When people think of the Bahamas, they think of beautiful tropical beaches with the warm, turquoise water, enjoying life and taking in the beautiful island landscape that the Bahamas has to offer tourists.
Since the 2008 recession, Americans are once again choosing the Bahamas as their island vacation destination, in greater numbers. Tourist Arrivals in the Bahamas were 452.60 thousand in August 2015. Tourist Arrivals in the Bahamas averaged 442.27 thousand from 2004 until 2015, reaching an all-time high of 674 thousand in March of 2013 and a record low of 150.30 thousand in September of 2004. Tourist Arrivals in Bahamas is reported by the Central Bank of The Bahamas.
According to tradingeconomic.com, visitors to the Bahamas are estimated to remain steady with around 513,000 monthly through 2020.
In fact, the Bahamas reported that Gross Domestic Product (GDP) for 2015 reached $8.88 billion USD, the highest GDP reading the nation has had in its history. GDP in the Bahamas, which is reported by the World Bank, averaged USD$3.47 billion from 1960 until 2015.However, GDP per capita index for the Bahamas has been in a downtrend since 2002, when the index had reached its all-time high of around $24,000 USD and recently settled at $20,689.63 USD. Overall, 60% of the Bahamas’s economic growth and expansion comes from the tourism and financial services industries, while only receiving paltry GDP contributions from manufacturing and agriculture, which make up less than 10% and 5% of the GDP, respectively.
The Bahamas’ lack of agriculture and manufacturing operations forces the nation to import around 97% of its total food requirement, which in turn sends $1 billion to other nations that provide the food. With tourism being the single most important economic characteristic and despite strength in Bahamas tourism, the country still imports around 95% of their total souvenirs. This totals souvenir imports at around $250 million annually. In addition,and the Bahamas is sitting on fresh water springs that feature high alkaline content. In other words, the water is so fresh that bottling would require only basic filtration, rather than more expensive reverse osmosis treatments. The Grand Bahamas Port Authority (GBPA) owns the rights and controls the water spring access, yet there is no official branded water bottle company in the Bahamas.
One company has been able see the potential economic growth and returns associated with developing the Bahamas: Bahamas Development Corporation (OTC Pink: BDCI).
Overview
Bahamas Development Corporation (OTC Pink: KSTV), formerly known as KSTV Holdings, Inc., is a business-consulting firm that hopes to become a premier recruiting service of bringing businesses and opportunities to the Bahamas. The company will be working with U.S. start-ups or younger businesses that have only been in business for one to three years, in order to establish more tax-friendly operations in the Bahamas. Bahamas Development Corporation (OTC Pink: KSTV) will also be working with Bahamian entrepreneurs and businesses with consulting services to help jumpstart a new Bahamian economy that focuses on greater domestic manufacturing and agricultural output.
Cutting food imports and choosing to manufacture goods in the Bahamas will be beneficial for the Bahamas which, according to the most recent data from tradingeconomics.com, is experiencing 15.7% unemployment and hourly wages of around USD$5.25. In fact with some U.S. cities and States having a $15 per hour minimum wage, the differential provides a significant incentive for small U.S. companies looking to relocate to the Bahamas. The prospect of dramatic savings on wage costs when compared to U.S.-produced items and goods should result in a positive boost to the bottom line.
Companies relocating to Freeport, also have a more tax-friendly environment under the Hawksbill Creek Agreement which provides significant tax advantages out to 2054.
Bahamas Development Corporation (OTC Pink: KSTV): Island Operations and Revenue Streams
As was touched upon earlier, Bahamas Development Corporation (OTC Pink: KSTV)’s primary business is recruiting and syncing U.S. companies into the Bahamas in order to gain favorable taxation, worker wages, and ability to produce same items for less. Under the primary business model, the company will also work with Bahamian entrepreneurs and consult on management, production, cost analysis, and more.
However, Bahamas Development Corporation (OTC Pink: KSTV) has more revenue streams than just the business consulting segment. In fact, the company has three additional revenue streams from island operations: aquaponics, bottled water, and souvenirs.
Aquaponics or vertical farming, as it is also known, features a new method to grow fresh, organic fruits and vegetables on a very large scale. In a country where 97% of the food supply is imported, Bahamas Development Corporation (OTC Pink: KSTV) plans to establish a number of vertical farms that will be able cut food imports by seven to ten percent over the next five years. This helps Bahamian people in multiple ways. Organic produce is freshly grown on the island,and the reduction in food imports helps cut reliance on other nations. It also leaves more Bahamian dollars on the Islands so that provides a stimulus for more spending in the local economy. Not to mention, Bahamas Development Corporation (OTC Pink: KSTV) could be bringing in as much as $100 million in revenue over the next five years, if the company is able to successfully take a 10% share of the $1 billion food import market.
Next, branded bottled water presents a major potential revenue source for Bahamas Development Corporation (OTC Pink: KSTV). As was touched upon earlier in the article, the Bahamas are home to underground fresh water springs that also are high in alkaline content. Despite the fact that the Grand Bahamas Port Authority (GBPA) maintains complete ownership and rights to the water spring, Bahamas Development Corporation (OTC Pink: KSTV) has managed to strike a deal with the GBPA that would allow the company to bottle and sell the water on the island. In a tropical climate that requires one to hydrate, Bahamas Development Corporation (OTC Pink: KSTV) will officially be the first to offer Bahamas-branded bottled water.
Lastly, Bahamas Development Corporation (OTC Pink: KSTV) will help revive manufacturing growth in the island nation through its plan to manufacture souvenirs, rather than importing 95% or $250 million of souvenirs mainly from China. Among the items that the Bahamas Development Corporation (OTC Pink: KSTV) will target first is t-shirts. It is important to note that there is not one t-shirt manufacturer on the island, according to the Bahamas Development Corporation (OTC Pink: KSTV). This provides a local production base which can replace imported t-shirts, and also sets the stage over time for an export business to the U.S. and other countries.
