 1.40)<ref name=":4">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref>, the degree of risk associated with an investment in Agronomics is 'medium'.


{| class="wikitable"
Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report.
|+Key inputs
 
!Description
The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to ccc.
!Value
 
!Commentary
=== Credit risk ===
|-
Credit risk is the risk of loss associated with the counterparty’s inability to fulfil its obligations. The Company’s credit risk is primarily attributable to receivables, cash balances, and cash deposits, with the maximum exposure being the reported balance in the statement of financial position. The Company has a nominal level of debtors and as such the Company believes that the credit risk to these is minimal. The Company holds available cash and cash deposits with licensed banks and financial institutions. The Company considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. Cash balances are available on demand, with cash deposits having varying maturities up to 6 months.
| colspan="3" | <div style="text-align: center;">'''Revenue'''</div>
 
|-
=== Market price risk ===
|What's the estimated current size of the total addressable market?
Market price risk is the risk that the market price will fluctuate due to macro-economic issues such as changes in market factors specific to that security, market interest rates and foreign exchange rates.
|$2,700,000,000
 
|Here, the total addressable market (TAM) is defined as the global agricultural market, and based on a number of assumptions<ref group="Note" name="Note01" />, it is estimated that the size of the market as of today (14th September 2023), in terms of revenue, is $2.7 trillion.
The Company is exposed to significant market price risks as financial instruments recognised directly by the Company and indirectly by the Subsidiary are linked to market price volatility.
|-
 
|What is the estimated company lifespan?
A 10% increase/decrease in market value of investments held by the Company and its subsidiary would increase/decrease equity and profit by £9,481,309 (2021: £3,877,068). Taking into account the Shellbay consulting fee, the increase/decrease in equity and profit would be £10,903,505 (2021: £4,458,628).
|50 years
 
|Currently, Agronomics employs around five people, making the company a small organisation (less than 10,000 employees). That said, given the company's mission, we expect the company to grow to a large organisation, and research shows that the average lifespan of a large corporation is around 50 years.<ref>Stadler, Enduring Success, 3–5.</ref>
=== Liquidity risk ===
|-
The Company is exposed to liquidity risk to the extent that it holds investments that it may not be able to sell quickly at close to fair value.
|What's the estimated annual growth rate of the total addressable market over the lifecycle of the company?
|3%
|Research shows that the growth rate of the global agricultural market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022)<ref>https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate</ref>.
|-
|What's the estimated company peak market share?
|0.10%
|The Stockhub users estimate that especially given the leadership of the company, the peak market share of Agronomics is around 0.10%, and, therefore, suggests using the share amount here. As of 31st December 2022, Agronomics's current share of the market is estimated at around zero%.
|-
|Which distribution function do you want to use to estimate company revenue?
|Gaussian
|Research suggests that the revenue pattern of companies is similar to the pattern produced by the Gaussian distribution function  (i.e. the revenue distribution is bell shaped)<ref>http://escml.umd.edu/Papers/ObsCPMT.pdf</ref>, so the Stockhub users suggest using that function here.
|-
|What's the estimated standard deviation of company revenue?
| 5 years
|Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Agronomics's current revenue amount (i.e. £12.68 million) and Agronomics's estimated lifespan (i.e. 50 years) and Agronomics's estimated current stage of its lifecycle (i.e. introduction stage), the Stockhub users suggest using five years (i.e. 68% of all sales happen within five years either side of the mean year), so that's what's used here.
|-
| colspan="3" |'''<div style="text-align: center;">Growth stages</div>'''
|-
|How many main stages of growth is the company expected to go through?
| 4 stages
|Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.<ref>Stef Hinfelaar et al.:, 2019.</ref>


