Stock Selection/Fundamental Analysis- part 3 of 3 collated by...

Stock Selection/Fundamental Analysis- part 3 of 3
collated by xela.hc

Poster: FullMoonFever

Date:26/03/16

Time:16:21:08
Post #:17364386

Well as usual, the weekend lounge is a hotbed of useful information and insights of various methods, ideas & reference material for new or experienced traders alike to pick at to enhance their own strategies....enough can't be said about the quality freely shared by knowledgeable illustrious posters. A thanks as well from me.

So...just to add some other bits from my own thoughts for those interested.

A couple of sites I like that can be either subscribed to or have free components as well.

ASXiq is one and the other Investogain. Not being able to monitor all stocks across all industries obviously, I find these provide a couple of diff triggers for me to then look further into a stock TA & FA as a potential...not perfect or foolproof but just another handy tool.

ASXiq provides various inbuilt scans for TA as well as useful FA info such as PE, PEG, EV etc (subs req'd) , the merits of which have been discussed already but one free section I like is the filter by sector or industry ranking that I can use to see % gain over 1 day or week or mth & vol for example that prompts me to then look at the chart and then also the poss FA behind the movement. Can have it's own little glitches occasionally - like Co. name not updated eg. RSL to SRT.

Investogain has various Co. info in one spot when looking but also the quick filter listing of the last 20 buys / sells list for Directors for "all" or "over 100k", I find again, is a handy trigger to then look at why they may be doing so.

Try post one of my own thoughts on FA as well later with a kinda ongoing live(ish) example I'm researching atm.

Site links and couple snips to show:

http://asxiq.com/end-of-day-screener/end-of-day/1/

http://www.investogain.com.au/directors-transactions







Poster: FullMoonFever

Date:26/03/16

Time:17:41:48
Post #:17364582

As others have pointed out in regards to various FA research styles and one being Directors or people behind stock etc. I also like to look at their background as well, but also who else they are linked to, personal relationships, other unlisted entities etc and the see what those connections are up to via random google search words.

As a possible live(ish) example - lets use MW (of Cicero) as most on HC appear to know who he is, what he does and how he does it...irrespective of personal views on methods. As some say, can find the shell and get set early, accumulate and wait or maybe sit and watch for the DD, presso's etc and trade the trade that inevitably comes with the support of the HC community

So, whilst Cicero overall appears more involved with shell plays etc. Alto Capital appears more involved in other ways, seed funding being one. By default as a Dir, MW is linked into Alto also.

Anyway, apologies as longish post as I just try to relate one FA example on connections & linking thoughts I used to start researching this potential IPO (yet to be ann'd / finalised obviously) and its market space (which I do like btw). Is the mkt of 3D printing of which there are some ASX listings in this field, medical, prosumer (one RTO to be finalised near term) etc.

So...links and snips below - my bold at some points and hope some readers get some value in of my thought processes in researching.

This first bit picked up for MW ex Bloomberg which lead to the Alto Cap relationship:

http://www.bloomberg.com/research/stocks/people/person.asp?personId=11212569&privcapId=30957671

Part snip:

He served as an Interim Chairman of Aspire Mining Limited from September 2009 to February 2010. He has been an Executive Director of Delta Capital Pty Ltd since May 2005; and West Peak Iron Limited since July 29, 2012. He has been a Non Executive Director of Skywards Limited since June 11, 2013. He serves as an Executive Director of Louisiana Petroleum Limited. He has been Non-Executive Director of Star Striker Limited since August 01, 2014. He serves as a Director of Imperium Minerals Limited. Mr. Walker serves as Founding Director of ACNS Capital Markets Pty Ltd. He serves as a Director of boutique investment firm Alto Capital and corporate advisory firm Delta Securities. He serves as a Director of Cicero Corporate Services Pty Ltd and Resource Star Limited.

Next, just one google linking popped up on Alto I looked into (bold):

http://finfeed.com/startups/how-3d-printing-is-moving-markets-and-nasa/20151210/

How 3D printing is moving markets and… NASA

December 10th, 2015 | by Jonathan Jackson

Uptake of 3D printers has been impressive with a 33.8% compound annual growth rate over the past three years.

And investors are taking note, with more investment and capital being poured into 3D innovators to help them commercialise their products every day.

Even the CSIRO has got into the action opening a $6 million metal 3D printing centre in Victoria in May 2015.

Last year thebull.com.au hinted that 3D printing was the next big thing to come to the ASX.

And they weren’t wrong. The first to eye an ASX spot was Oz Brewing, a tiny beer brewer who decided to give up the amber to concentrate on 3D.

