BP, I only have the most recent Bell Potter report, so I have the numbers from Scott Power (Morgans) but not the narrative. However, I will ask a friend for a copy and post the the summary in a day or two. In the meantime here is the key paragraph as it relates to John Hester's downgrade to his target price.
"Accordingly we have reduced the revenue capitalisation multiple (from 16x to 12x) applied to our capitalised earnings model . The valuation is determined from a hybrid of the capitalised earnings model and a DCF. Valuation is amended from $1.60 to $1. 30 . We retain our Speculative Buy recommendation."
There were some single digit downward adjustments to future revenues. For the DCF section he does not provide either the terminal growth rate or the discount rate he is using, I stand to be corrected but I am pretty sure he is using a market proxy possibly with a small premium for the discount rate rather than Volpara's WACC.
Other things to note he does not forecast any acquisitions, he has Volpara as loss making and cash flow negative in 2022, 2023 and 2024, you can imply from the progress in his CF predictions, that on a runrate basis, he has Volpara turning cash flow positive @4th quarter FY 2024. What is odd (or at least odd to me, as he may have some insight that we don't), he has capital sales picking up again from $ 1.2 million this FY, to $ 3million in FY 2023 and to $4 million in FY24. This is not inline with what we have been told about the direction of travel by management (although it might be where he booking any revenue from genetic test and other partnerships using the platform). Also rather interestingly, if you were to remove these numbers or keep them at FY2022 levels it will blow a huge hole in his profitability and CF projections and delay both by @ 12 months.
For what it is worth, he also shows Volpara holding a debt of NZ$ 2.4 million during this period (from FY21). I think he has made a mistake when he updated his model. I am pretty certain this relates to the loan from the Paycheck Protection Program in the US which was booked as a liability, but has now been forgiven and this should be removed, note the cash was received in 2020/21 and it will have no effect on current cash balances.
On balance there is huge sensitivity in his model both to the rate of sales but also to underlying interest rates. The other thing to pay close attention to is what he classifies as capital sales, they account for a very large proportion of his increases in projected revenue in FY2023 (@75%) and 2024 (50%), so this is something to watch. FYI your quoted CAGR rate for sales growth is massively increase by the two acquisitions the organic rate is below 20% and we will start to see the effects of this stop as we lap the anniversary of the CRA acquisition next month.
