Mighty Craft will head into the holiday season with a market cap that appears to vastly undervalue its businesses, brands and inventory.
Mighty Craft’s market cap today is $56 million, only fractionally more than the $47 million it paid to acquire Adelaide Hills Group in June 2021.
This is despite the company’s portfolio of other investments that includes a 37 per cent stake in the Better Beer juggernaut, which was projected to achieve volumes of ten million litres in FY23.
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Based on a conservative brewing industry benchmark valuation of $20/litre, Mighty Craft’s stake in Better Beer would be worth at least $74 million alone.
CEO Mark Haysman acknowledged the discrepancy in a recent interview with Drinks Adventures, at which time the company’s market cap was $52 million.
“If you look at the quality of the brands and the businesses we’re building in the beer and cider space, and you apply any of those industry averages, there’s a business that is worth a lot more than what our market cap is right now,” he said.
Whisky bank value ‘exceeds market cap’
Haysman said the valuation also fails to account for its spirits brands and inventory, with Mighty Craft projected to have more than 500,000 litres of whisky under maturation by the end of FY23.
“Even conservatively, the whisky bank in its own right will be worth more than our market cap is today,” he said.
“Definitely the sum of the parts is worth well above the whole, in terms of what the market is valuing us at the moment.”
Haysman suggested the valuation may reflect a belief among investors that Mighty Craft will have to undertake another capital raising.
Such an event would dilute the value of any shares purchased in the interim, which has a dampening effect on the share price.
“They want to be confident that we’re funded to get through to that path to profit,” he said.
The company’s total available funding of $5.85 million at the end of September was enough to finance only another 2.2 quarters of operations, based on its Q1 cash outflow of $2.69 million.
But Haysman said the company was confident its priority brands could generate enough cash flow in the second and third quarter to allay concerns.
“The result we expect… is going to help us see our way through without having to go back to the market [for funding], other than for something around a growth opportunity,” he said.
Mark Haysman increases shareholding
The CEO signalled his belief in the stock by purchasing 88,435 shares at 19.1c each on October 28, and another 45,000 shares at 19.5c each on November 25.
But the market was largely unmoved by these transactions, with shares now trading at 17c to arrive at the $56 million market cap.
Podcast:
From Islay to Kangaroo Island: Mighty Craft distiller George Campbell
Daniel Motlop: From AFL star to craft spirits entrepreneur
Chris Malcolm, founder Hidden Lake Whisky