This type of interest was the start of a 3D printing revolution in Australia of the type that has been going on in the US for a little while longer. Publicly-listed companies on the US stock exchanges include: Stratasys (NASDAQ:SSYS), 3D Printing Systems (NYSE DD), ExOne (NASDAQ:XONE) and Voxejet Ag ADR (NYSE:VJET).

It’s a strong movement both in Australia and the US and 3D companies are growing in confidence and stature as more and more look to go public.

One Australian 3D start-up who is at the forefront of the 3D printing movement in this country is Aurora Labs. Aurora has been hard at work for the last year on a large scale metal 3D printer, that according to the company is 100 times the speed of other machines on the market.

In fact, Aurora recently announced the release of their Information Memorandum (IM) for a seed capital raising with Alto Capital to help them commercialise their consumer products.

The company is hoping to follow in the footsteps of companies such as US consumer-focused 3D printer company Robo3D who are the subject of an RTO by Falcon Minerals (ASX:FCN) and recently achieved record monthly revenues on the back of launching its printers into major US retail chain, Best Buy.

Aurora’s machine is said to be able to construct objects that weigh as much as 1000kg and measure 2.5 metres in length, 1.5 metres in width and 1.5 metres in height.

While 3D printers have piqued the interests of many corporate organisations, this one could actually turn interest into investment.

Especially if rumours are true and NASA gets involved.

Aurora Labs CEO David Budge told StartUp Smart, “They’re (NASA) interested in having a chat about what we’re up to, and they can see the advantages of using this technology. The main difference between ours and others in the market is ours can run at about 100 times faster with a similar resolution.”

NASA is interested in printing rocket engines which would be printed by Aurora’s large format 3D metal printer (LFP) at far better speeds than are currently available.

Budge says that Aurora’s printer could print a one tonne part in a day, where competitor printers take up to three to four months.

He believes the speed of the machine will make it commercially viable, particularly when you consider further interest has come from high-end electric motorcycle companies as well as others in the aerospace field. This includes a Silicon Valley start-up that wants to launch micro-satellites into orbit.

Despite most of the company’s products still at prototype stage, Budge has been in talks with several large US organisations about using this breakthrough 3D metal printing technology.

And they are also re-focusing on the consumer market with the hope of creating a printer the size of a microwave for every home.

There is also ASX-listed 3D Medical which recently signed a deal with Canadian Medical Imaging company Interlad to take its 3D printing surgical tools to the international market.

Aurora is planning an IPO in the first half of 2016 with details to be finalised closer to the date.

The current capital raising is intended to enable Aurora to complete the proof of concept prototype of the LFP.

It will also allow the company to go into full production of its other 3D printer models the S-Titanium and S-Titanium Pro while speeding delivery of units currently on back order.

“The list of what we can make is literally endless, from car parts to tools to rocket motors,” Budge told StartUp Smart last year.
“We can see a time when most homes and every manufacturer have one of these. It’s not too different than when you compare it to the first photocopiers, which were enormously expensive. So expensive they were licensed instead of being sold.
“I see 3D printing, particularly with metal and other materials expanding massively in the next five to 10 years,” Budge said.
“I see it resulting in the decentralisation of production for a lot of products.”

Which is great news for those in the 3D space who are looking to be the leaders of innovation in this space.

Another article link: http://www.startupsmart.com.au/advi...-with-aussie-3d-printing-startup-aurora-labs/

And all lead to Auroras web as per below:

http://auroralabs3d.com/aurora-labs-begins-raising-seed-capital/

"We are happy to announce that we have released the Information Memorandum (IM) for a seed capital raising that we have been working on for some months with Alto Capital. We are also planning an IPO in the first half of 2016 with details to be finalized closer to the date. These capital raisings will allow us to go to full production of the S-Titanium and S-Titanium Pro while speeding delivery of units currently on back order. It will also allow the completion of the proof of concept prototype of the large format printer (LFP). The LFP is anticipated to deliver speeds up to 100x faster than commercial models currently on the market.

If you would like more information on the seed raising or our current plans for the IPO in 2016 please contact us via the usual links or the Alto Capital representatives listed below:"



Poster: forrestfield

Date:24/03/16

Time:18:28:27
Post #:17358310

Market cap... it's a very important thing for me to know before I invest... particularly while investinv in small caps it makes if easier to do peer comparison...
So the simple step by step approach...
Total number of shares X share price... include escrow shares as well.
Then check any options listed on unlisted both... if there are options and they are in money... calculate them as heads minus the money which will be raised as a result of their exercise...
Now check debts and con notes... add them in the market cap as well...
And finally deduct cash... it will give you the exact EV...
As an example SRT... using it as it has options both listed and unlisted, cash and potential cap raise...
Existing cash 2.5m approx...
Cap raise to raise 2.4m at 2c...
Exercise of 0.4c options...
As a result of all the three above, srt will have 1b shares on issue...
ow other options...
150m at 2c... will raise 3m cash.
260m approx exercise price 0.8c. Will raise 2.1m.
Total shares on issue (including all options and cap raise shares)... 1.41billion
Srt has no debt or con notes...
1.41b X 0.022 = 31m market cap... minus cash minus money raised as a result of options being exercised...
EV equal to 23 - 24m
Now as its a shell hence remember that there are performance shares which are based on performance milestones... this must be kept in mind for all shells and RTOs.

