Analyst Recommendations
August 11, 2010
Sport Endurance, Inc.
Healthcare- Drug Related Products
Sport Endurance, Inc. is an innovative and rapidly growing provider of high quality nutritional and dietary supplements targeting health issues that include energy and weight loss, muscle growth, and sleep. The Company is the first to offer pharmaceutical grade gel cap forms of increasingly popular energy products and energy shots, establishing a profitable niche for itself in the lucrative $10 billion “energy” product market and the $68 billion nutritional supplement space, and is preparing to begin a massive marketing and distribution rollout of its product offering to more than 15,000 retail locations within the next quarter.
INVESTMENT OVERVIEW
• Growing market opportunity. The energy product phenomenon has been one of the most noticeable trends in the beverage and nutrition industries over the last decade, and the industry has grown at a 5 year CAGR of over 50% from revenues of approximately $400 million in 2000 to total revenues that exceeded $6.6 billion by 2007. Future growth is expected to be robust, with market research from both Goldman Sachs and Mintel predicting total revenues of over $10 billion by the close of 2010. SENZ is also well situated in the $68 billion annual nutritional supplements industry.
• Innovative and Broad Product Offering. Sport Endurance is the first player to introduce gel-cap forms of energy products, offering consumers numerous benefits over more traditional product lines in terms of price, appeal, and efficacy. In addition to its Energy Liquid Gel Cap, the Company’s product line includes complimentary products focusing on muscle mass and sleep/ relaxation, creating a comprehensive health and lifestyle brand, with additional product launches planned into the intermediate term.
• National Market Penetration. SENZ has launched an aggressive distribution and marketing strategy with the goal of reaching distribution to over 100,000 national retail locations within the next twelve months. The recent distribution agreement with Mr. Checkout Distributors is a major coup and will place the Sport Endurance product line in approximately 15,000 locations over the next fiscal quarter.
• Outlook. We believe SENZ is well positioned to attain national distribution of its products within the year, and attain substantial, accretive revenue and earnings growth into 2011 and beyond, as its products gain exposure. We anticipate that SENZ will top revenues of $7.4 million in 2011 with positive earnings, attaining annual revenues in excess of $38.7 million by 2013.
• Relative Valuation. At its current price of $0.39 per share, based upon the average trading range and market valuation of a peer grouping of comparable companies in the health and nutritional supplement space Sport Endurance is priced at a significant discount. By applying this peer grouping’s average price to earnings and price to sales multiples to
anticipated FY 2012 financial results we can arrive at an implied valuation for Sport Endurance of approximately $0.60 to $2.00 per share.