It is now four months since the CDY financial analysis reported in an earlier thread was undertaken [LINK]. A good deal of useful information has arisen since then that would allow a more reliable estimate of likely future financial progress. Such an analysis is described below.
Key to any estimate is the major distribution agreement into China formed with OHM. Critical Chinese import permits have been received since May, which now will allow Cellmid to obtain full pricing for the Advangen products included in this agreement.
A small first OHM order in January was undertaken in the absence of import permits, requiring the product to be supplied in bulk and packaged in China at OHM’s cost. The average unit price involved of $6.26 therefore would not be representative of prices going forward. That arrangement is likely to have been around half normal price at best, or possibly simply represents supply at cost in order to kick off the distribution process.
The record Japan QVC sales result in June of $1.38M was derived from 80,595 bottles, for an average net price of $17.12 per unit. With both QVC and OHM covering their associated promotional costs this should act as a fair price guide for the OHM distribution as well. In the main analysis reported below a unit price of $12.00 has been used as a conservative estimate.
Recent distribution agreements such as those with Aeon and Pump are seen as just part of continuing growth in the heritage Advangen business. This growth in future has been assumed in the calculations to be 20% pa, which again is a conservative estimate when compared with the 37% pa average growth that has been achieved over the last seven years.
The recent Preliminary Report shows the average gross margin obtained on all Advangen products to be 68.9%. Again a more conservative value of 65% has been applied in the detailed calculations below.
Because of the size of the OHM contract the reported estimates of future profitability are materially affected by the pricing of the Advangen products. With this in mind a sensitivity analysis testing different unit prices was undertaken, as outlined below. While a $12.00 price was used in the main analysis above, I have trialled unit prices of $17.00 (similar to QVC) and $8.00, and a hypothetical situation with no OHM agreement.
It is notable that with the assumptions made, and in the absence of the OHM contract, the Company would just reach operating profitability by the end of this current FY2022, and would not achieve positive earnings (NPAT) until FY2024. With the contract however it should be well earnings positive this financial year.
In each of the different pricing scenarios above I have applied a P/E ratio of 20 to the calculated earnings (NPAT) in order to generate an indicative share price. This metric is close to the current average ASX200 market P/E.
In determining an appropriate P/E to apply in an analysis it is common practice to look for one that best fits with a comparable listed business. The business that I consider to now be most similar to Cellmid’s is that of BWX Ltd (BWX). For comparative purposes I have shown below some details of its financials. Notable is its consistent historical P/E of around 30 or so.
The above should provide some inspiration for those who like to play around with numbers, but also should make a point that the Company’s immediate future is likely to be significantly different from its past.
T7
The above analysis is all IMO. It is not intended as advice and no responsibility is taken for numeric accuracy. DYOR.
CDY Price at posting:
5.2¢ Sentiment: Buy Disclosure: Held
