Value investing

Hispanica International (HISP) is Growing Revenue and Increasing Transparency

Hispanica International Delights of America Inc. (OTCQB: HISP) is an emerging producer and distributor of ethnic foods and beverages in the United States. The company is pursuing an aggressive acquisition strategy to grow both its portfolio of brands and to expand its own wholesale distribution network throughout the country.

According to Statista, U. S. retail sales of ethnic foods totaled around $11 billion in 2013, with about half of the sales created by Mexican or Hispanic foods. That $11 billion is predicted to expand to over $12.5 billion by 2018 as people from all cultural backgrounds become more used to the variety of foods offered, and as U.S. ethnic populations grow larger.

In this article, we will take a look at Hispanica International's recent financial performance as it implements the acquisition and growth strategy, as well as the impact the company's recent uplisting could have on the stock.

Growing Revenues 

In July 2016 Hispanica acquired Energy Source Distributors Inc., adding nearly $3million dollars of annual revenue while expanding the company's wholesale distribution channels. Since the acquisition came near the end of the company's first quarter (ending August 31), Hispanica was only able to report a few weeks of revenue from the acquired company in the recently filed 10-Q.

Product sales for the quarter totaled about $650,000 as compared to approximately $130,000 the year prior, a jump of about 400%. Hispanica also provided a pro forma Consolidated Statements of Operations that give a picture of what the revenues would have looked like for the quarter had the combined company existed at the beginning of the period, June 1. Looked at in this way, product sales for the quarter would have risen to just under $1 million, representing a 665% increase over the same period the year prior.

Hispanica plans to continue the brand and distributor acquisition strategy, as well as seeking beneficial licensing arrangements that can add to the company's top line. One interesting effect as the company executes its plan is that the expanded distribution network should act as a multiplier as more brands are brought on board.

The company reported a net loss for the quarter of just over $1 million, as compared to about $25,000 the year prior. Most of this loss can be attributed to professional fees of nearly $600,000 as compared to $22,000 the year prior, and interest and financing costs of about $440,000. These expenses could decrease over the coming quarters as Hispanica settles in with its new financing in place.

Uplisted to Higher Exchange

Hispanica International announced on October 19 that the company had uplisted on the OTC Markets from OTC Pink to the OTCQB Venture Market. The Securities and Exchange Commission considers the OTCQB and established public market, while the OTC Pink has no such designation.

With the increased transparency requirements and reporting standards of the higher exchange comes increased access to brokers and dealers who typically would not trade in OTC Pink stocks. This effect could lead to greater liquidity and awareness within the market as trust in the company is built.

Fernando Oswaldo Leonzo, Hispanica's CEO, stated, "As we focus on building a solid and profitable core business that delivers long-term shareholder value, we believe this uplisting will enhance investor accessibility and serve as a stepping stone to meeting the listing requirements for admission to a higher stock exchange in the future such as NASDAQ."

Looking Ahead

According to OTC Markets, Hispanica International is valued at about $9.6 million with just under 15 million shares outstanding. This could represent a value buy for investors moving forward as the company builds revenues while decreasing some of the costs associated with its recent burst of growth. With ethnic populations growing in the United States, and demand for ethnic foods in general increasing nationwide, Hispanica is operating in a promising industry niche with a lot of headroom.