TFSA Investment Letter – Issue 4 – May, 2009
GLG Life Tech Corporation – GLG (TSX) – $1.85
GLG Life Tech Corporation stock is trading around $1.85, so it is not what I would traditionally list in the TFSA Investment Letter as a low-priced stock. However, I believe that GLG could be one of those companies that would become accepted in the stock market as a world leader in their sector and generate substantial capital gains over the next few years.
What is their sector? Sweetener
GLG is a world leader in the production of high quality stevia, a zero-calorie, natural sweetener. Their vertically integrated operations include stevia seed breeding, propagation, growth and harvest, extraction, refining and formulation.
Stevia is a natural, calorie free sugar substitute, derived from the leaves of the stevia plant scientifically known as Stevia Rebaudiana Bertoni. Indigenous to Paraguay, stevia has been used to sweeten food and beverages for over 200 years. It includes no additional chemicals and provides a healthy, 100% natural solution for consumers. Stevia is stable at high temperatures (thus safe for cooking purposes) and has been shown in clinical trials to have many health benefits. Stevia is safe for diabetics, has been shown to help prevent tooth decay, and has even been recommended by the World Health Organization for use as a treatment for hypertension. By replacing sugar with stevia, consumers could potentially decrease caloric intake, helping to reduce obesity and other associated health risks.
Currently, stevia is approved as a food additive in many countries such as China, Japan, Paraguay, Korea, Brazil, Israel, Malaysia and Taiwan. In Paraguay, it has been used for over 200 years to sweeten food and beverages. In other parts of the world, stevia is very widely used and even now accounts for over 40% of the sweetener market in Japan.
The most important event in the recent history of stevia as a sweetener came on December 17, 2008 when the United States Food and Drug Administration (FDA) approved the use of high quality stevia extract in food and beverages.
Rebiana is a stevia-based sweetener jointly developed by international food and agricultural supplier Cargill and leading beverage giant Coca Cola. GLG is the leading producer of rebiana, an all-natural, zero-calorie stevia extract made with 97-per-cent pure rebaudioside A.
GLG recently announced a $40.5 million order from Cargill for Truvia, a tabletop sweetener. GLG has just announced that it has partnered with Zevia which has recently launched a reformulation of its natural soda lines which now utilize GLG rebiana stevia extract. Zevia has been recognized by SPINS, a division of AC Nielson for retail performance, as the #1 selling diet soda in the all natural food category as well as the #3 best selling product over all carbonated beverages in natural foods.
You should be aware that there is another competitor to GLG, called Pure Circle. I think the potential market for stevia – will allow both companies to rapidly expand for a number of years before they start to crowd each other. Pure Circle is listed on the AIM, under the symbol PURE.
I could write a long, detailed report on GLG, but I think that if you find this of interest, it would be better for you to take the time to visit the Company’s web site, read some of the information on the Company and log in this week to listen to a webcast of latest earnings.
NOTE: The webcast this Friday will contain a very comprehensive slide presentation which would give you a great background on the Company and the last one, if you care to go to Company web site and listen to it, has a very long section with a number of analysts asking and getting answers to many questions.
WEBCAST:
Date: Friday, May 15, 2009
Title: GLG First Quarter Earnings Discussion
Time: 10:00am PST/1:00pm EST
Host: Brian Meadows, Chief Financial Officer
Wellington West Capital Markets analyst Robert Winslow rates the shares “buy.” He targets the stock at $3.50. Extract output is forecast to rise 400 per cent by fiscal 2010. Earnings are forecast at 25 cents a share in 2011. The company lost ten cents a share in fiscal 2008.
There are approximately 78.6 million shares outstanding, with 74.5% held by insiders, associates and institutions:
- 18.2% Skyland International Investment Management Ltd. (Peoples Republic of China)
- 12.9% HZ Health Management Company Limited (Marshall Islands)
- 10.3% Pacific Marketing Consultants Ltd.
- 6.4% Dr. Luke Zhang (China)
- 5.2% Brian Palmieri (Wyoming)
- 1.9% Cargill
- 4.7% Black River (Cargill)
- 14.9% Other Institutional Investors
News Update – Wall Street Journal, May 12, 2009 – Soda Tax Weighed to Pay for Health Care
Senate leaders are considering new federal taxes on soda and other sugary drinks to help pay for an overhaul of the nation’s health-care system. The taxes would pay for only a fraction of the cost to expand health-insurance coverage to all Americans and would face strong opposition from the beverage industry. They also could spark a backlash from consumers who would have to pay several cents more for a soft drink.
