True Picture at market open on 19 Aug 2019, page-19

After reading through the reports, this is my summary and hope it represents the true picture.

Key Salient Points
- Operating cash flow reported at $262k including the prepayment of $1.18M to secure the supply of inventory. Without the one-off prepayment, the proforma operating cash flow is $1.45M vs $1.28M in 2018.
- the lower Q4 revenue is due to capacity expansion initiative. The capacity was doubling to 30T from 15T in Apr
- $491k investment for a new lab, which aligns with the announcement on 9th Jan 2019 for the new product development with the global chemist network
- Continuous expansion in capacity by 2.6x from FY19 to FY20. This excludes the dotted line that presented (up to 889T in Q4FY20)
- The management projected FY20 ZinClear revenue of $28M, ie 2.5x from FY19. I expect a higher ZinClear revenue in FY20 due to higher WIP inventory in FY19 and the improved new high-speed mixers
- FY19 DSO improved to 60.2 days vs 88.4 days in FY18. FY17 was 130.5 days, improved in collection
- A new development on the Battery project: Started the collaboration with The University of Queensland
- Improvement in FY19 revenue reporting by breaking out other income from revenue correctly.
- Under the Sunscreen Innovation Act (SIA), FDA is required by law to finalise and make effective the sunscreens final monograph by November 26, 2019

Areas of Improvement
- $0.8M short on the $2M Alusion FY19 forecast (actual $1.2M)
- Aged AR for > 60 days increased to 70% in FY19 vs 51% in FY18
- FY19 DPO dropped to 36.7 days vs 69.5 days in FY18. An opportunity to drag payment
- Tighten the reporting during the critical periods such as year end
- Missed expectation of some investors who are expecting a better cash position because of dividend payout
- FY19 PE may be considered high at 65x based on the share price of $3.90 and EPS of 5.93c

Subject to different perspectives, with the capacity expansion at 2.6x, the targeted share price can be $3.90 x 2.6 = $10.
A good investment philosophy is to invest in a growing company that focusing its resource and energy on execution.