I took some profits. Now on a forward PE of around 28 if you assume a $6m profit run rate. Last presentation stated 82 tonnes on order, which is enough to keep them busy for about 5.5 weeks. I am sure more orders are coming through but I thought they would have had more forward orders and it would be nice to see customers ordering further ahead to guarantee supply. Keep in mind the product once received by the customer, then needs to be made up and packaged, which can take a couple of weeks. Having come from this area I know that finished goods orders are normally ordered two to three months in advance and therefore I would have expected them to have at lease 8 weeks of orders at full capacity. This is probably why they are reducing their price, so that they can increase demand and fill the extra capacity they are going to create.
The doubling of capacity won't equal a doubling of revenue as the price is being reduced. I agree that there are definitely economies of scale with larger production runs. So even if they achieve revenue of $16m next year at the lower price, my $8m profit forecast after tax and an increase of expenses as stated by the company, would be an incredible achievement. So a forward PE of 20. Lets hope there are no raw material delays or production line breakdowns.
ANO Price at posting:
$2.83 Sentiment: Hold Disclosure: Held
