Firstly I think you have to take the new management teams comments more like the conservative team they are:
1. The margin in June 30.6% Then they state this has continued closer to a goal of greater than 40%
2. June Cash Flow neutral on $2.1 m and 30.6% produced cash flow neutral. Depreciation is only $360K Finance costs were already 600K and the new facility is at much better rates (previous commentary)
So my take on this is that we cannot predict expenses to be straight line - They had those expenses in my opinion to deliver low margin sales. They now have the same resources to sell into a greater margin customer base.
My take is that they are around break even @ $25 million cash flow @ a 30.6% margin. So I expect them to be profitable by virtue of a growing margin achieved as long as they hit the $2.1 million a month. I cannot see the turnover not growing with the Pegasus deal and thus I expect a turnover to deliver a small profit in 2018.
That said I think the downside case that I had which was more CR's and low margin loss making has mostly been erased by what is a very detailed report.
I think it is significantly undervalued and for those that know me I don't this I have posted that more than 5 times in the time I have posted on HC. What is significant well I am happy with my average price a tick below 60c per share. May well buy a few more ...
AJX Price at posting:
44.0¢ Sentiment: None Disclosure: Held
(20min delay)