In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.<ref>Dickinson, 2010.</ref> A summary of the economic links to cash flow patterns can be found in the appendix of this report. The Stockhub users estimate that with Agronomics's operating cash flows negative (-), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the first stage of growth (i.e. the 'introduction' stage), and, therefore, it has a total of four main stages of growth. Note, to account for one-off events, the three-year average (median) amount was used to calculate the cash flows.
The risk is managed by the Company by means of cash flow planning to ensure that future cash requirements are anticipated and, where financial instruments have to be sold to meet these requirements, the process is carried out in a controlled manner intended to minimise the liquidity risk involved.
|-
 
|What proportion of the company lifecycle is represented by growth stage 1?
=== Interest rate risk ===
|30%
A significant share of the Company’s assets is comprised of cash held at banks. As a result, the Company is subject to risk due to fluctuations in the prevailing level of market interest rates. However, income earned from bank interest is not considered material to the Company’s performance or financial position.
|Research suggests 30%.<ref name=":6">http://escml.umd.edu/Papers/ObsCPMT.pdf</ref>
 
|-
The Company holds investments in convertible loan notes (“CLN”), which attract interest income. The rates of interest are fixed for each CLN investment held, which results in a reduced interest rate risk.
|What proportion of the company lifecycle is represented by growth stage 2?
 
|10%
'''Fair values of financial assets and liabilities'''
|Research suggests 10%.<ref name=":6" />
 
|-
At 30 June 2022, the carrying amounts of cash resources, trade and other receivables, and trade and other payables approximate fair value due to their short-term maturities.
| What proportion of the company lifecycle is represented by growth stage 3?
 
|20%
'''Foreign currency risk'''
| Research suggests 20%.<ref name=":6" />
 
|-
The Company is exposed to foreign currency risk on fluctuations related to financial assets and liabilities held directly itself and indirectly via its subsidiary that are denominated in a number of currencies. The Investment in Subsidiary is held in Sterling. The analysis below reflects the underlying currency exposure in the Subsidiary’s portfolio.
|What proportion of the company lifecycle is represented by growth stage 4?
 
|40%
== Valuation ==
|Research suggests 40%.<ref name=":6" />
===Absolute Valuation===
|-
====What's the expected return of an investment in the company?====
| colspan="3" |'''<div style="text-align: center;">Growth stage 1</div>'''
The Stockhub users estimate that the expected return of an investment in the company over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below.
|-
 
|Cost of goods sold as a proportion of revenue (%)
Assuming that a suitable return level over five years is ccc% per year or less, and Pantheon Resources achieves its expected return level (of ccc%), then an investment in the company is considered to be an 'suitable' one.
|12.92%
====What are the assumptions used to estimate the return?====
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7">http://people.stern.nyu.edu/adamodar/pdfiles/papers/younggrowth.pdf</ref>. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
ccc
|-
====Sensitivity analysis====
|Operating expenses as a proportion of revenue (%)
The main inputs that result in the greatest change in the expected return of the Pantheon Resources investment are, in order of importance (from highest to lowest):
|159.10%
#The size of the total addressable market (the default size is $ccc);
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
#Pantheon Resources peak market share (the default share is ccc%); and
|-
#The discount rate (the default time-weighted average rate is ccc%).
|Tax rate (%)
The impact of a 50% change in those main inputs to the expected return of the Pantheon Resources investment is shown in the table below.
|(3.07)%
{| class="wikitable sortable"
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|+Agronomics investment expected return sensitivity analysis
|-
!Main input
|Depreciation and amortisation rate (%)
!50% worse
|56.26%
!Unchanged
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
!50% better
|-
|Fixed Capital Investment (FCInv) as a proportion of revenue (%)
|8.59%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Working Capital Investment (WCInv) as a proportion of revenue (%)
|50.93%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Net borrowing as a proportion of revenue (%)
|21.75%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Interest expense as a proportion of revenue (%)
|0.06%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 1)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''
|-
|Cost of goods sold as a proportion of revenue (%)
|0.00%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Operating expenses as a proportion of revenue (%)
|41.11%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Tax rate (%)  
|15.23%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Depreciation and amortisation rate (%)  
|79.52%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Fixed Capital Investment (FCInv) as a proportion of revenue (%)
|1.13%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Working Capital Investment (WCInv) as a proportion of revenue (%)
|52.01%  
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Net borrowing as a proportion of revenue (%)
|0.27%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|-
|Interest expense as a proportion of revenue (%)
|The discount rate
|0.41%
|ccc%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 2)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|ccc%
|ccc%
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 3</div>'''
|The size of the total addressable market
|ccc%
|ccc%
|ccc%
|-
|-
|Cost of goods sold as a proportion of revenue (%)
|Pantheon Resources peak market share
|0.00%
|ccc%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|ccc%
|-
|ccc%
|Operating expenses as a proportion of revenue (%)
|55.16%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Tax rate (%)
|19.91%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Depreciation and amortisation rate (%)
|18.93%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Fixed Capital Investment (FCInv) as a proportion of revenue (%)
|2.21%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Working Capital Investment (WCInv) as a proportion of revenue (%)
|(1.46)%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Net borrowing as a proportion of revenue (%)
|(1.10)%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Interest expense as a proportion of revenue (%)
|0.31%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 3)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>'''
|-
|Cost of goods sold as a proportion of revenue (%)
|36.13%
|Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Operating expenses as a proportion of revenue (%)
|174.39%
|Research suggests that it's best to use a similar margin rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Tax rate (%)
|(1.94)%
|Research suggests that it's best to use a similar rate as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Depreciation and amortisation rate (%)
|47.29%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Fixed Capital Investment (FCInv) as a proportion of revenue (%)
| 6.25%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Working Capital Investment (WCInv) as a proportion of revenue (%)
| 2.13%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Net borrowing as a proportion of revenue (%)
|0%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|-
|Interest expense as a proportion of revenue (%)
|0%
|Research suggests that it's best to use a similar amount as the one used by peers that are in the same growth stage (i.e. growth stage 4)<ref name=":7" />. Information on the peers and the calculation of the figure used here can be found in the appendix of this report.
|}
|}
==Appendix==
ccc


