Thanks Krug (reply function not working),
Also a well written response byyou. I've offered my two cents next to each of your queries. All in my opinionof course, if you don't agree then thats completely OK. My responses in bold.
'My opinion is that you are conflating the annual accounting..... EPS,intangibles on balance sheet, shareholder equity.....which is after the factreporting for a fixed period, with items that is current and actually matter interms of the forward looking performance of the company and evaluation of valueon the current share price.' I agree that the future is whatmatters with respect to valuations, however it is also very important IMO tounderstand and incorporate the current financial health of a business in yourfuture valuation. Looking at previous year financial statements gives a verygood insight into the financial workings of a business and Management'sperformance. These are all useful for forecasting future performance. In MYX'scase, the financials don't paint a pretty picture unfortunately. To simplydisregard current financial health (Balance Sheet) and past performance (IncomeStatement) to come up with future valuations is not appropriate IMO.
'.... this was already true themoment cash was paid for a non producing asset..... the accounting justrealises this on paper after the fact If they were to try and "sell"what they "bought" immediately after buying it.... that is the realvalue... not what you put on paper.' It shows Management's poor ability to provide areturn on shareholder equity. The intangibles will continue to erodeshareholder equity in the future if they do not produce profits. Based on yearsworth of financial data, this is looking likely in my opinion.
'- it would be incorrect tocompletely ignore intangibles, especially in a company where most of the valueIS from intangibles, which is more and more the case these days. Brand,exclusivity etc. .. but yes.... those intangibles ONLY have value in whatincome they produce.... so one should be careful and not take the figure atface value since these numbers are seldom correct.' Agree here, however the questionto be asked is will those intangibles create value for shareholders, or will itbe written off as per previous years? When looking at financial health of abusiness (i.e. debt to equity), I disregard intangibles.
'- so you are suggesting valuing MYX on a liquidation basis? As per above,lots of companies only have their real value in exactly the intangibles.....Areyou suggesting then that MYX is worth A$0.06 ?' I think it isreasonable to value a business at many multiples times liquidation basis, infact at many times earnings, so long as the intangibles and hence businessproduces good profit YoY. As for MYX, this is not the case and so unless thebusiness can prove it can make money, then I would caution valuing MYX toinclude the intangibles. IMO the past performance of MYX reveals intrinsicvalue well below current SP. I wouldn't personally buy MYX at this stage so Iwouldn't bother placing a buy price (because I don't have one). Your $0.06valuation could be a reality of MYX continues to post losses YoY. The bigquestion mark is the success/profitability of E4.Valuations are very personable,and everyone can come up with a different number based on their futureassumptions of business performance. So it is very reasonable for you to comeup with a completely different number to me.
'absolutely. But for someonebuying in at 33c the profits don't have to justify previous expenditure.' The way I personally valuecompanies is on a per share basis based on a reasonable assumption of futurecash flows, discounted to the present. Then I assess what my buy SP should bebased on the return I require. The key here is you need earnings, so if MYXdoes not produce earnings in the future then the company is only worth as muchas it's tangible assets. Looking at the income statement, Operating Income(which excludes non cash impairments) has been falling YoY, and OperatingMargins also. Last year MYX posted a negative OI - will this continue to be thecase??
'sure we need to make a profit.and that profit needs to pay back the initial cash investment, but this happensover time. not in any specific12 month period. MYX is in the position thatthere has been some bad previous investments.... therefore the SP has alreadybeen punished. Currently if you work back the 33c to "implied" equitythen you come to US$436m. ( if you can do that ... )The question thembecomes.... is paying this much going to produce profitable returns....' Referto my above response.
' I don't think valuing a pharma on a liquidation basis is the way to go. Itmeans you put NO value in the structure, brand or existing licence agreementsand partnerships... and that is not correct. You can value it quite low if youwant, but you cannot just ignore it. So what do you value MYX at then?' Referto above responses which should answer this question. I value MYX at nettangible asset value since the business is not profitable, so what confidencedo I have that the business can grow shareholder equity?
'As per thispost, https://hotcopper.com.au/posts/54127794/single, Nextstellis alonecould be $0.54c in NPV10Please point out any errors.' I'll be honest, the medical fieldis not my strong point so predicting the future performance of nextstellis isdefinitely not my strong point. All I have to go with is Management's pastability to provide ROI's to shareholders (which they clearly fail at). Based onthis, I personally wouldn't bet on nextstellis providing value accretion untilI see the cash flows from it. So for me if I were to value MYX, I wouldcurrently not attribute Nextstellis performance in that valuation. But ifsomeone/you has a better understanding and more confidence that Nextstelliswill provide good returns then by all means use that in your valuation.
