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@wombat777
Thank you for your brilliant and in-depth analysis. Like many of the MSBers here, this company occupies a space in our hearts and also has a place in our current or future retirement plans. Retirement is also the time and place for many of us to serve the greater good, over and above MSB saving many lives.
This weekend, most of us are reflective, emotionally drained, and having more than the odd cleansing ale! And no wonder, because we can finally see Day One of a new commercial enterprise (or the break even point). Which brings me to the question/issue that your analytical mind might latch onto (I'm hoping anyway).
Your analysis starts with revenue from royalties in the various spheres of operation, down to the earnings per share (EPS) and what the P/E ratio might be. Could you consider some of the following points which concern that royalty revenue dropping below the EPS into dividends?
As a starting point, I think the current annual outgoings are about $500m. Even with 25 new operational staff across the US in sales and marketing, it's hard to see those fixed costs going up to $600m.
A business with revenues based on royalty, is very unlike an airline which has huge capital and running costs. This is the case whether it's in the air or grounded, as certain shareholders will be finding out soon when they get tapped for cash. Every plane takes X amount to get into the air, so the best they can do is cram all their customers in.
The point here being that MSB, after getting to break even point, the next $500m in US revenue might result in a 10 cent dividend, but the $500m after that might result in a 45 cent dividend, and so on. There will still be extra costs to the business, for sure, like the Osiris out-earnings, but they won't be the airline equivalent of putting another plane into the air. In other words, they won't grow in the same proportion as revenue.
Opening European markets will definitely require new staff but once that's done, the exponential return on investment begins again.
All of that is a long-winded, and roundabout way of asking the question about whether you have considered charting the estimated dividends vs revenue on a graph, as the X-axis goes through in $500m increments and the y-axis marks the estimated dividend for each revenue point up to the magical $1.00 dividend and beyond.
If this pandemic has taught us nothing else, it is that nothing ever works on a straight line analysis and the exponential curve of dividends vs revenue in a royalty based company might well be one of the things that turns the sights of many shareholders to the long-term (in the same way we committed MSBers are).
That's it for my Saturday reflection. Enjoy the celebration, relief, joy, vindication, euphoria etc. and STAY SAFE!
(20min delay)