== Risks ==
=== Transactions ===
As with any investment, investing in Agronomics carries a level of risk. Overall, based on the Agronomics' adjusted beta (i.e. 1.40)<ref name=":4">Research shows that an investment has two main types of risks: 1) non-systematic and 2) systematic. Systematic risk is the risk related to the overall market, and non-systematic risk is the risk that's specific to an individual investment. Evidence shows that taking on non-systematic risk is inefficient, and it's, therefore, best to eliminate it; and in most cases, elimination is fairy easy to do [by holding a diversified portfolio of investments (i.e. around 15 investments)]. Accordingly, when assessing the riskiness of an investment, it’s best to look at the systematic risk only (i.e. ignore the non-systematic risk). A key measure of systematic risk is beta, and a main way to determine the riskiness of an investment is to compare the beta of the investment with the beta of the market, which is 1. For estimating an asset's beta, in terms of time period, and frequency of observations, the most common choice is five years of monthly data, yielding 60 observations. One study of U.S. stocks found support for five years of monthly data over alternatives. The beta value in a future period has been found to be on average closer to the mean value of 1.0, the beta of an average-systematic-risk security, than to the value of the raw beta. Because valuation is forward looking, it is logical to adjust the raw beta so it more accurately predicts a future beta.</ref>, the degree of risk associated with an investment in Agronomics is 'medium'.
{| class="wikitable"
 
|+
Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta. In addition, here, we have assumed that for an investment to be considered 'medium' risk, it must have a beta value of between 0.5 and 1.5. Further information about the beta ratings can be found in the appendix section of this report.
!Name
 
!Funding type
The key risks can be found below. For us, currently, the biggest risk to the valuation of the company relates to ccc.
!Funded company
 
!Funding amount raised (USD)
=== Credit risk ===
!Investment
Credit risk is the risk of loss associated with the counterparty’s inability to fulfil its obligations. The Company’s credit risk is primarily attributable to receivables, cash balances, and cash deposits, with the maximum exposure being the reported balance in the statement of financial position. The Company has a nominal level of debtors and as such the Company believes that the credit risk to these is minimal. The Company holds available cash and cash deposits with licensed banks and financial institutions. The Company considers the credit ratings of banks in which it holds funds in order to reduce exposure to credit risk. Cash balances are available on demand, with cash deposits having varying maturities up to 6 months.
!Funding round date
 
!Funding round investor
=== Market price risk ===
|-
Market price risk is the risk that the market price will fluctuate due to macro-economic issues such as changes in market factors specific to that security, market interest rates and foreign exchange rates.
|
 
|
The Company is exposed to significant market price risks as financial instruments recognised directly by the Company and indirectly by the Subsidiary are linked to market price volatility.
|
|
|
|
|
|-
|
|
|
|
|
|
|
|-
|
|
|
|
|
|
|
|}


A 10% increase/decrease in market value of investments held by the Company and its subsidiary would increase/decrease equity and profit by £9,481,309 (2021: £3,877,068). Taking into account the Shellbay consulting fee, the increase/decrease in equity and profit would be £10,903,505 (2021: £4,458,628).
=== Number of Securities in Issue ===
The company’s issued share capital consists of 993,152,034 fully paid Ordinary Shares of £0.000001 each (‘Ordinary Shares’), each share having equal voting rights.


