Copied and pasted from the OptiBiotix thread. A few thoughts about this start-up company.
Why is it taking so long for OptiBiotix to strike a deal with a multi-national?
In a way, Nanoco's "exclusive" deal with Dow Chemical is a excellent reference point. When the deal was announced, it was too much excitement and the SP duly shot up on general euphoria. However, the share price has since come back to earth with a bump and the "exclusive" deal is now a "non-exclusive" deal.
This line from Nanoco's August trading update tells you a compelling story,
"The Company has received notification of its royalty payment from Dow for the quarter ended 30 June 2016 and, although modest, it is higher than the first royalty received earlier this year."
The big companies call the shots.
Think about OptiBiotix and the Slimbiome technology platform for instance.
Let's say that Opti want a licensing deal with a multi-national. The multi-national will feel it is taking all the risk. Why should the multi-national do all the marketing? i.e. convince consumers that the products are safe and indeed do what they say on the tin. It's not as if there aren't thousands of dietary products or (so-called) cholesterol busting products already out there. They might like the technology but they're not going to spend multi-millions in marketing and offer Opti a big slice of the pie. Why would they? There's already plenty of diet shakes and bars out there already, and there will be plenty of rival technologies.
That's why I believe that they've cut a deal with the Healthy Weight Loss Company for GoFigure, and taken a 51% stake. A small company where OptiBiotix will be stumping up cash for marketing but taking a bigger share of any revenues.
Howvever, if you google diet bars and shakes I'll bet you'll get literally thousands of pages. See if you can locate GoFigure? Marketing spend will be horrendous to get even decent sales in an overcrowded market.
They are not providing a must have technology. In fact, a Mediterranean diet will be far healthier in the long run, far tastier and a fraction of the cost. Indeed a healthy Mediterranean diet is better than statins for reducing cholesterol.
In short, you can apply the same principles to all their technology platforms. They are not "must have" technologies, and hence if they are trying to cut deals with multi-nationals then the multi-nationals will be playing hard-ball and that's why it's taking so long.
If any deals do crop up then the devil will be in the detail. Don't get overly exuberant and expect lots more cash raisings in the months and years to come before they (if they ever do) reach meaningful revenues (never mind cashflows or profits). A £50m market cap. is too large a valuation at this point in my opinion.
Wednesday 5 October 2016
Saturday 1 October 2016
Avesco - massive upside potential
Following Friday's late news from Avesco i.e. the sale of Presteigne for £5m cash, I've done a quick bit of maths this morning to try and find a fair valuation for the newly streamlined business going forward.
Last year the figures were as follows:-
Creative Technology made a operating profit of £8,699,000 whilst Presteigne made an operating loss of £3,279,000.
Stripping out the operating loss but keeping finance costs, a small loss at mclcreate and the tax expense the same, it gives us a picture of possible earnings for the streamlined group going forward.
Without Presteigne then operating profits for the group would have been £5,633,000 or 30p per share putting the group on a p/e ratio of 10 (2015 figures).
The trading profit would have been even better at £6,776,000 (that includes all of the above deductions) or 36p per share (p/e ratio 8.75).
Given that CT is growing rapidly, and finance costs should be substantially reduced then a p/e ratio between 15-20 is fair imo.
On last year's figures alone that gives fair value of £4.50-£6.00 for operating profits or £5.40-£7.20 working with trading profits.
A further favourable factor includes exchange rate gains (a big slice of CT's profits are generated in the US).
Remember that these figures are based on last year's results and CT is a growth company, and hence I think it's reasonable to assume that results will continue to improve significantly.
Clearly there is massive potential upside in the share price which ever way you look at it.
p.s. A key driver will also be their ability to sustain their progressive dividend policy, and based upon the above projections this is pretty much assured. They clearly have the cash to pay special dividends as well if they so choose.
Now I've had chance to look back at the figures, I'd be very disappointed if a sale of the whole group was eventually made for anything less than £8+.
Last year the figures were as follows:-
Creative Technology made a operating profit of £8,699,000 whilst Presteigne made an operating loss of £3,279,000.
Stripping out the operating loss but keeping finance costs, a small loss at mclcreate and the tax expense the same, it gives us a picture of possible earnings for the streamlined group going forward.
Without Presteigne then operating profits for the group would have been £5,633,000 or 30p per share putting the group on a p/e ratio of 10 (2015 figures).
The trading profit would have been even better at £6,776,000 (that includes all of the above deductions) or 36p per share (p/e ratio 8.75).
Given that CT is growing rapidly, and finance costs should be substantially reduced then a p/e ratio between 15-20 is fair imo.
On last year's figures alone that gives fair value of £4.50-£6.00 for operating profits or £5.40-£7.20 working with trading profits.
A further favourable factor includes exchange rate gains (a big slice of CT's profits are generated in the US).
Remember that these figures are based on last year's results and CT is a growth company, and hence I think it's reasonable to assume that results will continue to improve significantly.
Clearly there is massive potential upside in the share price which ever way you look at it.
p.s. A key driver will also be their ability to sustain their progressive dividend policy, and based upon the above projections this is pretty much assured. They clearly have the cash to pay special dividends as well if they so choose.
Now I've had chance to look back at the figures, I'd be very disappointed if a sale of the whole group was eventually made for anything less than £8+.
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