....this $0.90 valuation target likely to be raised post FY23 earnings IMO.
Both on unexpected reported final quarter sales expansion and a little the R&D offset ($3.2 actual vs $2 million expected) and higher final cash balance -
OCC just reported a closing $24.8 million cash balance in its Appendix 4C vs Veritas' expectation of $21.7 million (a pretty significant beat).These DCF analysis as much about cash flows as accrued earnings. The FY23 estimate for outgoing cash flows was too high and the FY24/25 cash burn estimates have to reduce significantly quicker on accelerating sales as just reported, so I would expect positive net adjustments for Veritas' figures in its FY24/25/26 estimates extrapolated from those.
FY23 actual figures significantly beat Veritas figures (cash from operating activities $14.3 million actual vs $11.3 and $3 million extra cash balance going into FY24 starting balance). Veritas base cash forecasts irrefutably has to go up, and its EBITDA losses for FY24/25 likely to come down on the better sales announced (and FY26 profits go up). We will be able to make far better estimates on the final full year accounts, but I have OCC going cash positive in FY25, not FY26 as Veritas does:
As I said before the latest announced sales results, from my modelling I have OCC 'running' cash flow positive by the end of 2024 calendar year (and report at least a small positive cash flow in FY25 - Veritas had FY26 but that will likely either bring forward after these results or at least raise its +$0.1 million FY26E cash flow forecast.
I appreciate many retail investors struggle with forward forecasting. Veritas have done a nice DCF analysis for everyone (and shown very good business understanding in their analysis clarification). Even if you ran with Veritas old conservative figures before the much larger sales rises announced (and they were significantly larger) you can see Veritas predict positive cash flow in FY26 and an ending balance of $5 million (yes people, as I have been crowing since the BH deal - no more raises!!). You now can take that to $8 million on their FY23 end of year cash balance underestimation i.e. it has more than adequate cash to get it to positive cash flows, as Veritas already forecast in its, now already shown, too conservative forecasts:
I don't know why investors are selling OCC lower than where it was trading before its recent expectations beating 4C (and contained accelerated sales increases) but its certainly not due to competent forward earnings valuations and if its on capital/credit fears along with the rest of the small cap bio-tech mkt, they've not done their homework. OCC will not need any new capital injected.
(I will shut up - on HC too much for my own liking, but this too compelling)
(20min delay)
