G'day
@VeeKayShare , as of today I have finished backing up the figurative truck, so thought it was time for that long overdue post of where we are!
I'll reiterate, I have been happy buying all the way from 9c up to 38c, and continue to believe BUD is highly
undervalued.
My target of $1.00+ this CY and $3.00+ in CY2019 remains.
Where are we?
I'll start by saying that not much has changed since my last post, except for the fact you can now purchase shares in BUD at a near 50% discount to when I last posted a thread update. It's always interesting to remember that "
price is what you pay, value is what you get."
1. Management selldown
There appears to be a LOT of (ignorant) posters criticising Dave and the team for their recent sale of shares. These posters appear to solely base their criticism on the fact management has sold shares. They ignore the fact that:
- We were warned of the sale (including the time of sale, and exact amount of stock to be sold)
- The team had tax obligations after their shares came out of escrow
- The team, particularly Dave, still holds a
significant (
15% of the company) amount of shares
There is nothing to suggest the sale of stock is in anyway negative, and I am impressed with how the sale has been handled by Dave - with the utmost integrity and transparency. I have not seen such a well handled and opaque sale of shares by any other management team on the ASX!
2. Fundamentals:
(a) $50m++ of
guaranteed contracted minimum revenue over the next 2.5 years - this means the revenue is guaranteed, and distribution partners wouldn't agree to the commitment unless they were sure they could meet it/vastly surpass it (and even if they don't for some reason, they would be contractually liable to BUD for the shortfall...)
(b) Significant distribution network - US, UK, Aus, Canada, Caribbean - this is only going to increase! (
soon to be global 
)
Note:
on the basis of the minimum contracted revenue alone, BUD should be valued at 31.5cps, notwithstanding Buddy Cloud, Alternative Data, or other revenue from future products.
3. Capital Structure & Valuations:
Present value:
-Fully diluted, BUD has 1.15bn shares on issue
- $230m MC @20c
- Annual costs (currently) of $12m p.a
Therefore, on the basis of a PE of 30, the current SP give an implied annual profit of $7.5m (or $19.5m revenue). To achieve $19.5m revenue, BUD needs to sell 1,600 ohms.
Do you think BUD have sold, or can sell 1,600 ohms, in which case and notwithstanding Buddy Cloud, Alternative Data, or other revenue from future products, Buddy is fairly priced (with no growth)?
Future value:
Again, notwithstanding Buddy Cloud, Alternative Data, or other revenue from future products:
Do you think across BUD's vast distribution network, BUD can sell:
- 4,000 Ohms (implied value of $1.00+/sh)
- 10,000 Ohms (implied vlaue of $3.00+/sh)
- 30,000 Ohms (implied value of $10.00+/sh)
I think by the end of 2019 BUD will have sold somewhere between 4,000 and 10,000 Ohms across the globe. I think this is realistic, if not likely, given the vast demand for Ohms and the strength of BUD's distribution network.
4. Impending newsflow
- Jan 31 Quarterly (
note: significant revenue not to crystallise until July Quarterly IMO)
- Monetisation of alternative data
- Monster deal (
global distribution agreement that required a large capital raise to facilitate)
- South American distributorship deal
- Asian distributorship deal
- Additional hardware order
- Inclusion into the ASX Top300/200
5. Buying opportunity
If the instos were happy to put in $23m at 20c, and now a further $6m at 20.5c, then I am more than happy to load up at these levels.
Whilst $230m MC might seem like a deceptively high valuation, IMO we are cheap if you factor in the growth potential over the next 6-12 months (and beyond) as to whether or not, through BUD's vast distribution network, the team have the potential to execute on 4,000 Ohm installs, or more!
GLTAH!
2018/2019 are going to be huge for BUD
All my posts are IMO and do not constitute investment advice. Always do your own research!