The Center for Science in the Public Interest, a Washington-based watchdog group that pressures food companies to make healthier products, plans to propose a federal excise tax on soda, certain fruit drinks, energy drinks, sports drinks and ready-to-drink teas. It would not include most diet beverages. Excise taxes are levied on goods and manufacturers typically pass them on to consumers. The Congressional Budget Office, which is providing lawmakers with cost estimates for each potential change in the health overhaul, included the option in a broad report on health-system financing in December. The office estimated that adding a tax of three cents per 12-ounce serving to these types of sweetened drinks would generate $24 billion over the next four years.
Proponents of the tax cite research showing that consuming sugar-sweetened drinks can lead to obesity, diabetes and other ailments. They say the tax would lower consumption, reduce health problems and save medical costs. At least a dozen states already have some type of taxes on sugary beverages, said Michael Jacobson, executive director of the Center for Science in the Public Interest.
“Soda is clearly one of the most harmful products in the food supply, and it’s something government should discourage the consumption of,” Mr. Jacobson said. The beverage-tax proposal would apply to drinks that many Americans don’t consider unhealthy — such as PepsiCo’s Gatorade and Kraft’s Capri Sun — based on their calorie content.
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This could have a major impact on the speed at which stevia is used in soda pop…
Soda Tax Weighed to Pay for Health Care
The Wall Street Journal – May 12, 2009
Senate leaders are considering new federal taxes on soda and other sugary drinks to help pay for an overhaul of the nation’s health-care system. The taxes would pay for only a fraction of the cost to expand health-insurance coverage to all Americans and would face strong opposition from the beverage industry. They also could spark a backlash from consumers who would have to pay several cents more for a soft drink. On Tuesday, the Senate Finance Committee is set to hear proposals from about a dozen experts about how to pay for the comprehensive health-care overhaul that President Barack Obama wants to enact this year. Early estimates put the cost of the plan at around $1.2 trillion. The administration has so far only earmarked funds for about half of that amount.
The Center for Science in the Public Interest, a Washington-based watchdog group that pressures food companies to make healthier products, plans to propose a federal excise tax on soda, certain fruit drinks, energy drinks, sports drinks and ready-to-drink teas. It would not include most diet beverages. Excise taxes are levied on goods and manufacturers typically pass them on to consumers. Senior staff members for some Democratic senators at the center of the effort to craft health-care legislation are weighing the idea behind closed doors, Senate aides said.
The Congressional Budget Office, which is providing lawmakers with cost estimates for each potential change in the health overhaul, included the option in a broad report on health-system financing in December. The office estimated that adding a tax of three cents per 12-ounce serving to these types of sweetened drinks would generate $24 billion over the next four years. So far, lawmakers have not indicated how big a tax they are considering. Proponents of the tax cite research showing that consuming sugar-sweetened drinks can lead to obesity, diabetes and other ailments. They say the tax would lower consumption, reduce health problems and save medical costs. At least a dozen states already have some type of taxes on sugary beverages, said Michael Jacobson, executive director of the Center for Science in the Public Interest. “Soda is clearly one of the most harmful products in the food supply, and it’s something government should discourage the consumption of,” Mr. Jacobson said.
The main beverage lobby that represents Coca-Cola Co., PepsiCo Inc., Kraft Foods Inc. and other companies said such a tax would unfairly hit lower-income Americans and wouldn’t deter consumption. “Taxes are not going to teach our children how to have a healthy lifestyle,” said Susan Neely, president of the American Beverage Association. Instead, the association says it’s backing programs that limit sugary beverage consumption in schools. Some recent state proposals along the same lines have met stiff opposition. New York Gov. David Paterson recently agreed to drop a proposal for an 18% tax on sugary drinks after facing an outcry from the beverage industry and New Yorkers.
The beverage-tax proposal would apply to drinks that many Americans don’t consider unhealthy — such as PepsiCo’s Gatorade and Kraft’s Capri Sun — based on their calorie content. Health advocates are floating other so-called sin tax proposals and food regulations as part of the government’s health-care overhaul. Mr. Jacobson also plans to propose Tuesday that the government sharply raise taxes on alcohol, move to largely eliminate artificial trans fat from food and move to reduce the sodium content in packaged and restaurant food. The beverage tax is just one of hundreds of ideas that lawmakers are weighing to finance the health-care plans. They’re expected to narrow the list in coming weeks.