AFT Pharmaceuticals

[Sgt Pepper]

Insulting for whom?

I guess they are for a so called growth company quite slow growing. OHE anyone?

They are on the international scene just another minuscule "me-too" with no moat ... and their praised differentiation is just a mix of two well known and generic pain killers where the patents did run out a long time ago. Any doctor can prescribe medication with the same effect but without using their product (and they do ...).

Where do you see their competitive advantage? What can they do better than the big boys in Europe and the US or the cheap boys in India?

And sure - board and management holding plenty of shares can be a good sign, but it can be as well a sign of some rich and incompetent celebrities deciding to run their own and other shareholders money into the ground. Look at the fortunes of OHE. Look at CBL ...

I am not saying that AFT will go the same path, but it must be legitimate to ask what's different ...

Holding lots of shares does not mean that the people holding them are clued up or capable to run a successful company ...

Ah yes ... and you might be not quite up to date on Edison's research ... while they still use positive sounding words (I guess they are paid for that, aren't they) - predictions of growth and revenue did shrink somewhat since the last result presentation ...

https://www.edisoninvestmentresearch...harmaceuticals

I don't have their 12 month target, but given that they recently downrated earnings and revenue expectations would it make sense if they down rated the forecast SP as well.

As well - do you know any other research company looking at AFT? There is only one analyst in 4-traders and I am pretty sure it is Edison.

But hey, there are good evolutionary reasons for the endowment effect. Just a pity we can't get rid of it when dealing with stocks ; Anyway - I am sure we will review the performance of this company from time to time ... highly educational - looking forward to that ;

Maxigesic is indeed a combination of paracetamol and ibobrufen, however you you may be unaware they have also developed an intravenous formultation which will be of interest for hospitals as part of their prescribing formulary

[peat]

just wanted to say that I bought some AFT eye drops the other week. I didnt know they made those as well. They were very cost effective at a third the price of the big pharma options, and just as good as far as eye can tell.

re: THE MOAT - you could say its the branding. They're building that brand - just like ATM , and other companies with faux moats.

Is Coca-Cola a moat?
Yes - it has a patent on the exact formula
No- anyone can make fizzy cola and sell it in a bottle.

Combining two pills into one is simply more convenient for everybody and so will inevitably be the path of least resistance.


Also I think AFT is manufacturing in India, so has a low cost base.

Now that I'm watching occasional broadcast TV (I never used to) I seen some adverts of theirs on the tele. I wasnt that impressed but then I dont really appreciate those ads like eg Michael Hill (Jeweller), or that Chinese guy with the big teeth.

Oh and dont forget they have new regions coming on stream, as well as (maybe) lower legal costs in the order of a mill or two.

btw - I did review the result and was pretty good with it. I didnt post, which is why W69 has 20k and I only have a few

[trader_jackson]

Insulting for whom?

I guess they are for a so called growth company quite slow growing. OHE anyone?

They are on the international scene just another minuscule "me-too" with no moat ... and their praised differentiation is just a mix of two well known and generic pain killers where the patents did run out a long time ago. Any doctor can prescribe medication with the same effect but without using their product (and they do ...).

Where do you see their competitive advantage? What can they do better than the big boys in Europe and the US or the cheap boys in India?

And sure - board and management holding plenty of shares can be a good sign, but it can be as well a sign of some rich and incompetent celebrities deciding to run their own and other shareholders money into the ground. Look at the fortunes of OHE. Look at CBL ...

I am not saying that AFT will go the same path, but it must be legitimate to ask what's different ...

Holding lots of shares does not mean that the people holding them are clued up or capable to run a successful company ...

Ah yes ... and you might be not quite up to date on Edison's research ... while they still use positive sounding words (I guess they are paid for that, aren't they) - predictions of growth and revenue did shrink somewhat since the last result presentation ...

https://www.edisoninvestmentresearch...harmaceuticals

I don't have their 12 month target, but given that they recently downrated earnings and revenue expectations would it make sense if they down rated the forecast SP as well.

As well - do you know any other research company looking at AFT? There is only one analyst in 4-traders and I am pretty sure it is Edison.

But hey, there are good evolutionary reasons for the endowment effect. Just a pity we can't get rid of it when dealing with stocks ; Anyway - I am sure we will review the performance of this company from time to time ... highly educational - looking forward to that ;

The 'moat' concept is well explained above by peat, and yes (I believe) the manufacturing is of low cost it is largely, if not entirely, outsourced.

