Originally posted by vestro
Sorry for the slow update from my end. I was given a Robert Timms coffee bag as a Brisbane parting gift - I think it was spiked!
The meeting was yet another reminder of just how good this company is now that we have three quality businessmen at the helm.
Comments from me and some takeaways from the meeting:
Trading Result
An incredible result of $850k profit for only July to October. The key for me was understanding whether we were entering into any slow down which is not the case. I was told they haven't even been able to get around to fulfilling the AU peak season orders yet. Last year AU revenue was $1.6m so you assume the bulk of that comes around this time which will add to revenue for November/December to top off the 1H result for FY19. Yet again, profit continues to grow at rates of 100%+ and they are only just getting started. The company is looking very undervalued just on pure fundamentals yet again there are no signs of slowing growth it just keeps compounding!
Production
They are making smart calls - setting up this company for the now and the future. This is no longer a scrappy business, but a business that is taking on the biggest players in the world. They are talking about market share in the US - and wanting to dominate. Yet, look at the cleverness - we have multiple manufacturing facilities, labs and storage facilities and we're paying $120,000 less than we were last year? We are in great hands.
The ovens are progressing nicely, which ramps up powder capacity to 1000T now (prev they were saying 800T which was already great).
Distribution
There was talk about the new European/French reseller, Unipex who replaced Masso recently. Apparently Unipex is already locked in to an exclusive agreement with an ANO competitor until June 2019 which is why they have only been able to enter a non-exclusive agreement with us. However, Unipex love and prefer the ZinClear product and so are currently in the process of formulating new end-products for their customers using ZinClear in anticipation of the expiration of their supply agreement with the competitor in June where they will sign up with ANO and volumes should dramatically ramp up at this point. Given EU revenues for ANO have only ever been around $300k there is a huge opportunity for growth here once this kicks in. EU has previously been estimated as 2-3x the market size of USA which is where the bulk of our revenues come from currently. The board made the comment that "Unipex are already shipping quite a bit" - so I expect these volumes will add some immediate huge revenue upside for us.
ZinXation/OEM Products
They appear to be making great strides here and setting up the company to be a major leader in this space. The talk of the 3 new products were referred to as "world first" products (e.g the SPF50+ acne cream) - made by 2 of the best chemists in the world -
Mark Chandler and
Julian Hewitt - who are currently key members of ANO's chemist network and contributors to supporting and selling in ZinClear around the globe to some big brands. These guys travel with Geoff when he visits major customers and distributors as experts in formulation - they are almost like our own in-house team but they are working the global markets.
Reef safety
They made some comments about having high level meetings about reef safety and working with the appropriate authorities to get ZinClear product as the choice of sunscreen in Australian reefs. They talked about discussions being had with Great Barrier Reef Foundation who received $440m from Australian Government in grant funding recently. There's some serious opportunity here they are taking advantage of.
Capital Raising
The board outlined in great detail why they were doing this - Lev commenting that it was (unlike most capital raisings) a sign of their good fortune. The company is working 24/7, triple shifts to make product to meet demand - which they believe with some extra automation and some extra equipment will allow them to generate significantly more revenue by lifting this capacity - especially looking to the future.
The alternative of short term bank financing was discussed, but the board felt bank financing is difficult in the currently financing environment and had some restrictions they didn't need, particularly limiting their ability to pay dividends. They said the capital raising would allow them to get the equipment now (as they plan to wrap it up before the end of the year) and still be in a position to pay dividends in the near future. Given we have Lev, it is likely a fair amount of un-interested shareholders will not take up the rights issue and Lev (and others) will oversubscribe. I totally agree it's the right move, and the dilution is pretty insignificant if you do not participate. My calculation is they will issue 1.8m shares, which is not even as much as the UWA buy back took away (yet will raise a boatload more cash) and is also less dilution than if Lev himself took options (or a salary) as part of his remuneration (which continues to be NIL. Find me another board with a volunteer Chairman!). All in all, the chatter about dividends was serious, and they have a well thought out strategy about how to accelerate growth without harming shareholders. They are very confident about accelerating the profit growth, if it wasn't fast enough for you already at the current pace!
