Hi Micki,This is how TOX are going to increase revenue:1)...

Hi Micki,

This is how TOX are going to increase revenue:

1) Continue their cost cutting efficiency drive. Annualized profit based on the half year is $3M. Actual full year profit for this financial year will be around $750,000. The reason for this is that the new management turnaround started around 6 months ago.
First half = -$750,00 + second half $1.5M = $0.75M

2) Increase throughput at their Port Headland plant by 30%. It is currently running at full capacity. This brings next year profit to $3.9M annualised. Remember their other plant at Kwinana operates at breakeven for the moment.

3) Complete engineering study and buy a new piece of machinery at Kwinana costing $1.25million which will increase throughput. This is expected to generate them an extra $5-$10M gross profit per year - a company estimate.

4) Apply for a licence to process more toxic waste at new sites. However, this is a long term goal. Toxic Waste disposal licences are very hard to come by which is why TOX has only 1 small competitor in Queensland.

5) To fund any expansion, this company has $1.5M in the bank, and $3.1M coming through from the exercise of TOXO options in January. They have an overdraft of $500,000 which is fully utilized - maybe they'll pay that off too when they feel like it.

This information is available in their reports and on their website.

The estimate of gross profit from the new retort at Kwinana is a company estimate. The only reason you can give it credence is the fact that this management team is consistently delivering or beating its expectations.

Don't confuse this stock with some cr.ppy mining company. This may be a 4c stock, but it is in fact a services company which produces a profit, and is growing.

So, do your maths and work out if a company that can easily produce $3-$4M PROFIT per year is worth a market cap of 16million.

This is why the stock is being re-rated.

If successful news on the equipment at Kwinana comes out expect a further rerating to take into account expected future profits of between $9 and $14 million per year.


Joel