Cheers

Poster: Sector

Date:24/03/16

Time:19:07:55
Post #:17358542

TheGladiator said: ↑

Remember there is a different between market cap and enterprise value.

Will hopefully have time this weekend to write a detailed post on FA as per this weekends topic.

For short term trading getting the MC & EV right is one of the most important things to get right.
Click to expand...


EV is something I see getting constantly mixed up on HC.

Enterprise Value is simply

1. Market Cap (number of shares x shareprice)
2. ADD Debt (any debt, long and short)
3. MINUS Cash and other liquid investments (like holdings in listed companies)

Why is it more important to know EV. You could get 2 companies with same market cap and earnings but one could be cash strapped, and the other could be 80% cash.
The PE ratio will be the same, however if company B (with high cash) deploys the cash in an earning positive manner, they will have an advantage on company A...

and that's where we should look at PEG ratios (worth further reading for newbies - google it), and the PEG ratio adds in the expected future 12 month growth rate into the PE.
If a company is growing earnings faster than current PE ratio, then this is considered better than a company on a PE of 10 growing earnings at 10%pa. As if another company is growing at 20% pa, the PE will become cheaper on paper if the shareprice doesn't shift.

You might also consider payable and receivables into your EV valuations, although not common, I ALWAYS looks at payables vs receivables in the reports, as this can change EV dramatically, especially for those mining/ resources companies in large capex phase, ie drilling or building plant.

I don't consider options UNLESS they are in the money and unconverted as the cash conversion add cash to the balance sheet and EV remains the same.

Escrow shares should be in the total issue, they are just not sell-able during a set period, but have no effect on EV whatsoever.

Remember, the market is always trying to price in future profits and growth, whether actually or potential, and then reacts daily to actual results, news.

* If any newbie wants me to do an actual EV calculation and show how I got it, just ask, and I will have a look at your stock this weekend.

Poster: Sector

Date:24/03/16

Time:20:54:03
Post #:17359068

fungicide said: ↑
Hi SL,
As for debt do u include current and non current liabilities?
As for cash & liquid asset, would that be current asset only?
Simplicitically can I figure EV just from balance sheet?
I know if u want fully diluted , you'll need to look for options etc?
Click to expand...


Debt - correct, basically that's short and long term debt.
Cash and liquid - No, current (cash + receivables) and "non current" can include the "listed investments"

EV should be able to be worked out from 1/2 yearlies and quarterlies, yes

Please take note of "Subsequent Events" in reports. These can change the picture dramatically, especially results of placements or cap raises.

I would not consider options until they would actually become dilutive to shares on issue. Once they become in the money AND unconverted, this is the only dilution to adjust EV, as the company will receive "Cash" on exercise

Poster: Sector

Date:25/03/16

Time:10:43:26
Post #:17360675

raywang5 said: ↑
i was wondering if you could give a head up for OSL? really appreciate @Sector Lead
Click to expand...

@raywang5

ONCOSIL Medical - OSL

Shares on Issue (SOI) 421,905,468.

Always cross reference numbers on issue. This was quite easy for OSL, as they had just done a new presentation, but I also look for further confirmation. Check yahoo finance also as seems to be most up to date.
*Placement notices (3/2/16)
*Appendix 3Bs (10/02/16)

Current SP: 16.5c/ MCap = $69.6m

minus Cash
I cross referenced presentation saying $14m, with
*Half yearly 4B - End DEC 2015 (15/02/16)
End Dec showed approx $6m net of cash and for sale investments
+ $10m placement, so cash burn roughly $2m Q.

add Debt - no debt

add dilutive in money Options
*Go to latest 3B

shows 18.55m 6/16 5c options = dilutive effect of $2.13m (16.5c - 5c = 11.5c x 18.55m)
shows 19m 6/17 5c options = dilutive effect of $2.18m
Total $4.315m worth of in money option value.

EV calc
$69.6m - $14m + $4.315m = $59.915m or 14cps

* one other thing you can consider going forward is tax losses. OSL has around $20m, giving a future benefit on profits of circa $6m.

