The valuations included in the Scheme Booklet are highly...

The valuations included in the Scheme Booklet are highly informative, at various levels, for both the intentions of the analysts concerned and for the comprehensive financial information that they provide.

The ridiculously excessive value discounting that has been applied relates to the former and is deserving of comment in separate posts.

The projections of future ResApp revenues estimated by David Randerson in the Acuity Report however are well thought out and are of particular interest to shareholders wishing to still be shareholders when those future earnings are recorded.

Randerson estimates that it will take about 4 years from launch for each of the four ResApp products to reach peak earnings (Table 2, page 19). They are designated as ResAppDx, ResAppCC, SleepCheck and ResApp COVID-19 and are assessed for entry into the US, EP, CA, AU, JP and Asia markets. Value upside exists for inclusion in the African and South American markets or for the development of additional products.

Estimates of peak annual sales revenues for each product are given in Tables 3 to 6 of the Acuity Report (pages 19 to 23). These sum to US$462.8M p.a. (or A$617M p.a. at an AUD/USD exchange rate of 0.750).

Randerson adjusts this A$617M annual revenue figure to allow for probability risk (i.e. uncertainty) in his summary statement below:
“Our analysis estimated potential ResApp revenues of approximately $300 million in five or six years’ time from the target regions and current product portfolio”.

So what is the significance of that well-considered statement?

Below is a graphic that provides current trading details of the eight companies in the ASX top 500 falling under the advanced medical technology or medical software classifications. As can be seen from the graphic the average Price-to-Sales(Revenue) Ratio that the currently depressed ASX market assigns to such companies is 12.17.



Applying this average Ratio to a company with annual revenue of $300M generates a Market Cap of $3.65 billion.

Acuity’s probability-adjusted expectation therefore is that ResApp’s Market Cap, assuming it is allowed to remain listed, will increase to reach around $3.65 billion over the coming few years.

This of course needs to be balanced against the opportunity to accept $125 million next month as being beneficial to shareholders.

Acuity’s expert opinion quantifies the expectations and reasoning of those currently choosing ‘Against’ as their voting option.