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Bevo Agro Research

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By dquinton

Posted: Wednesday Jan 7 12:26:06PM 2004

A research report on Bevo Agro was issued today by Fundamental Research Corp. with a target price of $0.95. The information is presented below: Fundamental Research Corp initiates coverage of Bevo Agro Inc. (TSX Venture: BVO) with a “Buy” rating and assigns a fair value of $CAN 0.95 (most recent close: $0.60) A link to the full 13-page PDF report follows at the end of this message. Here, we note the following investment highlights from the report: - The company is in a unique industry position as the only pure plant propagator in North America. It supplies plants to greenhouse and other growers which optimizes their yields. -Strong fundamentals continue to drive vegetable consumption in North America which should drive demand for Bevo’s plants. One of the factors that we believe will continue to drive demand for vegetables is the trend towards healthier living reflected in practices such as the Atkins Diet. Per capita vegetable consumption in the United States has increased from 360 pounds in 1971 to 437 pounds by 2002. Similarly, tomato production in Canada has grown at a compound average growth rate of 11% from 3.5 millions pounds in 1951 to 480 million by 2002. -Our fair value on the stock is C$0.95, derived from comparing the EBITDA multiple of the recent Hot House (TSX: VEG.U) income trust IPO to Bevo’s current multiples. This implies an expected return of over 60% from the company’s most recent closing price of C$0.60. - Bevo is undervalued based on Hot House comparable EBITDA multiples and market P/E’s. The company trades at only 5.59 times EBITDA versus 6.77 times for Hot House. We think Bevo offers good growth potential at very attractive valuation levels for investors. Bevo trades at a P/E of just 6.7 times versus 37.49 and 19.20 for the TSX/S&P Small Cap and Market Composite respectively. Please read the important disclosures and disclaimers at the back of the 13 page PDF report which is available by clicking:

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