Gruelling Is a very apt word for my IPD experience, Not counting my chickens as yet, It's been at the back of my bottom draw for so long gathering dusk, almost forgotten and close to being written off as one of my bad judgements to learn lessons from. Then I hear a faint whisper "I'm not dead yet".
If this sunshine period continues for a while, I will have to do some serious research and analysis of how management deal with the situation they are presented with. Just how much revenue hits the books and just how do they propose to deal with it. In the past they have had a serous cash burn problem that had previously ignored, Old habits can die hard.
One of my success stories is PLS, Their revenue hitting the books over the last 6 months was astounding, Their excellent management from this windfall gain made provisions for capacity expansion, downstreaming, research, capital expenditure onlong term efficency gains and then announced that they would allocate between 20-30% of their free cash flow from now on to provide shareholders with franked dividends, They paid an inaugural 6 month franked dividend of 11c, This will be ongoing, not just a one off and I am soon expecting another 6 monthly franked dividend.
With IPD I will be looking at the revenue hitting the books in conjuction with their spending patterns, I will be watching their cash burn like a hawk, I will also be watching closely just how many bonus shares they will reward themselves with during this sunshine period. Previously they have been experts on growing the number of shares on issue,
The company besides revenue needs good guidance and some prudence,
One of my faults is getting well ahead of myself before the penny actually drops,
Then as a reality check I have to remember that IPD has 2b shares on issue,
So firstly cash burn has to get neutral. Last year the cash burn was $27m. We have expanded our sales team. I guess that this years will be upwards of $30M. So upwards of $30m revenue to get to that situation assuming no opening of shoulders as far as expenditure is concerned,
So. to be like PLS and pay shareholders a 1c franked dividend ( $20M). Let say they roughly using the same formula that PLS used. 20% of free cash flow ( after costs and tax) that means that on top of the cash burn neutral $30m revenue that they would need (back of a matchbox calculation) and additional $150m .
So thats $180m revenue annually to pay the shareholders a 1c franked dividend, With a 1c franked dividend what would the SP be?
A bridge too far? Who knows.
Sometimes reality sucks, Almost sorry that I did the rough exercise.
We shall see? DYOR
cheers Lies
IPD Price at posting:
23.0¢ Sentiment: Hold Disclosure: Held
