seems like people got some value from that post. so just to continue the outline
so BUD currently
$28m cash
$5m listed shell (this value fluctuates with the ipo market + how clean the balance sheet/legal history is).
$20m id ascribe to parse + BUD platform + ip + contractual setup + designs + patents + other company assets - could be less or more depending (so the key here is to think about what a competitor would pay as a minimum just to move in and takeover a company's setup at a fire sale auction)
so at $200m mkt cap - id ascribe ~$150m of that to market valuation of future cashflow
now future cashflow is tricky because market can be looking at one - 2 or 10 years out - variety of participants will look at a variety of outcomes - further you go the cheaper you want pricing to be though
but generically 1 year out is standard and 2 years about right for companies seen to be very fast growth. amazon and tesla investors have been looking 5+ years for 5+ years for eg. but that view is often tested - like FB after listing
Because BUD is a manufacturer with a product cost, rather than say a website - albeit with a very low unit cost as a proportion of sales - I wouldnt use 50x - probably set its top in a bull market at 40x. Equally because its got 3 year fixed term contracted annuities for what will be 90+% of its income stream you wouldnt use 5x as annuities are highly prized. So - given current market is moderately risk off in small tech - i'd use 10-20x currently.
on that basis Ohm + thor + cloud data sales needs to generate $7.5m -$15mpa FY19 (and those sales need to be after distributor's cut)
thats how State One and most analysts do their analysis.
however because its ~30 x 30 x 30 theoretical assumptions - you have to forecast everything from top to bottom line out 5+ years + assume capital base + assume a discount rate - to me the price to sales is a more practical method of arriving at whats, after all, largely a highly educated thumbsuck
the key to how a high growth stock then travels isnt its ability to precisely hit $7.5m-$15m run rate in a given quarter for eg - its the trend in the business and markets overall view on probability whether stock will undershoot or overshoot vs those 1 -2 year out expectations
given what BUD has announced and when distributors come online I'd say June quarter will be informative but September quarter key.
At that point nearly every distributor should be at least starting to contribute and data sales also starting to show
but going back to the top - what the stock price does between now and then will - absent company specific news - likely turn heavily on the pricing for small tech stocks
this is why i said market was only pricing the $22.9m over 3 yr minimums even at 41c - that wasnt market assuming $69m over 3 years - it was a 40-50x multiple from a bull market with momentum overlay for the teased monster + telstra imo
i expect market to be looking for validation that +750 ohm systems will be in place by years end - though that number will vary once market figures out what avg system month charge is and what the distributor cut is.
if mgt doesnt tell it the market will decide that answer for itself.
so if numbers in June suggest only 100-250 systems then v bad news for the sp. equally if its showing 500+ systems full fee paying then it should bode very well. in between would be a pass mark of varying degrees i would imagine
ofc if market gives stock a pass then it starts looking further out - comfortable in its baseline assumption as 'reliable income' and start focusing on 'where might company growth move to from there- thats when the sp will often hockeystick in advance of sales
thats why the goblin hole is referred to as the bear trap/bull trap phase. in the phase where the market second guesses everything about future earnings sp falls as its done with BUD - doom and gloom prevails in the narrative.
post the initial breakout this is known as the most rewarding time to invest - on successes the move from the bear trap tends to be quite large - but its much higher risk than the initial breakout.
which is why stock and mgt selection is crucial - which is why personality cultists tend to blow up money - they rely to heavily on an md to be competent because they arent.
whereas really practiced investors have good judgement on which mgt and value offerings will succeed vs which wont
though no one (practically) gets that 100% right. even the best of the best say winning 60-70% of those calls is all you can ask for
BUD Price at posting:
18.5¢ Sentiment: Buy Disclosure: Held