QLD Government Investment
There was also some interesting chatter about the QLD Government grants, which are happening at some high profile meetings - talking directly with Ministers about investing in nanotechnology for QLD. I think the capital raising is a good look in that scenario if you have your hand out to Government asking them to chip in for you to grow. It's a perfect strategy. We aren't talking $10k here and there, but million dollar+ investment by the state to cement nanotechnology development in Queensland.
Merck/Alusion
It sounds like Merck continues to go gangbusters. They are talking continued growth at similar momentum. They are still airfreighting product to keep up (but need to move to container loads) - Merck are asking them to create and store 20T of product once they can catch up. They speak about being able to double Alusion production by early 2019 which should help them significantly grow further in 2H 2019.
Battery Tech
The other major chatter that is not made fully clear from the release alone is that this battery technology we are sitting on is not as hocus pocus as you might think. It's serious. They're taking it seriously. They were talking about wanting to scale their graphite production process to be in a position to make "a few hundred" full scale batteries for testing. The small scale tests in the lab were so promising, according to Lev they would be foolish to not progress it. The overall summary was they believe they can produce a solar house battery that is cheaper than competitors, non-combustible (as opposed to typical lithium tech) and has a usable life of 20 years (2x norm). They have a perfect platform with ties in to Dixon Homes and AstiVita to test and get it to market if needed. How to value this part of the business, I have no idea - but they are treating it like there is something worth a bit there.
Ultimately, I can't believe how great things are going. The results are exceeding my (already high) expectations. I truly believe you can sit on this over the next few years and expect to experience incredible profit and share price growth.
They are building a company here that is already competing with billion dollar players and winning. This will easily be a several hundred million dollar business soon in my eyes if not, much, much more.
Originally posted by vestro
Sorry for the slow update from my end. I was given a Robert Timms coffee bag as a Brisbane parting gift - I think it was spiked!
The meeting was yet another reminder of just how good this company is now that we have three quality businessmen at the helm.
Comments from me and some takeaways from the meeting:
Trading Result
An incredible result of $850k profit for only July to October. The key for me was understanding whether we were entering into any slow down which is not the case. I was told they haven't even been able to get around to fulfilling the AU peak season orders yet. Last year AU revenue was $1.6m so you assume the bulk of that comes around this time which will add to revenue for November/December to top off the 1H result for FY19. Yet again, profit continues to grow at rates of 100%+ and they are only just getting started. The company is looking very undervalued just on pure fundamentals yet again there are no signs of slowing growth it just keeps compounding!
Production
They are making smart calls - setting up this company for the now and the future. This is no longer a scrappy business, but a business that is taking on the biggest players in the world. They are talking about market share in the US - and wanting to dominate. Yet, look at the cleverness - we have multiple manufacturing facilities, labs and storage facilities and we're paying $120,000 less than we were last year? We are in great hands.
The ovens are progressing nicely, which ramps up powder capacity to 1000T now (prev they were saying 800T which was already great).
Distribution
There was talk about the new European/French reseller, Unipex who replaced Masso recently. Apparently Unipex is already locked in to an exclusive agreement with an ANO competitor until June 2019 which is why they have only been able to enter a non-exclusive agreement with us. However, Unipex love and prefer the ZinClear product and so are currently in the process of formulating new end-products for their customers using ZinClear in anticipation of the expiration of their supply agreement with the competitor in June where they will sign up with ANO and volumes should dramatically ramp up at this point. Given EU revenues for ANO have only ever been around $300k there is a huge opportunity for growth here once this kicks in. EU has previously been estimated as 2-3x the market size of USA which is where the bulk of our revenues come from currently. The board made the comment that "Unipex are already shipping quite a bit" - so I expect these volumes will add some immediate huge revenue upside for us.
ZinXation/OEM Products
They appear to be making great strides here and setting up the company to be a major leader in this space. The talk of the 3 new products were referred to as "world first" products (e.g the SPF50+ acne cream) - made by 2 of the best chemists in the world -
Mark Chandler and
Julian Hewitt - who are currently key members of ANO's chemist network and contributors to supporting and selling in ZinClear around the globe to some big brands. These guys travel with Geoff when he visits major customers and distributors as experts in formulation - they are almost like our own in-house team but they are working the global markets.
