It is just the curse of the small cap. We went up from 25c to 31c on @A$12k of volume and we have come down yesterday and today on about the same. You can read nothing in to either of those moves. Management need to deliver on sales if they can get back to US$ 28 million to US$ 30 million level this year then next year we should be decently profitable and at 30c on probably on a comfortable single digit P/E. If they can do that level of sales 58c seems a very fair price. However over the last 18 months management have not been very good at delivering on forecasts, some of it due to the market and some of it self-inflicted so they have something to prove.
For me the key is the Cognigram product, this deal with Esai will go along way to proving its potential and if it works will create a paradigm shift in valuation methodology applied. A good part of its income will move from cyclical CRO work to recurring and growing diagnostic services.
I really hope they are able to put some meat on to the economic potential of the deal in Japan at the AGM .... I don't need to see sales forecasts just market size and likely pricing would be good enough at this stage. You would think with good execution the potential over the coming years has to be in the 2 or 3 million dollar range per annum. You would also think it would prove the concept for similar opportunities in US or Europe. My other hope is the board take a look at their own and the overall corporate costs and also do not spray around options like confetti which they have done in the past. Things are a lot more positive than they were a few months ago but with me management has a debt it needs to clear first before I will take their forecasts with out applying a decent discount.
CGS Price at posting:
26.0¢ Sentiment: Buy Disclosure: Held
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