The upgrade of this stock to buy at this stage should be withdrawn IMVHO.
CFU only has pre commercial sales into trials which won't be finished until early 2011 as a minimum, but at the current cash burn rate CFU will have run out of money in Novemeber 2010. Even if they reduce the cash burn back to where it was in Q4 2009 they burnt so much more in Q1 2010 that cash would still only stretch to Jan 2011. Trials in place do not finish intil Q2 2011, then there will be the time taken to asses results before orders are placed, so where will they get cash to cover A$6.6m per quarter burn from Nov10/Jan11 until they are selling by the thousands and covering operating costs?
In my opinion, due to the length of time before true commercial sales begin(CFU only expect to sell a couple of hundred units this year and they will all be into 1 or 2 year trials) I believe CFU will need to raise enough cash to last until mid to late 2012, to cover themselves for the increased cost of increased production, protection against a global meltdown over government debts, protection against not selling enough units to cover the cash burn next year.(I calculated they need to sell 2,366 untis at 40% net margin to cover the current burn rate, can they do that in 2011 or 2012, even they don't know that!)
So summing up, anyone that is advising you buy CFU is missing or avoiding the issue of potentially huge(38% IMVHO) dilution ahead.
Please feel free to argue this point, but please avoid the ramping so often seen on this stock, not just from PI's either.
CFU Price at posting:
17.3¢ Sentiment: LT Sell Disclosure: Not Held
