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Bucha Inc (OTCBB:ABRW) Remains Undervalued

Bucha Inc (OTCBB:ABRW) Remains Undervalued
Written by
Alex Carlson
Published on
July 13, 2016
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Bucha Inc (OTCBB:ABRW) is one of the most exciting and undervalued names we've come across on the OTC Markets. The company just made a game changing acquisition that will vault the company into the big leagues and allow the company to uplist to NYSE or NASDAQ. How many OTC companies are out there doing over $50 million in revenues and posting a gross profit of $10 million? Not many and there's a lot more we like about Bucha Inc, which will soon become The New Age Beverage Corporation.On July 6, Bucha Inc announced that it had completed the the acquisition of Colorado-based New Age Beverages and Xing Tea. The final transaction included a combination of cash and equity totalling $19,995,000 in return for 100% of the assets and interests of New Age Beverages including their brands XingTea, XingEnergy, and Aspen Pure. Bucha Inc was able to complete the acquisition with $10.7 million dollars of debt financing from US Bancorp, the largest commercial bank in the United States. CEO Brent Willis said:

"The transaction from start to finish happened quickly and seamlessly. The overall consideration for the acquisition of $19.9 million and financing of the cash portion of it at 3.7% interest rate is definitely in shareholder's best interests. We are very fortunate to have US Bank as a long-term partner and are excited about the potential of the combination of the businesses. Our focus now is to integrate the operations, expand distribution on the entire portfolio, and drive out costs to further improve our margins and facilitate growth."

The deal included an $8.5 million cash payment, the issuance of common stock in ABRW totaling $6,995,000, and a promissory note of $4.5 million in cash. What we like is that shares took off and the total amount of shares to be issued was based on the Volume Weighted Average Price ("VWAP") for the thirty days prior to closing. The 30-day VWAP calculated to be $1.6066 per share and equated to a total of 4,353,915 shares issued. The higher share price allowed for less dilution to existing shareholders and really made the deal a steal for Bucha Inc and its shareholders.Post issuance, on a fully diluted basis, there are now 20,797,468 outstanding in Búcha, Inc. A formal company name change has been applied for and the new company name, New Age Beverage Corporation is expected to be finalized imminently. Dan Carney, founder of Pizza Hut and the previous largest shareholder of New Age Beverages and XingTea said:

"I am extremely pleased with the transaction with Búcha, Inc, and I am excited to be a shareholder of the new company going forward. I have enjoyed my time helping build the business and am confident that this platform will allow someone like Mr. Willis to take it to the next level. It's why I wanted equity in the new Company, because I am confident the team will make it significantly more valuable and capture the full potential of the business."

The combined company will compete in the growth segments of the Ready-to-Drink (RTD) beverage category. The company currently competes in the RTD Tea segment with its XingTea brand, in the rapidly growing Kombucha segment with Búcha Live Kombucha, and on a regional basis in the West in Functional Waters with its Aspen Pure brand. The company also just launched its new XingEnergy brand, a naturally flavored, GMO free, cane sugar product to begin competing in the Energy Drink segment. The brands are sold in 46 states within the US and in more than 10 countries internationally across all channels via direct and store door distribution systems.Currently trading with a market cap of only $38 million, shares of ABRW are trading at just .7x sales, 3.8x gross profit, and 10x cash flow. When you compare ABRW to a competitor like Monster Beverage Corp (NASDAQ:MNST) that trades at 11x sales and 45x earnings, you get the picture of how undervalued ABRW is compared to its peers. With over $7.5 million in cost savings already identified and a runway for growth, we see ABRW shares continuing to climb. We wouldn't be surprised to see The New Age Beverage Corp as a takeover target from the likes of Monster Beverage, Pepsi or Coca-Cola that need to diversify away from sugary drinks. We will be updating Insider Financial as soon as we know more. For continuing coverage on ABRW and our latest updates, sign up for our free newsletter and get our free eBook as an added bonus!Disclosure: We have no position in ABRW and have not been compensated for this article.

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