For any share you own, we often compare it to other stocks to get a sense of comparative value. I've tried to put together a few stocks I've been looking at recently that are similar in concept, similar in life cycle stage, to try and determine how AHZ compares. This is all IMO only but forms the basis of my investment thesis. I don't vouch for the validity of the numbers as lots of copy paste from lots of annual reports. Ie DYOR.
I'm going to compare several Stocks AHZ, RAP, OBJ, OCC, PNV. Firstly lets look at the baseline AHZ as this is the AHZ forum. I don't mean to cross promote but hard to compare if you don't and I hold OBJ and AHZ as of present.
AHZ
|
Column 1 |
Column 2 |
Column 3 |
| 1 |
|
2016
|
2017
|
| 2 |
Market Cap / Share Price $
|
$64M
|
$68M / $0.31
|
| 3 |
Revenue
|
14.1
|
$22.30M
|
| 4 |
Revenue Growth
|
|
58.00%
|
| 5 |
Gross profit
|
5.1M
|
10.7M
|
| 6 |
Profit
|
-25.1M
|
-12.6M
|
| 7 |
Costs
|
|
|
| 8 |
EPS
|
-12.6c
|
-4.9c
|
| 9 |
Accumulated Losses
|
$68M
|
$80M
|
Ok we all know about AHZ – but this is the benchmark I want to compare against to try to determine if the market cap is under valued, over valued or about where it should be compared to others, or even to just highlight some crazy discrepancies in the market overall.
The upsides to these figures are
1. Growing Markets which are real. Up and till this year, AHZ was really only getting revenue from USA and MENA and only from Cardio. Europe is only just starting. India starting Feb. Neocel and vascucel released start of 2017.
2. Growing Unique products which are real. Up and still start of 2017, we only had Cardiocel. Now we have Vascucel, Neocel. 3D has finished its trials very successfully and ready for full launch in the USA in February 2018. TAVR is a $5B market and the AHZ TAVR device a game changer which will redefine the cost model of how operations are done – quicker, cheaper, safer with a better outcome. And all IP is now filed. I've held it, touched it and seen it. Next products will be even more unique and high margin products such as Vascucel3D assuming they can develop.
RAP
Firstly I just want to say I like this technology concept. I think great technology, however I never invested. Firstly, Resapp has no revenue. The initial trials were poorly executed but the re-trials better prepared to achieve more reliable results – I believe recruitment still in progress. Its value appears to be purely based on imagined blue sky. I say that because even though I researched this share for quite a while, I still can't find any real prediction of revenue or their revenue model. I don't even really understand how they intend to “sell or license” it and what the uptake would be. I decided not to buy in the mid 30's even though our mates at Morgan's said it was a high conviction buy and to sell AHZ. Firstly its market cap already seemed to include HUGE blue sky so all I could see was downside for a few years until real income started increasing. IMO – Morgans who preached this didn't really appear to understand the revenue model either, the risks, the downside or the upside. I will keep looking at RAP though because at present its probably fair value. The technology is cool but would only invest when I understand the real income potential. At present I don't but this could change and is still worth keeping on the watch list IMO
|
Column 1 |
Column 2 |
Column 3 |
| 1 |
|
2016
|
2017
|
| 2 |
Market Cap ($M) / Share Price $
|
$250M / $0.39
|
$49M / $0.075
|
| 3 |
Income
|
$85k
|
$1.3M
|
| 4 |
Revenue Growth
|
0.00%
|
0.00%
|
| 5 |
Gross profit ($M)
|
-3.2M
|
-10M
|
| 6 |
Profit
|
0
|
0
|
| 7 |
Costs
|
3.3M
|
11.3M
|
| 8 |
EPS
|
-$0.65
|
-$1.65
|
| 9 |
52 week high
|
$0.55
|
$0.39
|
| 10 |
Accumulated Losses
|
$11.4M
|
$16M
|
Hence in this case, I believe AHZ at this stage has better guidance and determinism in its approach to growing revenue. I can understand the business model easily. The trials of the technology are completed. At this stage, IMO I would consider AHZ to be ver under-valued when compared against RAP. I do however keep a close eye on RAP for a potential breakout but won't invest until I understand the revenue business model.
