Share price rebound?

The share price of Ellex has performed poorly recently.  I think this is explained by the fact that, despite a very promising business model, skeptical investors usually punish companies with increasing annual losses.  However, typically in this situation, when there is actual evidence of an improvement in profits the share price can respond positively and relatively quickly.  I predict this is about to occur with Ellex. 

In terms of the three individual components of Ellex: the laser and ultrasound section is likely to continue to improve profit on the back of strong sales of the Tango Reflex SLT laser; ongoing investment in iTrack will lead to an increase loss in that section and increased use of 2RT will lead to a small increase in profit for that section.  Overall, the impact of the changes in these three areas could cancel each other out leading to a neutral impact on profit.  

However, the biggest driver of NPAT will be the fall in the Australian dollar.  In the trading update for the first four months of F19 sales were up 27%.  Ellex said this was due to a 17% in constant currency - which implies there was another 10% increase due to the fall of the AUD.  Applying that to the H1 18 results that would increase sales by $3.8M - from $Au38M to $Au 41.8M.  This would result in NPAT improving $3.8 M from $-2.4M to $+1.4M (assuming tax losses are carried forward).      

Each year the H1 Trading Update is typically released by Ellex in the last week of Jan or first week of Feb.  I predict this return to profit will lead to an significant turnaround in the share price of Ellex.