=== Liquidity risk ===
The Company does not hold any Ordinary Shares in treasury and therefore the total number of Ordinary Shares with voting rights is 993,152,034.
The Company is exposed to liquidity risk to the extent that it holds investments that it may not be able to sell quickly at close to fair value.


The risk is managed by the Company by means of cash flow planning to ensure that future cash requirements are anticipated and, where financial instruments have to be sold to meet these requirements, the process is carried out in a controlled manner intended to minimise the liquidity risk involved.
(Last updated: 31st July 2023)
 
{| class="wikitable"
=== Interest rate risk ===
|+
A significant share of the Company’s assets is comprised of cash held at banks. As a result, the Company is subject to risk due to fluctuations in the prevailing level of market interest rates. However, income earned from bank interest is not considered material to the Company’s performance or financial position.
!Name
 
!Number of Ordinary Shares
The Company holds investments in convertible loan notes (“CLN”), which attract interest income. The rates of interest are fixed for each CLN investment held, which results in a reduced interest rate risk.
!% of Share Capital
 
'''Fair values of financial assets and liabilities'''
 
At 30 June 2022, the carrying amounts of cash resources, trade and other receivables, and trade and other payables approximate fair value due to their short-term maturities.
 
'''Foreign currency risk'''
 
The Company is exposed to foreign currency risk on fluctuations related to financial assets and liabilities held directly itself and indirectly via its subsidiary that are denominated in a number of currencies. The Investment in Subsidiary is held in Sterling. The analysis below reflects the underlying currency exposure in the Subsidiary’s portfolio.
 
== Valuation ==
===Absolute Valuation===
====What's the expected return of an investment in the company?====
The Stockhub users estimate that the expected return of an investment in the company over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below.
 
Assuming that a suitable return level over five years is ccc% per year or less, and Agronomics achieves its expected return level (of ccc%), then an investment in the company is considered to be an 'suitable' one.
===What are the assumptions used to estimate the return?===
 
{| class="wikitable"
|+ Key inputs
!Description
!Value
!Commentary
|-
|-
| Which valuation model do you want to use?
|Jim Mellon<ref>Shares are held directly by Jim Mellon and through Galloway Limited, which is indirectly wholly owned by Jim Mellon, Denham Eke is a director of Galloway Limited</ref>
|Discounted cash flow
|154,553,366
|Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, so that's the approach that he Stockhub users suggest to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report).
|15.56%
 
Agronomics has never paid cash dividends, and on 7th February 2022, it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, the Stockhub users suggest using the free cash flow valuation method (rather than the dividend discount model).  
|-
|-
|Which financial forecasts to use?
|Hargreaves Lansdown (Nominees)
| Stockhub
|86,850,033
|The only available long-term forecasts (i.e. >15 years) are the ones that are supplied by the Stockhub users (the forecasts can be found in the financials section of this report), so the Stockhub users suggest using those.
|8.74%
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 1</div>'''
|BlackRock, Inc.
|62,133,460
|6.24%
|-
|-
|Discount rate (%)
|Canaccord Genuity Wealth Management
|30%
|54,970,000
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
|5.53%
|-
|-
|Probability of success (%)
|Interactive Investor Services
|70%
|50,755,773
|Research suggests that a suitable rate for a company in this growth stage (i.e. stage 1) is 70%.
|5.11%
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 2</div>'''
|JPMorgan Chase Bank
|39,239,575
|3.95%
|-
|-
|Discount rate (%)
|Jupiter Asset Management
| 15%
|23,069,979
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
|2.32%
|-
|}
|Probability of success (%)
| 80%
| Research suggests that a suitable rate for a company in this growth stage (i.e. stage 2) is 80%.


