evolisus.com, page-55

A comparison of BWX and CDY is pretty interesting.

BWX is an Australian company operating in the international consumer healthcare market with ‘natural’ products in skin care and hair care. I think this makes the company relevant to Cellmid for at least two reasons.

(1) Its stated growth strategy is through acquisition, and it has demonstrated this by acquiring eight manufacturing or distribution companies since 2014. Its largest was Mineral Fusion in July for A$54M. It therefore is quite possible that at some point it might become interested in all or part of the Advangen business, which looks to be a very good fit.

(2) Looking at its annual report and presentations it is easy to see BWX as a reflection of where Advangen will be in a few years time. The close similarities between the two businesses therefore allow BWX to act as a good guide to the financial metrics that could be applied to fundamentally valuing the Advangen business, moreso than any other company I can see on the ASX.

Over the last two financial years BWX has shown revenue growth of +95% and +34%, compared with Advangen’s +73% and +42%. Its FY17 Gross Margin was 65%, compared with Cellmid’s stated minimum of 70% for evolis. BWX currently has a P/E ratio is 38.

Although encouraging for the future, this high P/E is not relevant to Cellmid yet until consistent earnings are established. However, its P/R ratio (price-to-revenue) of 7.04 is much more useful. Applying this to Advangen’s reported FY17 revenue of $4.475M values that component of Cellmid’s operations at $31.5M (or $39.1M for the whole business with no allowance for blue sky).

It does also give an idea of what the projected $100M revenue from US evolis sales should contribute to Cellmid’s market cap in a few years time if achieved (i.e. $704M or a SP contribution of 70 cents).

A well worthwhile comparison I think, for how the market can be expected to treat CDY once its business ramps up in the not too distant future.