Is GenTech Holdings Inc (OTCMKTS:GTEH) Primed for an Acquisition Spree? (HLF, WW, NATR)

GenTech Holdings Inc (OTCMKTS:GTEH) is a small-cap player in the functional foods and sports nutrition space, driven by recent growth in its SINFIT Nutrition branded line of products.

The company has been talking up its growth potential in recent communications. Talk is cheap, but naysayers are eating crow this morning after the company put out data in a mid-quarter performance update that backs up that talk with some very impressive comps data.

Another big point we see in its recent communications that should be highlighted here is the company’s clear focus on making new acquisitions.

Based on data put out this morning, both sales activity and cash flows from operations appear to be surging, and the company has been pointing to the likelihood of possibly multiple major acquisitions coming onto the radar over the near-term. Those are highly related ideas. To wit: the company’s increased pace of business and strengthening balance sheet support its ability to go shopping with credibility.

And the company now firmly has a good track record in its M&A activity given that SINFIT was an acquisition last summer that now looks set to produce possibly as much as 1,000% year-over-year sales growth, pre- and post-.

One thing is likely quite certain: any acquisitions are likely to come in the functional foods or sports nutrition space, which has been a solid long-term secular growth story defined by the likes of Herbalife Nutrition Ltd (NYSE:HLF), WW International Inc (NASDAQ:WW), and Nature’s Sunshine Products (NASDAQ:NATR), among others.

 

Red Hot

As noted above, GenTech Holdings Inc (OTCMKTS:GTEH) put out a performance update this morning that would seem to confirm the notion that it is seeing lift-off for its SINFIT brand of sports nutrition and functional foods products.

David Lovatt, CEO of GenTech, put it this way: “We are now seeing the hockey-stick curve we have been talking about month in month out. In this quarter, we have long surpassed last quarter’s top line number with one of the best months in the year for Functional Food sales still ahead of us. More importantly, with a war chest of cash on hand, our acquisition strategy can now start to execute effectively. We have Yourganics and I anticipate more significant roll-ups in the coming weeks and months.”

Sinfit, it should be noted, is a top five functional foods brand sold in over 2,500 GNC locations in North America and over 10,000 global physical and e-commerce stores across more than 10 countries around the world.

The data put out by the company for its fiscal Q2 mid-quarter update (GTEH has a Q2 that stretches from Feb thru Apr) clearly points to massive year-over-year and quarter-over-quarter growth in terms of both sales and cash on hand.

According to the release, gross consolidated revenues are on pace to jump 89% on a sequential quarterly basis this quarter, and perhaps over 1,000% year over year.

This is the hockey stick Lovatt is referring to in the quote above. And it smacks of something important taking hold at the company.

 

Going Shopping

The other key point to note here is the nearly 300% growth in cash on a sequential quarterly basis already – and remember, this is a mid-quarter update. The pace calls for more like a 460% jump in cash this quarter.

GenTech Holdings Inc (OTCMKTS:GTEH) also recently put out news that it has managed to negotiate a settlement by way of which it has cleared over 30% of its current liabilities for a token payment, dramatically cleansing the balance sheet.

Given the company’s recent clear statements about current and upcoming value-add acquisition negotiations, GenTech appears to be very well situated to get multiple deals done over the near term.

That could drive significant interest in the stock given the growth and monetization already in evidence following the company’s last acquisition.

Lovatt Continued “We are beginning to see clear evidence surfacing in performance data to back up our sense of positive trends in our SINFIT operations from our boots-on-the-ground perspective. Our Q2 data is well on its way to casting a big shadow over our Q1 performance despite the fact that Q1 seemed like a breakout quarter in and of itself. Momentum is beginning to gain traction. On a year-over-year basis, we are already showing growth of more than 600% on the topline and we still have another month to go in the quarter.”

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Published by Steve Hackney

Steve Hackney is a corporate finance professional with over 14 years of experience in cash management and investing. He earned a Bachelor of Science in Finance from Florida State University and holds a Certified Treasury Professional certification. Steve lives in Orlando, Florida with his family.

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