Valuation, page-4

Market value (Market Cap) and intrinsic value are completely different things. Karoon gas until very recently traded at substantially below their cash at bank! What is the value of the company?... less than its cash and other tangible assets? i think not. Market Cap will always catch up with fundamentals.

I digress. In the case of Yowie, i'd be interested in posters thought on the kind of margins we can expect once we scale up. Now, at the core we're a food manufacturer, so they're not going to shoot the lights out - 5% - 8% NPAT margin? However, as we grow our brand and begin to leverage its power, books, movies etc, higher margin products will carry much more profit to the bottom line. But how much? Can we conceivably scale up to a 10% - 15% NPAT margin?

IMO, Cashflow will also be lackluster for a while, as we constantly manufacture ahead of growing demand (50%+ YOY for the next 3 - 5 years is conceivable). I'm totally fine with this though, as re-investment in inventory is likely to generate better returns than what i would do with divies. Again, once we scale up cash conversion should be greatly enhanced as the the growth rate tapers, and a steady stream of divies should begin to flow.

Interested to hear posters thoughts on valuations based on potential earnings / NPAT margins / cash conversion. It would be nice to talk about something substantial for a change!