i don't like giving advice to people about buying shares but i sent this email below yesterday to a young man who wants to start dabbling. i also suggested to buy Smart Investor or a similar magazine, just to get a feel for gaining an interest in certain companies. its hard trying to help someone that does not even understand PE ratio. EPS and dividend yield. anyway, what do you think of my email
@TwinTurboCelica ??
Example of speculative medical company - PIQ
PIQ is a company with
On 09/06/2015, the share price of PIQ was 20 cents.
The 1st thing that I had to do before buying the share was check:
1. How many shares the company has on issue. This is done by finding the most recent “Appendix 3B” or “Capital Raising” announcement. Therefore, looking at the 1st link above, an “Appendix 3B” was announced on 05/06/2015, here: https://www.asx.com.au/asxpdf/20150605/pdf/42z159mfh6nldh.pdf. Reading the document, PIQ had 18,750,000 shares plus 31,813,453 shares plus 17,500,000 performance rights, for a total of 68,063,453 potential shares. Multiplying 68,063,453 by 20 cents meant the company was worth $13,612,690, which is actually quite cheap for a medical company with a product that is probably commercial and highly needed. With medical company, it is important the technology is needed and practical (rather than too speculative, such as a touted cure for cancer).
2. Check how much cash the company had in the bank, which is found in the most recent half-yearly or quarterly report. In this case, PIQ was newly admitted on the ASX so the financial information was found in the “Pre-Quotation” announcement of 14/04/2015, here: https://www.asx.com.au/asxpdf/20150414/pdf/42xwlbzpncgpy1.pdf The company had $2.9M in current assets.
3. Check how much debt the company had, which is found in the half-yearly & annual reports. In this case, it was also in the above “Pre-Quotation” announcement of 14/04/2015. PIQ had debt/liabilities of $735,586.
Therefore, PIQ had enough cash to operate for the near term. Every quarter the company issues a Quarterly Report forecasting the spending for the next quarter so a shareholder can always check how much money the company has and if the company must raise new capital (money) and issue more shares.
Proteomics secures major contract with The a2 Milk Company
Proteomics secures major contract in Bio-similars market
Diagnostic Test Patent Accepted for Diabetic Kidney Disease
Proteomics granted US Patent for Diagnostic Test
2016 announcements are here: https://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=piq&timeframe=Y&year=2016
2017 announcements are here: https://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=piq&timeframe=Y&year=2017
2018 announcements are here: https://www.asx.com.au/asx/statistics/announcements.do?by=asxCode&asxCode=piq&timeframe=Y&year=2018
A shareholder must check daily for new announcements on a speculative company; in fact every morning and every lunchtime, if possible.
So, updating to the current time, the most recent INVESTOR PRESENTATION is here: https://www.asx.com.au/asxpdf/20181122/pdf/440jqf7fx2b1hy.pdf
On pages 16, 17 and 18 of the presentation, the company predicts it could make US$165 million in the USA, US$65M in Mexico and US$18 million in Spain per year.
On 04/02/2019, PIQ announced its most recent Appendix 3B (https://www.asx.com.au/asxpdf/20190204/pdf/442c5z88nyshng.pdf) showing it now has 80,511,965 shares.
The current share price is 30 cents. So the company is current worth 80.5M shares x 30 cents = $24M.
The company claims it might make US$165 million in the USA plus US$65M in Mexico plus US$18 million = US$248M per year or AUS$300M at a 75 exchange rate.
After $50M in annual operating costs and 30% tax, the company could make US$175M per year or AUS$233M.
The company currently has $2.9 million in cash, here: https://www.asx.com.au/asxpdf/20190227/pdf/4430wqbs5ggff7.pdf
The company hopes to start making money this year. Therefore, it may not have to issue more shares. However, assuming the company will have 100 million shares when it starts making money, in the long term, from USA, Spain & Mexico alone, it could make AUS$233 million or $2.33 per share.
Now, the profit forecasts by the company may be exaggerated however a medical company that makes $2.33 per share in profit per year would be worth at least $35 per share. The potential profit here is 100 times, from 30 cents to $35.
However, if PIQ makes only 30% of the above predication, it would still make $70M per year in profit or 70 cents earnings/profit per share. The share price would be worth at least $10. The potential profit is 33 times, from 30 cents to $10.
At written in the INVESTOR PRESENTATION, PIQ has a deal in Mexico with the Carlos Slim Foundation. Carlos Slim is one of the world’s richest men. https://en.wikipedia.org/wiki/Carlos_Slim
In the USA, PIQ is getting a new larger partner, here: https://www.asx.com.au/asxpdf/20190124/pdf/4421xcfyrhzvht.pdf and here https://www.asx.com.au/asxpdf/20181126/pdf/440mb86sdpmk7m.pdf
OK. So this is one example of a speculative share. The technology is proven and is patent protected. The only question is does the medical industry wish to use it? If a medical product threatens the profits of the big pharmaceutical companies they will either try to sabotage the company (using government regulation) or take it over.
(20min delay)