Last year I went to the PGC AGM and it was quite a conservative meeting. Whilst they had strong expectations of new acquisitions happening they pretty much kept the lid well and truly on.
Today I went and it is a very different picture. The board seemed to be palpably brimming with excitement.
On the organic growth side of things:
1. They are pushing the Western Biomedical business into South Australia and expect a similar $20M annual revenue sized business to eventuate. The warehouse is already established. Its all a go.
2. They will also push this same business into Qld.
3. The equipment service & maintenance business has grown from 1% of their revenue to 10% in 12months. They are very optimistic of the surge in growth of this business and see a very strong 2nd half. It is also a great source of market intelligence as their service guys are on the scene in the hospitals getting direct feedback from users.
4. They are seeing stronger seasonality this year than normal (which means the first half could be very modest).
5. The Designs for Vision business has been subdued by the introduction of a new lens but it should be strong from here on. Overall PGC were very confident of this niche in the market.
6. The new in-house hospital bed is ready to hit the market - they had a sample in the showroom - they expect strong acceptance of this product in the market based on pricing and well informed design. Its a business they know well. But it will take time to grow as hospitals only change out beds every 7 years.
The upshot of all this is that the existing businesses are strong. They set the scene with the steady as she goes guidance out today.
PGC described Midas as the 'X factor'. As per the presentation released today it appears a deal is imminent with a global ultrasound company. They bought this IP for $2M and they have spent $1M on developing it further since. So it seems we are getting the X factor for very little downside. PGC suggest that little further ongoing R&D will be required to maintain any market position gained .... (it seems difficult to believe). I am expecting an announcement on this very soon.
Mark Samari's move to acquisitions appears to have been at his own request. M&A seems to be his thing and he genuinely wanted to move away from running the company. The new CEO starts in the New Year and wasn't at the AGM.
On top of that, there was very strong intimation that a large deal was imminent. And this will be Mark Samari's focus. All good if it happens. One of the AGM resolutions was to increase the placement scope to 25% - (they didn't do that last year...). They said any deal would involve a rights issue to shareholders.
To add to the bullishness the Chairman said that they expected to be running at the targeted $250M annual revenue 'run rate' in 12 months time. And the only way they are going to do this is to bed down one or more good sized deals.
I added to my PGC position post the meeting, what more do you want from a company on a P/E of 13?
Cheers
Gosouth
PGC Price at posting:
85.5¢ Sentiment: None Disclosure: Held
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