OBJ
I'm a fan of OBJ – I like the technology and concept and IMO I think a profitable business model as long as they can keep innovating. Basically using tuned magnetic dipole forces to push / repel molecules consisting of active ingredients through barriers such as skin. Great for cosmetics, surface hygiene, or perhaps pushing pain relief or vitamins or minerals to areas they are needed in the body (ie knees) without having to suffer first pass digestion which increases dosage requirements. Royalties are easy to understand and being something physical I can see and touch it and have seen products on shelves going through airports. IP is great. OBJ IMO is in a very similar life cycle and pain stage as AHZ. Its had several years of people expecting instantaneous HUGE revenue (sound familiar) with overvalued market cap (sounding very familiar) but when OBJ started getting first revenue this year, the share price got punished to perhaps slightly under a real valuation. The share price has bounced of IMO unrealistic lows of 3 cents to about 4.5 cents at a similar time to AHZ which has . Big issues revolve around confidentiality with some of the worlds biggest companies such as Proctor and Gamble. Directors said “revenue would start as a trickle but quickly build up to a Tsunami”. OBJ are just passing the trickles stage and are now getting higher value, higher volume products to the market.
Growth opportunities are Bodyguard and Surface Hygiene which have potential to be 100M or billion dollar products but still lots of unknowns. Testing in both is at advanced stages but appears to be dragging on. I think similar to Cardiocel 3D where we all expected revenue ramping up before trials had finished a few months ago. Trials always take longer than you think.
|
Column 1 |
Column 2 |
Column 3 |
| 1 |
|
2016
|
2017
|
| 2 |
Market Cap ($M) / Share Price $
|
$200M
|
$83M / 4.6c
|
| 3 |
Income
|
1.5M
|
1.95M
|
| 4 |
Revenue Growth
|
|
30.00%
|
| 5 |
Profit
|
-$3.5M
|
-$3M
|
| 6 |
Costs
|
$5M
|
$5M
|
| 7 |
EPS
|
-$0.20
|
-$0.17
|
| 8 |
52 week high
|
11c
|
8.1c
|
| 9 |
Accumulated Losses
|
27.8M
|
30.8M
|
I guess the comparison here is that OBJ has significantly less revenue that AHZ at this point in time. Revenue growth is significantly lower at this stage but the issue is no one appears to know what it could be due to AMAZINGLY annoying confidentiality clauses. There is a feeling that OBJ can and should be much higher (which is why I am invested) but there has been limited or no guidance from management unlike AHZ. Hence in this situation, I think as a comparison and IMO AHZ is probably slightly undervalued when compared against OBJ. I think both stocks show amazing potential but AHZ its a little more obvious how to achieve it.
OCC - Orthocell
I've only just started following so still learning about the technology and company.
Orthocel have a “celgro” scaffold for Tendons, bones, cartilage, peripheral nerves.
They also have a product called Ortho-ATI for regeneration of Tendons. It appears unique and differentiated and able to solve problems with tendor repairs can't.
They have collaboration with Johnson and Johnson for tendon repair. The markets are large Addresses markets worth $10B p/a. There is potential for growth if the product can win large market share. At this stage I can't find anything on Gross Profit margin but even 20% GPM of 10% of the market is a really good number.
From what I can see the market is very large. An example is their presentation states 1.5M procedures for Dental at $0.6B, Tendor Rotation Cuff 460,000 Procedures at $0.9B, Tennis Elbow 1M procedures at $4.3B. Looks like a high volume lower margin product than the CC family
FDA approval expect Mid 2018. Products are available Australia, New Zealand, Hong Kong and Singapore. Has recently commence treatment of 1000
th patient.
|
Column 1 |
Column 2 |
Column 3 |
| 1 |
|
2016
|
2017
|
| 2 |
Market Cap / Share Price $
|
|
$39.1M / 38.5c
|
| 3 |
Revenue
|
$1.18M
|
$1.07M
|
| 4 |
Revenue Growth
|
|
Zero of negatve at this stage.
|
| 5 |
Gross profit / Loss
|
-$3.8M
|
-$4.2M
|
| 6 |
EPS
|
|
|
| 7 |
52 week high
|
$0.99
|
$0.51
|
| 8 |
Accumulated Losses
|
$15.5M
|
$19.7M
|
So from what I can see, OCC IMO appears about 2-3 years behind AHZ in terms of FDA approvals and actually getting products to market. As per the AHZ journey, we know lots can wrong or delays and although the markets this product will compete in are large, the journey is just starting. Like AHZ, you need sales people to sell it and we know that is expensive. There is cash burn here – not a lot but enough to erode the cash balance within the next year or so. Cash at bank was about $5M and wages expenses are about $4M alone let alone R&D so I would think a capital raising of some form might be necessary. For these reasons I think AHZ is fairly valued compared with OCC as in AHZ is valued higher, even perhaps a little low considering the head start AHZ has. Now on saying this, I have no idea how fast the OCC uptake will be. Again a cool technology and not many shares on issue and collaborations with companies like Johnson and Johnson may speed up market penetration. At this sage OCC is on my watch list and I'll wait until first real revenue and markets become obvious. I think at least a year away.
