Opportunity to Buy ProGreen US Inc (OTCMKTS:PGUS) Shares on the Dip?


ProGreen US Inc (OTCMKTS:PGUS) shares were down 16.45% on Tuesday to $0.0139 and flat in after-hours trading. Share prices have been trading in a 52-week range of $0.00 to $0.03. The company has a market cap of $5.35 million at 348.39 million shares outstanding.

ProGreen US Inc is a company that owns and manages residential real estate rental property in the Oakland County, Michigan area. Formerly known as ProGreen Properties Inc, it  is engaged in acquiring, refurbishing and upgrading residential real estate by purchasing residential real estate apartment homes, condominiums and houses in the State of Michigan. Currently, the company is focusing its investments and interest in agricultural land in Baja California, Mexico.

In a press release yesterday, ProGreen US Inc announced that it recently offered a first 300-acre tract of land for lease in Baja California through a joint venture with Inmobiliaria Contel. As CEO Jan Telander explained, they have gotten a lot of offers for an outright purchase of the land ranging from $500,000 to $700,000 but they have decided to lease rather than sell because of new developments.

These developments pertain to the opportunity to acquire an additional 1,500 acres bordering the property at very low costs. Initially investors seemed disappointment over the company’s decision to forego any profits from the sale in opting for leasing arrangements, but this could guarantee sustained income for the foreseeable future.

As announced previously, we have much more water available from the original 300-acre tract than is required for the 150 acres that have been prepared for farming. Our permit application allows for 400,000 cubic meters of water/year, while approximately only 150,000 cubic meters will be required for farming the 150 acres. We will simply pipe this large over capacity of water from the wells we have already drilled to the adjacent land,” Telander disclosed.

Telander went on to explain that leases tend to run for ten years, which means guaranteed cash flow for ProGreen US Inc for that period, likely making up for the costs to acquire the property in less than half the time frame. He said that the company intends to lease the 150 acres of the original land tract immediately upon execution of a contract, providing a temporary solution for power generation to pump the water.  In this arrangement, the lessee for the first land tract can have first right of refusal for leasing the second tract as soon as the land has been prepared and the power and water depositor installation have been completed.

I am very pleased with this new development, as we will be able to leverage the value of this particularly unique piece of land,” Telander added. “We will be able to not only generate a much larger sustainable income stream, but also use the entire installation as a show piece for our future leases, as both of these properties are bordering the main road.”

For now though, it seems that the bearish reaction to the news has offered a nice opportunity to buy on the dips before ProGreen US Inc starts to benefit from lease revenues in the next few years. Many were also surprise to see the stock drop after the news but the steady income should provide a solid base for the company in the longer-run. Leases could start in January and kick off profitable quarters and fiscal years for ProGreen US Inc moving forward.

DISCLAIMER: There is a substantial risk of loss with any speculative asset, especially small cap stocks. The opinions expressed are those of the author, and do not constitute recommendations to buy or sell a stock. Do your own research before committing capital.