In addition to shirts, the company hopes to manufacture tote bags, towels, hats, cups, key chains, and other items through a factory located on the island that will help provide jobs to locals. The souvenir business alone shows the potential to generate millions in revenue, when considering the hundreds of thousands of tourists that visit the island throughout the year. Just as a quick example, let’s say Bahamas Development Corporation (OTC Pink: KSTV) produces souvenir t-shirts and list their price to wholesalers is $6.00,and around half of the visiting tourists, around 250,000 people, purchase just one t-shirt each, Bahamas Development Corporation (OTC Pink: KSTV) is looking at revenues of $1.5 million, excluding any potential exports to the U.S., or other countries, and also excluding any future acquisitions
Financial and Competitor Analysis
Taking a look at Bahamas Development Corporation (OTC Pink: KSTV)’s financials and competitive analysis, the niche company continues to lay the groundwork for its new business helping to assist commerce and economic growth in the Bahamas. As of July 2016, the business services company has a market cap of $5.93 million and year to date returns of -86.21%. Furthermore, Bahamas Development Corporation (OTC Pink: KSTV) has 250 million authorized shares, 148.2 million shares outstanding, and a float of 36.02 million shares, as of June 2016. During the first quarter 2016, then-KSTV Holdings Co. (OTC Pink: KSTV) reports no revenues and a net loss of $3.03 million. However, as previously mentioned, the first quarter results are a wash due to the fact that the company was transitioning to a new business model and target market.
Being that Bahamas Development Corporation (OTC Pink: KSTV)’s new four-prong business model is so unique and niche, the company has no direct or even remotely close competition in the development of the Bahamas and attracting further business investment to the island nation. However, we can compare Bahamas Development Corporation (OTC Pink: KSTV)’s four businesses (business services, aquaponics, branded bottle water, and souvenirs) individually to help develop a sense of earnings potential for the company’s new venture in the Bahamas.
Huron Consulting Group Inc. (NASDAQ: HURN) specializes in business consulting services and corporate strategy across a variety of industries. The consulting firm has a market cap of $1.32 billion, 20.84 million shares outstanding, and a float of 20.72 million shares, as of July 2016. During the first quarter 2016, Huron Consulting Group Inc. (NASDAQ:HURN) reported total revenue of $197.05 million and net income of just over $6 million.
CRA International Inc. (NASDAQ: CRAI) specializes in comprehensive consulting services to corporations and businesses worldwide. The company consults companies on financial, economic, litigation, management, operations, and other aspects of business development. CRA International Inc. (NASDAQ: CRAI) posts a market cap of $228.11 million, nearly 9 million shares outstanding, and a float of 8.63 million shares, as of July 2016. During the consulting firm’s fiscal first quarter earnings, which ended on April 2, 2016, showed the company had total revenue of nearly $81 million and net income of $2.423 million.
GreenGo Technologies, Inc. (OTC Pink: GRNH) operates in the manufacturer sale of vertical cultivation systems and designs to consumers and industrials farmers. The company entered the vertical cultivation business through its acquisition of Vertical Hydrogarden, Inc. As of July 2016, GreenGo Technologies, Inc. (OTC Pink: GRNH) has a market cap of nearly $18.7 million. Furthermore, the vertical farming company had 500 million authorized shares and 267.5 million shares outstanding, as of December 2015. Also, GreenGo Technologies, Inc. (OTC Pink: GRNH) had a float of 160.4 million shares, as of June 2015. During full year 2015, the vertical cultivation company posted total revenues of $570,000, but a net loss of $3.52 million.
Primo Water Corporation (NASDAQ: PRMW) is a consumer water company that operates in two businesses: self-serve water refill kiosks and bottled water. As of December 2015, Primo Water Corporation (NASDAQ: PRMW) had its bottled water and self-serve water kiosks across 25,700 retail locations in the United States and Canada. The water company posted a market cap of $295.6 million, 25.82 million shares outstanding, and a float of nearly 19 million shares, as of July 2016. During the first quarter 2016, Primo Water Corporation (NASDAQ: PRMW) reported total revenues of nearly $32.3 million and net income of $1.03 million.
Alkaline Water Company Inc. (OTCQB: WTER) specializes in distribution of alkaline water products that contain 84 minerals and electrolytes. Through its Alkaline88 brand, the company hopes to provide an alternative to other hydration drinks and alkaline water companies. As of July 2016, Alkaline Water Company Inc. (OTCQB: WTER) had a market cap of nearly $10.3 million. Furthermore, the water company listed 200 million authorized shares and a float of around 5.72 million shares. During fiscal quarter ending December 2015, the Alkaline Water Company Inc. (OTCQB: WTER) saw total revenues of $1.78 million, but a net loss of $1.1 million.
In short, Bahamas Development Corporation (OTC Pink: KSTV) appears to be undervalued when considering the earnings potential of its business services/consulting segment, aquaponics and vertical farming segment, bottled water business segment, and their souvenir manufacturing segment. The company stands in a niche market that has no direct or closely related competitors and the company’s strong relationship with the Bahamas Port Authority provides significant advantage with having government agency backing.
Overall, Bahamas Development Corporation (OTC Pink: KSTV) could see its market cap expand into the mid-teen millions once the company is able to fully implement its new business model and gain traction over the next year or two.
Outside of direct financial returns, the company is also looking to provide opportunities to the 17% unemployed Bahamian workers, focusing on helping the Bahamas grow, and see their citizens’ standard of living rise.
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