Amplify on-track with management's plan

by Eric Schroeder
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Paqui tortilla chips
Credit Suisse raised Amplify's target price to $16 from $13, seeing a strong upside for Paqui.

NEW YORK — Credit Suisse has increased its target price for Amplify Snack Brands Inc. to $16 from $13, and has upgraded its rating to “outperform” from “neutral” following strong third-quarter results that indicate the company is on-track with management’s plan, if not slightly ahead.

Robert Moskow, Credit Suisse
Robert Moskow, an analyst with Credit Suisse

“We now have a higher degree of confidence in our forward estimates for the SkinnyPop brand with the potential for upside driven by a number of factors: 1) Paqui sales could exceed our expectations by as much as double, 2) SkinnyPop expanding internationally ahead of schedule, and 3) the possibility of acquisitions to come sooner than expected,” Robert Moskow, an analyst with Credit Suisse, wrote in a Nov. 9 research note.

Adjusted EBITDA in the third quarter ended Sept. 30 was $18,110,000, which compared with $16,516,000 in the same period a year ago. Net sales increased 20% to $45,914,000, up from $38,142,000 in the same period a year ago. The increase in net sales reflects increased distribution and strong brand velocity across sales channels, Amplify said. The company’s growth rate was impacted adversely by the strategic decision to not run a large promotion in the third quarter of 2015 that ran in the same quarter of 2014.

In his research note, Mr. Moskow said Amplify improved its distribution footprint at several of its largest customers during the year and has established good visibility into further distribution gains in 2016. Customers at existing key accounts such as Wal-Mart, Costco and Target have agreed to merchandise more SkinnyPop items and improve merchandising, and one customer said it intends to begin testing SkinnyPop internationally in 2016, he said.

Additionally, Mr. Moskow said Paqui is on-track for a national launch in the first quarter of 2016.

“Initial retailer feedback has been very good and acceptance has been high,” he said. “We maintain our $15 million sales estimate for 2016, but that could prove conservative if the roll-out goes as well as preliminary indications suggest.”

In raising Amplify’s target price to $16, Mr. Moskow said Credit Suisse’s action implies a 12.5x multiple against its 2017 EBITDA estimate.

“Amplify has a short track record and a heavy reliance on just one brand, but it is growing at a far faster rate than its food peers,” he said. “We think there is upside to the valuation multiple once the company demonstrates its ability to integrate acquisitions and expand internationally.”
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