SMN (ASX) Rain Check

Originally posted by Gilant ↑

This is something I sent to a colleague recently. It might be of use here given the number of comments which appear to be somewhat anxious but it is very rough and ready and not intended to be any sort of professional advice or comment.

Realistic share value of a company is the cash at bank/number of shares on issue. In the case of SMN 4.515m/112m =4c per share
The offer price on the market around $1 per share is therefore pricing in a significant amount for goodwill and the value of the Patents for this technology, however until the 1/4ly reports establish a clear and increasing stream of revenue the share price will not move much as it is all speculation (albeit with solid justification) The recent 1/4ly announcement shows one months revenue from the company SMN bought in December-Anodyne who make the sensor on behalf of SMN

The market expectation 18 months ago was that with the Delta test results a worldwide agreement was imminent and revenue would flow in spades almost instantly. This fuelled demand for the shares of which there are very few in total. Unfortunately that was never a realistic expectation because each individual application for each individual aircraft model has to be approved by the OEM and the regulator in each jurisdiction. In the case of Boeing, Bombardier,Lockheed etc the FAA, in the case of Airbus the ESA (European Safety Authority) and in the case of Embraer the Brazillian equivalent. These regulators tend to tick off each others endorsements so if FAA accept an application for a Boeing aircraft ESA and Brazil will also give it a tick (but only for that aircraft model)

Back at the Ranch, as it were, the shareholders who did not do their research thoroughly jumped on the bandwagon and caused the share price to rocket from around 20c to the high of $2.99 we saw almost 2 years ago.
Since then a lot of them have bailed (good job too) because the promise appeared to be empty - not so, just taking a long time for the reasons above.

The critical issues from that 1/4ly report (previous post of mine) are
1. SMN now own Anodyne Electronics which is profitable
2.Anodyne have their own non CVM products and new products in the pipeline as well as skilled staff
3.Delta have submitted multiple applications to regulators for approval
4.Boeing independently of Delta has identified multiple applications for Civilian AND Military aircraft (significant that an OEM is doing the work for us!)
5.Boeing has 5 applications of the technology from Delta AND South West airlines- so no longer just Delta
6. Other carriers now showing interest
7.Airbus has 4 applications under consideration
8.Delta has SMN personnel reviewing a High Priority application for the Entire Delta fleet (a Major Pain Point for narrow body operators apparently)
9.Revenue from CVM expected late 2018
10.Buy in from OEM-Original Equipment Manufacturers (Boeing, Airbus,Embraer etc) has Exceeded managements expectations
12. Helicopter first move to commercialisation of CVM on rotary aircraft with an initiative involving a major operator of Sikorsky helicopters
13.Key meeting arranged with operator of >200 aircraft
14. Sandia labs meeting with S American OEM early Feb - must be Embraer and will involve Azul and Jet Blue, 500+ aircraft between them
15. SMN expecting to return capital to shareholders 2018/2019 onwards
16.Cash burn is minimal
17.$4.5m in bank
18. Board have stated they are taking a conservative approach to expectations

SMN will be announcing the third quarter trading by April 30 at the latest and that should show a full 3 months revenue from Anodyne and may even have some specific CVM revenue but realistically I expect that in the June and September 1/4ly reports

So you can imagine that getting approval for multiple applications on multiple aircraft types with multiple regulators and aircraft manufacturers takes time. Airlines will not want to install these sensors willy nilly and would prefer to install several at the same time when aircraft are in for heavy maintenance. That is the prime reason the technology has not yet taken off with only one specific application for one specific aircraft.

Hope that makes sense and my view has not changed. Also bear in mind SMN are staring to look at Rotor craft as well as fixed wing plus the potential they are currently ignoring for reasons of resources are all other forms of transport, trains, ships etc, structures like bridges and anything else which has a stress fracture or corrosion potential.

All my own viewpoint and the underlining is mine for emphasis

Expand

Good summary Gilant,

I think things are tracking nicely despite trending share price not reflecting that. I think jimmy you may be right with the management change.

I have a feeling Toby and co will take it to an revenue generating business first (CVM revenue) and can’t help but think Dennis roach and David pittt (however you spell his name) are getting groomed for the roles.

I am currently revisiting all the conference calls to check progress against what they thought 2 years ago would happen.

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(20min delay)
Last 49.3¢		Change -0.043(7.94%)		Mkt cap ! $76.04M

Open	High	Low	Value	Volume
53.5¢	53.5¢	48.0¢	$41.12K	82.90K

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