broker initiates buy on bct- 50 cents target, page-13

Updated Bailleu report (29 August) is on Bluechiip's website. DCF valuation of 69 cents with a target price of 50 cents. Extract below.

Brett, well done on the strategic alliance with Genetris Corporation.

Look forward to more announcements of sales and strategic alliances with hopefully minimal dilution of existing shareholders.

Good luck to all holders.

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http://www.bluechiip.com/fy12-early-days-baillieu-research/

FY12 – early days
? Headline: FY12 NLAT of A$2.9m versus our forecast NLAT of A$2.5m.
Key variance to our forecast was in R&D costs which increased to A$1.1m (+65% pcp). Revenue contribution was nominal which was expected as it is only in recent weeks that BCT has moved into the commercialisation phase. Naturally no dividend was declared.
? Cash flow: Group’s negative operating cash flow of A$2.2m (FY11: neg A$1.6m) had already been disclosed to the market via the 4Q12 quarterly update. Group had cash in bank of A$515k at FY12, although BCT also has an imminent A$0.9m R&D related tax receivable which is carried on the balance sheet. In addition, BCT has share options outstanding that are largely in the money with varying maturities until August 2013 which would
deliver capital of A$6.3m if converted.
? New contract: Signed customers to date have been the Australian Synchotron and US based biobank ATCC. In addition, BCT has just announced a strategic partnership with US based Gentris Corporation, which specialises in pharmacogenomics (translates pharmacology into
safer more effective medicines). Under the strategic alliance, Gentris will join BCT’s Early Adopter program, which will involve commercial sales – volume and value not disclosed.
? Changes to forecasts: No material changes to forecasts at this time, although we recognise that forecasting risk (upside and downside) remains high given the early stage of product commercialisation.
? Investment view: BUY call DCF valuation of A$0.69 (prev. A$0.68) and price target of A$0.50 (unchanged). We continue to view the logic and applications of BCT’s patented technology and products as compelling.
However, the stock remains somewhat speculative until we have a clearer picture of sales volumes going forward. We therefore have set our price target at a 25% discount to our valuation.