I am definitely a supporter and impressed by what Alexium have been achieving in their business and I am a holder ( about 20% of my portfolio, but heavily in the red having bought at the peak late last year and been averaging down - it has certainly felt like I have been catching a falling knife).
I did however want to comment here on some of my thoughts on market cap and share price expectations that make me a little more conservative than what most other posters here tend to be. Please forgive me if I make some accounting errors here and am happy to be corrected - I am a chemical engineer and not an accountant after all
I look at a company like Nuplex ( ASX: NPX, also listed on New Zealand NZX: NPX ) as a comparison ( probably a poor one I know but could not think of one better). Nuplex is a global player in chemical resin manufacturing which is used in coatings such as automotive paints, high end metal protection applications, and decorative paints. They have been in business for over 60 years, have expected sales of around NZ $1.5 M in FY16, announced an expected EBITDA upgrade of NZ$151 to NZ$161M just last week, and are the subject of a takeover offer right now which has significantly boosted their share price ( offer was 40% above the SP at the time it was made), and they have a yield well over 5%. They currently trade on a P/E just under 13 and have a market cap of just on NZ$ 1M. Their EBITDA margins appear to be around 10%.
Whilst Nuplex is probably still seen primarily as a yield rather than a growth stock, are in a mature and highly competitive industry, and have lots of manufacturing plants ( high net assets ), if I try and apply some of Nuplex's ratios to Alexium for say FY17 I get the following:
Alexium Sales FY 16 $18M
FY 17 say $50M please correct me if I have a bad estimate here as I am just guessing
Alexium EBITDA FY16 say breakeven
FY 17 say $10M ( assuming an EBITDA margin of 20%, double that of Nuplex)
Alexium NPAT FY16 -------
FY17 say $ 6M
Alexium P/E FY16 ----
FY17 say 25 as it is a growth stock but still establishing itself in a "non-sexy" industry
Alexium SP FY16 $ 0.58
FY17 $ 1.50
Alexium MC FY16 $168M
FY17 $434M
So it seems as if we will do ok if we are patient but it could be a longer wait than we think. If they don't achieve the NPAT I have estimated here in FY17 and they don't re-rate to a P/E of 25 ( which is much higher than their sector's average of 15), we could have to wait even longer. A P/E of 15 and a $6M NPAT only will give a SP around $0.9.
Of course if my estimates are too conservative ( and I hope they are ! ) then things will come faster
.
I will continue to hold and possibly buy more as it is a great company, but am resigned to a long wait I think.