=== Directors’ Shareholdings ===
As of 31st July 2023.
{| class="wikitable"
|+
!Name
!Number of Ordinary Shares
!% of Share Capital
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 3</div>'''
|Jim Mellon
|-
|154,553,366
|Discount rate (%)
|15.56%
| 10%
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
|-
|Probability of success (%)
|100%
|Research suggests that a suitable rate for a company in this growth stage (i.e. stage 3) is 100%.
 
|-
|-
| colspan="3" |'''<div style="text-align: center;">Growth stage 4</div>'''
|Richard Reed<ref>Richard Reed’s shares are held via Reepa Limited.</ref>
|6,354,412
|0.64%
|-
|-
|Discount rate (%)
|David Giampaolo
| 10%
|2,434,783
|There are two key risk parameters for a firm that need to be estimated: its cost of equity and its cost of debt. A key way to estimate the cost of equity is by looking at the beta (or betas) of the company in question, the cost of debt from a measure of default risk (an actual or synthetic rating) and apply the market value weights for debt and equity to come up with the cost of capital.
|0.25%
|-
|-
|Probability of success (%)
|Denham Eke
| 100%
|739,390
|Research suggests that a suitable rate for a company in this growth stage (i.e. stage 4) is 100%.
|0.07%
 
|-
| colspan="3" |'''<div style="text-align: center;">Other key inputs</div>'''
|-
|What's the current value of the company?
|£225 million
|As at 13th June 2023, the current value of its company at £225 million.<ref name=":9" />
|-
|Which time period do you want to use to estimate the expected return?
| Between now and five years time
|Research suggests that following a market crash, the average amount of time it takes for the price of a stock market to return to its pre-crash level (i.e. the recovery period) is at least three years.<ref>https://www.newyorkfed.org/mediabrary/media/medialibrary/media/research/staff_reports/research_papers/9809.pdf</ref> Accordingly, Stockhub suggests that to account for general market cyclicity, it's best to estimate the expected return of the company between now and five years time.
|}
|}


====Sensitivity analysis====
===Cost of equity===
The main inputs that result in the greatest change in the expected return of the Agronomics investment are, in order of importance (from highest to lowest):
{| class="wikitable"
#The size of the total addressable market (the default size is $2.7 trillion);
|+Cost of equity
#Agronomics peak market share (the default share is 0.10%); and
!Input
#The discount rate (the default time-weighted average rate is 12.5%).
!Input value
The impact of a 50% change in those main inputs to the expected return of the Agronomics investment is shown in the table below.
!Additional information
{| class="wikitable sortable"
|+Agronomics investment expected return sensitivity analysis
!Main input
!50% worse
!Unchanged
!50% better
|-
|-
|The discount rate
|Risk-free rate (%)
|ccc%
|4.297%
|ccc%
|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 3rd September 2023. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is 30 years years or longer, so we have used the longest maturity, which is 30 years.
|ccc%
|-
|-
|The size of the total addressable market
|Beta
|ccc%
|1.40
|ccc%
|Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta.
|ccc%
|-
|-
|Agronomics peak market share
|Equity risk premium (%)
|ccc%
|7.98%
|ccc%
|Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium, and is calculated as at 5th January 2023.
|ccc%
|-
|Cost of equity (%)
|15.469%
|Cost of equity = Risk-free rate + Beta x Equity risk premium.
|}
|}
==Appendix==
===Relative valuation===
As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.
====What's the expected return of an investment in Pantheon Resources using the relative valuation approach?====
Stockhub estimates that the expected return of an investment in Agronomics over the next 12-months is ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in one year time. The assumptions used to estimate the return figure can be found in the table below.
====What are the assumptions used to estimate the return figure?====
ccc
ccc


=== Transactions ===
====Sensitivity analysis====
{| class="wikitable"
The main inputs that result in the greatest change in the expected return of the Agronomics investment are, in order of importance (from highest to lowest):
|+
#The compound annual growth rate of the Agronomics book value (the default figure is ccc%);
!Name
#The price-to-book value multiple (the default multiple cccx); and
!Funding type
#Agronomics most recent book value figure (the default figure is $ccc).
!Funded company
The impact of a 50% change in those main inputs to the expected return of the Agronomics investment is shown in the table below.
!Funding amount raised (USD)
{| class="wikitable sortable"
!Investment
|+Pantheon Resources investment expected return sensitivity analysis
!Funding round date
!Main input
!Funding round investor
!50% worse
!Unchanged
!50% better
|-
|-
|
|The compound annual growth rate of the Agronomics book value between one year ahead and the most recent value
|
|113%
|
|185%
|
|266%
|
|
|
|-
|-
|
|The price-to-book value multiple
|
|42%
|
|185%
|
|327%
|
|
|
|-
|-
|
|Agronomics most recent book value figure
|
|42%
|
|185%
|
|327%
|
|
|
|}
 
=== Number of Securities in Issue ===
The company’s issued share capital consists of 993,152,034 fully paid Ordinary Shares of £0.000001 each (‘Ordinary Shares’), each share having equal voting rights.
 
