Maria Halasz Share Price Tracker, page-29

Hi Juzzy

Your historical chart of the CDY share price compared with the AllOrds and HealthCare indices is quite valuable. It provides an excellent example of a basic common misunderstanding on which many of the opinions placed on this forum are based, particularly several in this thread.

The two indices each are a measure of the combined market capitalisation of their constituent companies. The HealthCare index, which shows –5% growth over the period shown, is very highly weighted towards high cap blue chips such as CSL, Cochlear, Resmed, Ramsey Health, etc. Most of these have shown significant increases in market cap over the eight years displayed. That doesn’t say much for the performance of the remaining companies such as the smaller biotechs, whose average market caps must have seriously eroded over that time.

Since they measure the same thing, performance comparisons made between two indices are valid. So too would be a comparison of an individual company’s market cap history with an appropriate index. Simple comparisons between an index value and a company share price however, as in your chart, are fundamentally meaningless. If you were to convert your charts to show changes in CDY market cap rather than share price we would all benefit from their weekly comparative updates. I don’t think we need updated charts of the share price alone, which is the only meaningful information that yours contains.

Maria Halasz joined Cellmid (then Medical Therapies) as CEO on 10th April 2007, where your chart commences. The share price closed that day at 20 cents and 55 million shares were on issue. That means that the company’s market cap at that point was $11 million. Under Maria’s stewardship the Company’s market value reached a peak of $33 million in May 2013 (a 200% increase), but has drifted lower to now sit a little below $20 million. This currently represents ca 80% increase in the market value of the Company since April 2007, which outperforms the HealthCare index by about 85%. It must represent a massive outperformance of the average smaller components of that index.

Growth in the Company’s fundamental value under Maria’s watch has been much higher, as noted in an earlier post. This is important, since it is the fundamental value of the business components that will determine the level of any significant partner capital contributed or of any board-approved potential takeover offer. At the moment this apparently lies somewhere between 8 and 30 cents per share, enhanced further by an appropriate takeover premium. Fundamental value therefore is the reason why many have bought CDY shares, although they may not consciously realise it. That is the wealth that is being created by the Company for its shareholders, not the market cap, which is determined largely by those who have little understanding of the underlying business. Until those who do become involved, the share price is not likely to move anywhere near true value.

I realise that some of the above may be an inconvenient truth for anyone pushing an agenda on the HC forum. But this may not really be occurring. Many of the negative opinions expressed I think derive from genuine concerns that the market value of their holdings have not yet increased as had been planned. The only alternative to accepting responsibility for the trade decisions made would seem to be company management. This may simply be due to a lack of financial understanding beyond a fixation with the share price, sometimes combined with a lack of understanding of the nature of the biotech business itself. But then, investing is an adult activity.

Cheers