PNV - Polynovo
I've looked at PNV a few times but haven't got in yet but I like the concept. Novosorb was developed by the CSIRO around 2004 (another great invention by that great Australian institution). Its a polymer that is purely synthetic, no organic remnants, no risk of rejection, no cross species risk. Similar to the Cardiocel adapt process – just totally synthetic. PNV make a Biodegradable Temporising Matrix for treatment of burns or full thickness wounds where there skin doesn't exist. Basically a scaffold for a skin graft as I understand.
Available so far in Australia, South Africa and New Zealand so small markets so far but potential to grow to much bigger markets of USA, Europe and Asia in the future. In particular, it appears as though there are 25 hospitals in the USA doing trials read for the purchase or approval process. This presents interesting upside for growth in the next 1 – 3 years. Although having a great product to sell doesn't mean it sells itself – initially anyway!
One interesting thing is PNV are developing products for Hernia Repairs. This is something that's been asked several times for AHZ. The only reason I can understand AHZ hasn't done this is because its not as high mark-up with lower gross profit margin. PNV are also developing products for Bone Void fillers and breast sling development. Ok – so similar to AHZ lots of products being developed off the the initial concept.
|
Column 1 |
Column 2 |
Column 3 |
| 1 |
|
2016
|
2017
|
| 2 |
Market Cap / Share Price $
|
156
|
$118M / 41.5c
|
| 3 |
Revenue
|
2.5M
|
3.6M
|
| 4 |
Revenue Growth
|
|
45.00%
|
| 5 |
Gross profit / Loss
|
-$3.3M
|
-$5M
|
| 6 |
EPS
|
|
-$0.89
|
| 7 |
52 week high
|
|
$0.43
|
| 8 |
Accumulated Losses
|
|
88M
|
| 9 |
Cash in Bank
|
|
$27M (recent cap raise)
|
Ok – so the numbers are great. The revenue is about 15% of AHZ revenue. PNV made a bigger loss this year than last but revenue hasn't increased to compensate. The share price is sitting at a multi-year high which is nice. From what I can deduce the markets they are going into don't seem to have the high gross profit margin or value the Cardiocel family does.
Revenue this year is about $1.75M as of 15
th November already so already half of last year's revenue with 7.6 months to go and a growing sales team
The markets PNV are in are for Burns ($800M+), and developing products for Hermia ($1B+), Breast Slings ($2B), and Bone Void filler ($2.3B)
Compared to AHZ – well AHZ revenue is $22M compared to PNV $3.6M. AHZ costs are also higher but appear under control having decreased by 25% last year with 58% increase in sales, and are being confidently predicted now and have decreased dramatically since new management took over. The recent steady rise in PNV share price is interesting and indicates positive sentiment which is great – likely due to sales that are increasing off a low base. IMO I don't see any further cap raises in PNV's future thanks to a recent cap raise and growing revenue. I think PNV market cap of $118M includes a small amount of blue sky, similar to say the AHZ TAVR but IMO I think its solid.
Again I really like PNV as a great technology and its on my watch and I think comparable in value and technology to AHZ right now. I've told myself I'll buy in the future when I'm convinced of their revenue growth although time to buy might have been 3 months ago. I think if you are are holding now, its a great long term investment.
So after this – what is the potential.
IMO AHZ rates a lot higher than RAP, slightly higher than OBJ, slightly higher than OCC, Similar to PNV but with higher revenue right now and predicted to grow at higher rates this year.
If you were going to extrapolate then I would say compared to other companies our fair value market cap could be somewhere between $100M to $150M as of today, taking into account growth opportunities, known markets just opened, know products just about to come to market. At present we are about $75M. Its a rough figure and only IMO.
The potential for me is something in excess of A2M. At present this company has a market cap of 5.2B off sales of $550M with net profit of $90M. This is where AHZ could probably be in 5 years or more if things go slowly or 3 years if things go BOOM. In 5 to 10 years, who knows.
Anyway, GLTAH and DYOR
Cheers
David
(20min delay)