Poster: m3ntor

Date:25/03/16

Time:14:43:13
Post #:17361462

KDoc said: ↑
Two questions if I may please peeps;

1. I'm still a bit hazy on the importance of the "level" (i.e. the number) of Enterprise Value. Specifically; if I read Sector's post above correctly, you're looking for a lower EV and the lower, the better...

i.e. The more cash they have, the lower their EV.

Is this right? So, if I think about that myself for the reasoning; the reasoning being that the lower the EV, the more opportunity there is for a development/event/happening/announcement to add to the present SP......

However, Investopedia and any number of other sites define EV as;

Enterprise value can be thought of as the theoretical takeover price if the company were to bought. In the event of such a buyout, an acquirer would generally have to take on the company's debt, but would pocket its cash for itself.

But this makes no sense in the following example.

Company has;
MC $4m
Debt $0
Cash $3M

Ok. I recognise that this might be a "RARE" occurrence and that hence we have RTO's with any other number of deal-making formulas, but in this case, this company's EV = $1M.

There's no way any director with half a conscience is going to give away his company for $1M when he has $3M in the bank. Sooo..........



2. If I'm not mistaken, T20's are always (??? yes/no ???) disclosed in the Annual Report. Is this correct? So the only ways to get a T20 is;
a.) rock upto the Share Registry - might be difficult if on opposite side of the country
b.) write to and ask co. for it - apparently their allowed to chg ~ $250 for this, yes/no??
or
c.) look at last Annual report and start collating through (???) 604 notices........

Is this how you all do it? Or is there something else I don't know about
Click to expand...


Ev is just a better way to measure the size of the company , and excludes cash
good way of determining true value

In your example the company would be bought for $4m not $1m . Or taken over for $1m + cash

Think of it like selling a toy store business, you would sell it for $X + stock

Stock isn't in the price of the business / goodwill but rather something you just add on at the end . What you're really buying for $X is the branding the goodwill the supply relationships the reputation the existing customers the lease and everything else that comes with it, the actual business

In asx world the stock would be cash and everything else is what's important

I get what you're saying that a company with a large amount of cash is valuable in itself , but this is usually reflected in the EV anyway

Usually you'll see shells for example with loads of cash will trade at higher EVs than shells with no cash . This is because when they do an RTO vend they do not need to raise as much as they can use the shell cash too

Poster: Sector

Date:25/03/16

Time:14:43:33
Post #:17361464


"There's no way any director with half a conscience is going to give away his company for $1M when he has $3M in the bank. Sooo.........."

No, of course not. The acquirer would pay $4m + most likely a 25-35% premium in the real world if listed. However, they are actually getting the business for $1m. That is what the market is valuing the business itself as.

In this case:

MCap $4m
Debt $3m
Cash $0

The purchaser would pay $4m, but assume the $3m debt, therefore true amount paid in this case is $7m (the EV)

Poster: Anton Chigurh

Date:25/03/16

Time:14:47:38
Post #:17361479

See the "Transaction Explained" slide and the following table of this ENZ announcement, for a real world example of EV in action.

http://hotcopper.com.au/threads/ann...e-deck.2639411/?post_id=16401578#.VvSz9dX06BY

Poster: Sector

Date:25/03/16

Time:14:50:12
Post #:17361485


Listed companies can also of course have negative EVs.

If they actually have a business, or a potential turnaround situation, negative EVs can return explosive growth.

You must be careful in why they have a negative EV, and sometimes the market doesn't believe the cash will generate a good return, or they are in a difficult sector/ market.

Cash burn if high must always be considered.

Then some are just way oversold

Poster: fumoy

Date:26/03/16

Time:08:08:10
Post #:17363142

EBITDA/enterprise value ratio (EBITDA/EV)

A modified measure of the ratio of a company's operating and non-operating profits to the market value of the firm's equity and debt

. By providing a simple, though incomplete, ratio of profit to value , EBITDA/EV is often used to estimate the cash return on an investment
. See:

Enterprise value/EBITDA ratio

Read more: http://www.nasdaq.com/investing/glossary/e/e.b.i.t.d.a.-to-enterprise-value-
ratio#ixzz43x0p39Zf

http://www.wallstreetdaily.com/2014/06/06/ev-ebitda-valuation-metric/

https://en.wikipedia.org/wiki/EV/EBITDA

http://www.investopedia.com/terms/e/ev-ebitda.asp

http://valueandopportunity.com/2013/11/07/pe-evebitda-evebit-pfcf-when-to-use-what/

"EV/EBIT
This is why many “professionals” prefer EV/EBIT to EV/EBITDA. EBIT already deduces depreciation and should therefore be a better proxy for Free cashflow than EBITDA."