The Company does not hold any Ordinary Shares in treasury and therefore the total number of Ordinary Shares with voting rights is 993,152,034.
 
(Last updated: 31st July 2023)
{| class="wikitable"
|+
!Name
!Number of Ordinary Shares
!% of Share Capital
|-
|Jim Mellon<ref>Shares are held directly by Jim Mellon and through Galloway Limited, which is indirectly wholly owned by Jim Mellon, Denham Eke is a director of Galloway Limited</ref>
|154,553,366
|15.56%
|-
|Hargreaves Lansdown (Nominees)
|86,850,033
|8.74%
|-
|BlackRock, Inc.
|62,133,460
|6.24%
|-
|Canaccord Genuity Wealth Management
|54,970,000
|5.53%
|-
|Interactive Investor Services
|50,755,773
|5.11%
|-
|JPMorgan Chase Bank
|39,239,575
|3.95%
|-
|Jupiter Asset Management
|23,069,979
|2.32%
|}
 
=== Directors’ Shareholdings ===
As of 31st July 2023.
{| class="wikitable"
|+
!Name
!Number of Ordinary Shares
!% of Share Capital
|-
|Jim Mellon
|154,553,366
|15.56%
|-
|Richard Reed<ref>Richard Reed’s shares are held via Reepa Limited.</ref>
|6,354,412
|0.64%
|-
|David Giampaolo
|2,434,783
|0.25%
|-
|Denham Eke
|739,390
|0.07%
|}
 
===Cost of equity===
{| class="wikitable"
|+Cost of equity
!Input
!Input value
!Additional information
|-
|Risk-free rate (%)
|4.297%
|Here, the risk free rate is the US 30 year treasury bond, and is calculated as at 3rd September 2023. Research suggests that for the risk-free rate, it's best to use one that has the same or similar maturity to the estimated remaining lifespan of the company. Here, we have assumed that the estimated lifespan of the company is 30 years years or longer, so we have used the longest maturity, which is 30 years.
|-
|Beta
|1.40
|Here, to estimate the adjusted beta, we used the iShares MSCI World ETF to represent the market portfolio; and in terms of the time period and frequency of observations, we used five years of monthly data (i.e. 60 observations in total), which is supported by a study and is the most common choice. The beta value in a future period has been found to be on average closer to the mean value of 1.0, and because valuation is forward-looking, it is logical to adjust the raw beta so it more/most accurately predicts a future beta.
|-
|Equity risk premium (%)
|7.98%
|Research suggests that for the region of equity risk premium, it's best to use one that is the same or similar to the region of the beta market portfolio. Here, the region of the beta market portfolio is the world/global, so we have used the world/global region for the equity risk premium, and is calculated as at 5th January 2023.
|-
|Cost of equity (%)
|15.469%
|Cost of equity = Risk-free rate + Beta x Equity risk premium.
|}
===Relative valuation===
As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach.
====What's the expected return of an investment in Agronomics using the relative valuation approach?====
Stockhub estimates that the expected return of an investment in Agronomics over the next 12-months is ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in one year time. The assumptions used to estimate the return figure can be found in the table below.
====What are the assumptions used to estimate the return figure?====
 
