Hi Reg, here's the background to that SWS speculation on Share...

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Phaedrus

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28/04/24

14:22

Post #: 73543688
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Originally posted by reginaldp: ↑

Enjoying my weekend , its much nicer with a northwards climbing stock- musings of a long neck re valuations
It is worth $A16.94 per MSB or $US110 right now based on the assumptions they have used. Analysts have heavily discounted these valuations in the past and the professional insto market has no confidence in SI - so there is a big difference between what it is worth on these assumptions and what an analyst's 12 month price target would be, even if he used the same assumptions of free cash flow - i.e. he would use a much higher DR and probably also introduce a massive probability discount to take into account uncertainty caused by the FDA, cash runway and funding, and the insto market's problem with SI as CEO.

What an NPV indicates is that for an investor prepared to hold for the long term, if these cash flow assumptions work out, then he could pay $A16.94 today and receive a long term return of 6.24% on that investment. If he pays today's price of $A0.93, the long term return is obviously much higher - based on the SWS assumptions, that long term return would be 31% pa if you paid A93c today; so 31% is effectively the DR that the market is using at present to take all the uncertainties into account.

Once you start removing uncertainties, which are mainly over FDA approvals and funding, the market will use a much lower DR and valuations will shoot higher - that's why first FDA approval or a partnering deal are so important.

NPVs show the sensitivities to various assumptions and give you an idea of the valuation impact when things change - but an NPV isn't a 12-month price target

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Hi Reg,

here's the background to that SWS speculation on Share Price vs Fair Value. Not sure I follow the discount rate calculation, or share their view of the Cost of Equity (seems to be 2.2% if I'm reading it right) - I think they have the wrong value in the Risk-Free Rate table cell.

I could be completely wrong on those points. And I'd love to know what assumption they're making on the timing of cash flows in 2024- 2025, which seem to make no allowance for scaleable production.

However, here's how they run their model:

Cheers,
GLTA(LT)H

MSB Price at posting: 93.0¢ Sentiment: Buy Disclosure: Held
15 Upvote

0 Great analysis

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