Howdy
@The_Oracle
Yeah, you
are right. The deferral of the expected $14m initial payment from the San Quintin BOT and perhaps other smaller parcels of revenue once expected in 2017, does - effectively - downgrade this CY's revenue forecast. Henslow have gone with a figure of US$70m now for CY17.
$70m (A$91.5m) at a 2.5 multiple puts us at an SP of just over $0.545 (419m soi). Therefore
if this is the extent of the revenue shift into 2018, and
if this (circa 2.5 multiple) is how our valuation is being set,
maybe that is where the SP might be going for a bit. I don't know, i'm just musing here, everyone dyor.
However, from a holders point of view it is worth remembering that this "missing" (estimated) US$20m isn't disappearing - and should actually now provide up-til-now-unexpected upside on 2018 revenues.
From last week's 4C report:
"
Revenue Recognition: As timing of actual contract deployment cannot always be predicted with certainty, there is the possibility that revenue recognition on several existing signed contracts may shift into early 2018. In particular, due to local factors beyond the Company’s control, the financial close and disbursement on the executed contract for the large 30-year San Quintin Mexico BOT project may not occur until early 2018. As a result, recognition of the initial US$14M of revenues, which were included in our July revenue estimate may shift into early 2018. Importantly however, all revenue associated with any of these signed contracts is anticipated to be realized in full."
So, when the 'granular guidance' for CY18 is provided with the next 4C at the end of January, it should be an even rosier picture than it otherwise would have been. That seems logical, right?
CY18 Revenue: Some assumptions I will run with
• We have been told that the 2018 revenue growth expectation "does not include influxion demand from China".
• The
minimum 25% revenue growth target for 2018 was first announced on Page 4 of the Business Update which accompanied the HY report on 31st August 2017. This was when revenue expectations were US$90m (i.e. I am hereby assuming that their
minimum expectations for CY18 were, up-til-now,
US$112.5m).
• That
minimum 25% revenue growth in 2018 announcement was ALSO before the announcement of the African MOU on 14th September 2017. I am assuming this hasn't been included, and so
could offer another US$35m upside itself in 2018 revenue (one-third of the 'over US$100m' revenue would come in 2018).
So, 2018: US$112.5m + est US$20m slipped revenue + possible Africa MOU + China MABR
minimum. Is that fair? For the purposes of this forum frivolity, i'm going to run with it.
So - just musing again -
if our price is moving due to downgrades/upgrades of CY revenue expectations, and
if this comes in at circa 2.5 time anticipated revenue,
maybe we are in for a snap back upwards by the end of January 2018 at the latest?
Everyone please indulge me here while I grab a cigarette packet and scribble some amateurish sums (all of what follows is just a person on the internet trying to work things out, dyor obvs).....
Just with minimum revenue growth expectations....
• US$112.5m + US$20m (US$132.5m) = REV A$173.1m / MC A$432.75m /
SP $1.03 (at 419m soi)
Should the African MOU come in....
• US$112.5m + US$20m (US$132.5m) + US$35m (US$167.5m) = REV A$218.9m / MC A$547.25m /
SP $1.31
Then add any 2018 China sales revenue on top of that.
Conclusion: I suppose what i'm left thinking is that if/when FLC turns, it could really snap upwards. If these guesstimates are anywhere close, then there's potentially significant near term (3-6 months) opportunity in this stock. As
@lordearl has also said, it may not be easy to get back in. This just affirms to me my strategy of holding, and adding down here. We may not be at the bottom right now, but the risk/reward of buying here feels utterly compelling.
Note: All exchange rates above between US$ and A$ above are from XE today - and if DT gets his way with the US tax reform there could also be significant upside on all of these figures for us moving forward.
Disclaimer:
I can't emphasis this enough though: I have zero clue if any of this actually happens. I'm just trying to think things through logically and I thought I might as well do so on here as do so privately. However, ALL of the above is based on assumptions. Assumptions like how we are being valued, like our price moving positively with an upgrade in Jan the way it seems to have moved downwards with this 'downgrade' in Oct/Nov, like assumptions of no interruptions to revenue, and of the world not falling into nuclear war etc.
Please don't be pissed at me if none of this happens, is what i'm saying.
