Valuation attempt

Hello all … my first post was the blue-coloured text below on 30th Jan 2014 … 11 months ago … I have some time at the moment hence this review … the post actually disappeared from view, so thanks to Hot Copper’s Help team for retrieval. The valuation concept is to divide the overall business into its segments… value the segments then add together.
With respect to all other posters, I think we have learned something very interesting … read on …

Hello everyone
This is my first post. I confess that for some time now I have sat back and watched you various posters put in all the effort, but thought that it is time for me to add my perspective on a topic which I think is important.

Attempt at valuation at Feb 2014 of Admedus based on stand-alone segments

1 Existing hospital supplies & equipment business at $8m sales pa …. Gross profit (say) $3m … net profit before tax $1m
Value on p/e of 17 (moderate growth prospects) = $17 million
With approx. 1.4 billion shares =approx. 1.2 cents per share ($0.012 each)

So now at January 2015 we have pretty much a year’s worth of effort (11 months) since my previous post …. Seems to be pretty much spot on so far …. the $8m gross sales guess back in February seems spot –on according to Dr Chick’s recent presentation… the growth is modest off a small base ( a good family business here)

2 Cardiocell … guesstimate (say) 3 years from now sees sales of 50,000 units pa (all applications) at (say) $500 each average gross
Thus total gross margin pa at $ 25 million with high net profit ratio of (say) $20 m pa
Business value at p/e multiple of 20 (high growth) =$400m
BUT discount 3 years to present day
At a rough discount to present day of (say) 50% (ballpark 15% pa) = present-day value per share of ($200m/1.4b) $0.14 per share (fourteen cents)

This is where we can learn something very interesting … we are 1 year into the 3 years period of the business development … forget about my guesses as to margins and sales … we didn’t know anything back then .. these were only wild guesses … BUT… the $25 million figure sits well with Dr Chick’s advice in his recent presentation.
So the special thing we have learned is that the p/e ratio for this very-fast-growing segment of the business is more like 15 than 20 …. That is, $400 mil 2 years from now discounted back to today to get 10 cents per share valuation …. Or it could be a combination of lower p/e (say 17 or 18, but with a very much higher discount rate.
I prefer the discount rate being much higher than my originally assumed 15% per annum because as we go through time and the risk is reduced the value goes up more quickly.
The 10 cents per share is where we are at.

3 Vaccines business .. HSV2 … discount other vaccines in calc as being off too far in future
If it works, then we move to Phase 2/3 trials quickly (I hope) … I would think in 3 years $1 billion dollars
BUT discount to present day (50%) and remember we at Admedus only get a little over 50% (Coridon gets to rest)
Therefore (say) $250 million to Admedus present day implies $0.18 per share present value approx. ($250m / 1.4 billion)
BUT .. if it doesn’t work, it’s worth nothing (that’s why I am hanging out for confirmation of efficacy from Phase 1 results statement

4 Blue sky .. the net present value of the team and assets currently in place
If we put a value of $70 million then that’s 5 cents per share ($0.05) .. this is very rough
It is worth only what some other entity is willing to pay

Therefore 1,2 + 4 which should be current share price is approx. 20 cents .. what this shows is that the existing business asset shell has no value in the view of the market.
If the HSV2 vaccine works, then the price should add another 18 cents

I look forward to your comments … remember all this is very rough, but I thought worth putting together as it gives a perspective on the company’s value.

So again we learn that the market puts zero value on the vaccines business and the blue sky potential. Maybe there is fear of more capital raising?
Anyway, the share price has been where it is for quite a while … when I first posted, 11 months ago, it was 16.5 cents. Maybe people are more aware that we only get 63% of the vaccines profit? … but 63% of nil is still nil

Have a think about it … have I made any fundamental mistakes?

Best wishes to all of you for the new year