{| class="wikitable"
|+Key inputs
!Description
!Value
!Commentary
|-
|Which type of multiple do you want to use?
|Book value growth-adjusted price-to-book value metric
|The price-to-book value is really the only available commonly used value, so we suggest using that. To help compare peers at different stages of their business lifecycle, we suggest using the book value growth-adjusted price-to-book value.
|-
|In regards to the book value growth-adjusted price-to-book value multiple, for the book value figure, which year to you want to use?
|Year 1
|Research suggests that when using the relative valuation approach, it's best to use a time period of 12 months or less. Accordingly, for the book value figure, we suggest using Year 1, which is on 12th September 2024.
|-
|In regards to the book value growth-adjusted price-to-book value multiple, what multiple figure do you want to use?
|0.5x
|Here, we suggest using a multiple of 0.50x, which is in-line with the multiples of Agronomics' peers (for details on the peers can be found in the table below).
|-
|What is the estimated compound annual growth rate of the book value between one year from now and the most recent value?
|46.37%
|One year from now is 12th September 2024, and the most recent book value date is 31st December 2022. For simplicity, we based the estimate on the CAGR of Agronomics over the last five years, which is 46.37%. The most recent value is $248,178,354 (as at 31st December 2022).
|-
|What's the current market capitalisation of the company?
|£205.44 million
|As at 12th September 2023, the market capitalisation of Agronomics is £205.44 million.
|-
|Which time period do you want to use to estimate the expected return?
|Between now and one year time
|Research suggests that when using the relative valuation approach, it's best to estimate the expected return of the company between now and one year time.
|}
 
====Sensitivity analysis====
The main inputs that result in the greatest change in the expected return of the Agronomics investment are, in order of importance (from highest to lowest):
#The compound annual growth rate of the Agronomics book value (the default figure is ccc%);
#The price-to-book value multiple (the default multiple cccx); and
#Agronomics most recent book value figure (the default figure is $ccc).
The impact of a 50% change in those main inputs to the expected return of the Agronomics investment is shown in the table below.
{| class="wikitable sortable"
|+Agronomics investment expected return sensitivity analysis
!Main input
!50% worse
!Unchanged
!50% better
|-
|The compound annual growth rate of the Agronomics book value between one year ahead and the most recent value
|113%
|185%
|266%
|-
|The price-to-book value multiple
|42%
|185%
|327%
|-
|Agronomics most recent book value figure
|42%
|185%
|327%
|}
 
{| class="wikitable"
|+Local peers - BICS Best Fit (Algorithm)
!Name
!Ticker
!2Y Corr
!Mkt Cap (USD)
!BF P/E
!BF EV/EBITDA
!BF EV/EBIT
!BF EV/Rev
!Last fiscal P/BV
|-
|Agronomics Limited
|ANIC LN
|
|
|
|
|
|
|
|-
| colspan="9" |'''Publicly listed companies in the broader alternative protein sector'''
|-
|Beyond Meat
|
|
|
|
|
|
|
|
|-
|Oatly
|
|
|
|
|
|
|
|
|-
|The Very Good Food Company
|
|
|
|
|
|
|
|
|-
| colspan="9" |'''Investment firms or funds that focus on the alternative protein or cellular agriculture space'''
|-
|New Crop Capital
|N/A
|
|
|
|
|
|
|
|-
|Blue Horizon Ventures
|N/A
|
|
|
|
|
|
|
|-
|Stray Dog Capital
|N/A
|
|
|
|
|
|
|
|-
| colspan="9" |'''Companies in the cellular agriculture or alternative protein space which might be considered peers or competitors to the portfolio companies of Agronomics'''
|-
|Memphis Meats
|N/A
|
|
|
|
|
|
|
|-
|Mosa Meat
|N/A
|
|
|
|
|
|
|
|-
|Impossible Foods
|N/A
|
|
|
|
|
|
|
|-
|Beyond Meat
|N/A
|
|
|
|
|
|
|
|-
|Perfect Day
|N/A
|
|
|
|
|
|
|
|-
|Geltor
|N/A
|
|
|
|
|
|
|
|-
|
|
|
|
|
|
|
|
|
|-
|Mean (Including ANIC LN)
|
|
|
|
|
|
|
|
|-
|Current Premium to Comps Mean
|
|
|
|
|
|
|
|
|}
|}
===Beta risk profile===
===Beta risk profile===
{| class="wikitable"
{| class="wikitable"
Line 1,818: Line 1,339:
== References ==
== References ==
__INDEX__
__INDEX__
<references />
Please note that all contributions to Stockhub may be edited, altered, or removed by other contributors. If you do not want your writing to be edited mercilessly, then do not submit it here.
You are also promising us that you wrote this yourself, or copied it from a public domain or similar free resource (see Stockhub:Copyrights for details). Do not submit copyrighted work without permission!
Cancel Editing help (opens in new window)
Retrieved from ‘https://stockhub.co/research/Agronomics_Limited’