Reef safety
They made some comments about having high level meetings about reef safety and working with the appropriate authorities to get ZinClear product as the choice of sunscreen in Australian reefs. They talked about discussions being had with Great Barrier Reef Foundation who received $440m from Australian Government in grant funding recently. There's some serious opportunity here they are taking advantage of.
Capital Raising
The board outlined in great detail why they were doing this - Lev commenting that it was (unlike most capital raisings) a sign of their good fortune. The company is working 24/7, triple shifts to make product to meet demand - which they believe with some extra automation and some extra equipment will allow them to generate significantly more revenue by lifting this capacity - especially looking to the future.
The alternative of short term bank financing was discussed, but the board felt bank financing is difficult in the currently financing environment and had some restrictions they didn't need, particularly limiting their ability to pay dividends. They said the capital raising would allow them to get the equipment now (as they plan to wrap it up before the end of the year) and still be in a position to pay dividends in the near future. Given we have Lev, it is likely a fair amount of un-interested shareholders will not take up the rights issue and Lev (and others) will oversubscribe. I totally agree it's the right move, and the dilution is pretty insignificant if you do not participate. My calculation is they will issue 1.8m shares, which is not even as much as the UWA buy back took away (yet will raise a boatload more cash) and is also less dilution than if Lev himself took options (or a salary) as part of his remuneration (which continues to be NIL. Find me another board with a volunteer Chairman!). All in all, the chatter about dividends was serious, and they have a well thought out strategy about how to accelerate growth without harming shareholders. They are very confident about accelerating the profit growth, if it wasn't fast enough for you already at the current pace!
QLD Government Investment
There was also some interesting chatter about the QLD Government grants, which are happening at some high profile meetings - talking directly with Ministers about investing in nanotechnology for QLD. I think the capital raising is a good look in that scenario if you have your hand out to Government asking them to chip in for you to grow. It's a perfect strategy. We aren't talking $10k here and there, but million dollar+ investment by the state to cement nanotechnology development in Queensland.
Merck/Alusion
It sounds like Merck continues to go gangbusters. They are talking continued growth at similar momentum. They are still airfreighting product to keep up (but need to move to container loads) - Merck are asking them to create and store 20T of product once they can catch up. They speak about being able to double Alusion production by early 2019 which should help them significantly grow further in 2H 2019.
Battery Tech
The other major chatter that is not made fully clear from the release alone is that this battery technology we are sitting on is not as hocus pocus as you might think. It's serious. They're taking it seriously. They were talking about wanting to scale their graphite production process to be in a position to make "a few hundred" full scale batteries for testing. The small scale tests in the lab were so promising, according to Lev they would be foolish to not progress it. The overall summary was they believe they can produce a solar house battery that is cheaper than competitors, non-combustible (as opposed to typical lithium tech) and has a usable life of 20 years (2x norm). They have a perfect platform with ties in to Dixon Homes and AstiVita to test and get it to market if needed. How to value this part of the business, I have no idea - but they are treating it like there is something worth a bit there.
Ultimately, I can't believe how great things are going. The results are exceeding my (already high) expectations. I truly believe you can sit on this over the next few years and expect to experience incredible profit and share price growth.
They are building a company here that is already competing with billion dollar players and winning. This will easily be a several hundred million dollar business soon in my eyes if not, much, much more.
Don't be in any doubt
@vestro, that coffee bag was spiked! After once again showing you hospitality, even picking you up from the airport, your way of showing gratitude was explaining to my long suffering wife over breakfast just how much money she had personally lost on the market in the last two months, thanks to me, the ethical investor. I think you used the term it's all doom and gloom! Where do get off doing that to somebody! What is wrong with you, seriously!
That acne treatment with a SPF factor should be a winner. I recall them stating that it was going through a clinical trial involving 50 young adults with bad skin. That cost alone is up to $100,000.
