re: Ann: Appendix 4E & Full Year Statutory Ac... HI Joewolf My...

re: Ann: Appendix 4E & Full Year Statutory Ac... HI Joewolf

My reasons for liking PGC is because of the space it is in, and the 9 quarters in a row of grwoth it achieved before 2 quarter od 11/12 where it slowed stoppng momentum

The last 2 quarters it appears it is once agian oin the up

I like this business for number of reasons

1. All the directors own shares they bought at 20c + , and always subscribe to options exercise and pay themselves very conservatively . They will win if shareholders win

2. I think health care like ramsay health care and others is a growth business , PGC is really well placed for long term growth as the population ages , I have no doubt there is need for larger hospitals and aged care facilities needs to replace beds, equipment and continually update their infrastructure . The govt is also encouraging people to set up the family home with equipment , so more of the aged can get in home help Paragon is very strongly backed by govt in this space

3 The SP dropped from 40c to 20c , as Paragon did have a poor first half 11/12 , and the option pressure weighed heavily on them . That is behind them now and if you read the results , they have reduced debt massively from cash flow and using this money wisely , reduced expenses by over 700k in the 2nd half from restructring their cost bases , and it seems with big contract wins , are well placed to resume what had been very strong growth since moving in to this sector in 2009 by acquiring a number of smaller providers , and consolidating them in to one total offering

I have been in the stock for a long time , and with my broker met the CEO and chairman a few times ,

I expect the next 18 months will be the time PGC will move from a small busines to a medium one and start to see the SP rise again .

They now have 1600 different products as you can see on their web site ww.paragoncare.com.au

The products are big ticket items , ie premium beds ,equipment not small items that are like $2 a sale . and if the best hospitals are now buying their product I sense that means their products are premium .

The sost of consolidating the 5 premises to 2 in the previous 12 months at a large one off expense has hurt the numbers but with big long term savings, their success in winniing several large clients, ie alfred, royal childrens , Mercy , Pter macc , dept of health services just to name a few for long term contracts of supply i think they are sitting ready to go to a new level .

The critical mass is now achieved .

My guess on the numbers are

Margin on revenue approx 40% ,


Fixed operating costs appear to be about $5m (so they need a minimum of 12.5 m revenue to break even on ebit )

At 16m the ebit was about 1m


If they move to $20m revenue my target in the short term they should earn 8m gross and be close to a $2m ebit , I can see a multiple of 10 on the 2m ebit , ie market cap $20m

AT 6m market cap I cant see the downside although I admit the 20m might take a year or so to eventiate

i also think at a 20m market cap, and a business in the rigfht sector they would attract instos where at 6m they probably wont


I think a pe of 10 is high , however I I dont expect the 20m to be anywhree near a good long term revnue result, I see this as just a stepping stone to go towards 50m revenues over the next 3 years as they stated was their ambition in several presentations

With 33 m shares on issue the current market cap at 20c is $6.6m , imo is low and the pressure from ops , small set back last year , and a general apathetic market gives me confidence that it is more liley to go up 100% than down 25%

Just my opinion Joe wolf , I hope it explains my though process