East Coast Research discussion

Just trying to see how an analyst thinks...

I've read the following report:
https://www.sharesinvalue.com.au/wp-content/uploads/2024/05/Nova-Eye-Medical.pdf

And then tried to do a DCF and check the appendinx III of financial statement to see if it made sense.

On the research they say...
Let's do a discounted cashflow and then add the residual value of the business...

To do the residual value they say "Sight Sciences" (NASDAQ-SGHT), which is also losing money is valued on an EV/revenue of 2.3x.

They assume revenue increase of 19% every year.

17,025.0 * 1.19^10 = 96,952

So if we get valued with the same multiple they say the company will be worth

EV will be 97M*2.3 = 223M in 10 years money with almost no debt.

They say in 10 years we will have 228M shares from the current 67.5M

Which means in 10 years money we will have a price per share of 0.97

They discount to the present assuming RBA rate of 4% and stock market premium of 6% to give a 10%.

0.97/1.1^10 = 0.37

Which means that the rest of the fancy DCF is adding -0.02...
I mean why bother with the fancy DCF model until that point at all?

So really the only assumptions that mattered are:

1. revenue growth of 19% yoy
2. comparability with Sight Sciences on a price ratio basis for EV/Revenue (even though it is a different market altogether)

No info on why 228M shares is a good number.


Problems I had with the model:

1. I tried to reconcile the EBITDA of 2021-2022 that they put on Appendix III without any luck with the annual reports
2. I tried to find explanations on their capex path.

If anyone has any other comments on how they derived other numbers after reading the report, please tell me.