I've updated my model and expanded it for H2'FY24 and full year estimates. I made many assumptions in the model, some of which includes:
- Extrapolating the same rate of pearl sales and price for the remainder of H1'FY24 (aggressive approach, but it simplifies the model)
- Determining COGS by taking the H2'FY23 COGS per unit sold figure and increasing it by 20%
- Assuming that the entire tax loss balance of $9m will be used in H1'FY24
- Increasing most H2'FY23 costs by 10% for inflation/post-Covid normalisation of operations
- Note that the model did not incorporate currency impacts and the FV reval is a complete guess based on FY23 (however, I suspect that it may come in higher in FY24).
By my calculation, but 30 June 2024, the company should have ~367k pearls to work with (starting balance of $100k + 540k harvested - ~273k sold in H1'FY24), so we have the ability, albeit very unlikely, to increase sales from H1'FY24 by up to 35%.
Here's the updated model, with a base case of 0% increase in # of pearls sold and 0% increase in ave. price attained from H1'FY24, which results in a FY24 full year profit figure of $28.6m or a P/E of 2.5, a 300+% increase from FY23.
View attachment 5871052I further applied a sensitivity analysis to changes in the # of pearls sold and the average price attained in H2'FY24, showing the ultimate impact to the full FY24 financial year profit figure. Green highlighting indicates the most likely scenarios, however, anything can happen in this crazy market.
The bottom line for me is no matter how you slice it, even assuming a 25% decline in # of pearls sold and a 25% decline in average price attained, we still land up with a profit of ~$19m, or a P/E of 3.7. I am conscious though that markets can change quickly (like lithium's decline of 90% in a matter of several months), but I'm simply showing the most likely outcome based on recent results.
For fun, although I think this is unachievable, I have applied a 35% increase in pearls sold and a 20% increase in ave. price per pearl - which by my estimate results in a FY24 profit figure of ~$40m, or 1.8 P/E.
Very open to any feedback to refine the model.
Disclaimer: The above estimate can be completely wrong and this is NOT FINANCIAL ADVICE. Please do your own research before making investment decisions.
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