Lets have a look at some of those other companies you've mentioned (it is of interest)
- CBL: Although I don't really know what exactly went on (as it seemed hard to understand things), perhaps some 'creative accounting' (or at least questionable accounting, and arguably a questionable product) from a company that seemed to do so well yet need capital pretty much annually - even PEB, despite having been listed for a much longer time, on average goes quite a bit more than a year without a cap raising... who would have thought PEB would outlast CBL and WYN!

- OHE: Actually had consecutive revenue declines the past 2 years as well as burning through ALOT of cash while not really being able to deliver (at least since it has been listed) - big lumpy contracts, with arguably big lumpy costs as well

- WYN: Revenue flat for 3 years, while raising capital often less than a year after the last capital raise - big lumpy contracts, with arguably big lumpy costs as well

- PEB: Highly scalable model, very good product, but seems to burn through far more cash, year after year, than it can gain in revenue - and importantly, revenue growth has not been fast enough to 'catch up'... very much a watch this space (for, increasingly, all the wrong reasons...)

- XRO: highly scalable model, very good product (by the way, people said Xero, with what was no more than a "website" had zero moat as well, please pardon the pun), was criticized for years for their cash burn but have really turned it around - as has their share price - ultimately, they delivered.

- AFT? well highly scalable model as well, very good products, 18 years of non stop revenue growth (several, if not most, of those with profit)... but nearly 90% of the shares currently on issue are basically 'locked up' resulting in not a single insto being interested nor on board - no wonder nobody can get excited and start pumping them up with "research reports"!

So really there is ALOT different with AFT compared to the top 4 companies discussed above - credible product, credible management, credible (and consistent) revenue growth... and 9 in 10 shares aren't for sale

And Edison's research, as at 28 March 2018, was for $4.73 per share - so it ain't them (I don't think concensus estimates counts paid research such as edison - I would be very interested to see who else is covering it and their view with the $2.83 target price)
They (then) had the following predictions: 80.6m operating revenue for FY18 (vs 80.1m actual) and 12.5m loss for FY18 (vs 12.7m actual). In FY19 they had 98m operating revenue and a 0.5m loss - I reckon they will beat at least 1 of those 2... apparently they were going to update their research after results so will have to check back soon... then again who cares - they are waay out by nearly 100% with their $4.73 valuation per share clearly!

I do look forward to reviewing it from time to time as well

UPDATE: I note Edison said this in their post FY18 results: "We are increasing our valuation to NZ$478m or NZ$4.91 per share from NZ$460m or NZ$4.73 per share, mainly due to increased expectations for Australian revenues and rolling forward our NPV. This was partly mitigated by slight reductions to expectations for New Zealand and RoW and a higher net debt balance. Our fundamental assumptions such as terminal growth and terminal EBIT margin remain unchanged. We expect to update our valuation following additional information regarding the status of Maxigesic launches." - that estimate at $2.8 something is not from edison that is for sure! They also expect AFT to make a $1m profit FY19 before making a near $11m in FY20 and bigly and better in FY21 - I'm thinking $20m+

[BlackPeter]

Interesting ... so there must be somebody else out there using the same revenue and profit forecasts like Edison and coming up with a lower value ... any of the AFT holders know about that analyst / researcher?

Anyway - both forecasts don't make a lot of sense in my view, but if your info about the Edison forecast is right, than they are clearly delusional vs just unrealistically optimistic ;.

Never mind - I don't see AFT in the WYN or PEB category (they clearly do sell stuff ...), but I don't see them in the stellar growth category either. Not sure when they made money (as you say), this must have been ages ago. My records go 5 years back and the best of these years was 2013 with a "black" ZERO as a result, all other years they reported losses. 2 dear 4 me. But time will tell.

[hardt]

Interesting ... so there must be somebody else out there using the same revenue and profit forecasts like Edison and coming up with a lower value ... any of the AFT holders know about that analyst / researcher?

Anyway - both forecasts don't make a lot of sense in my view, but if your info about the Edison forecast is right, than they are clearly delusional vs just unrealistically optimistic ;.

Never mind - I don't see AFT in the WYN or PEB category (they clearly do sell stuff ...), but I don't see them in the stellar growth category either. Not sure when they made money (as you say), this must have been ages ago. My records go 5 years back and the best of these years was 2013 with a "black" ZERO as a result, all other years they reported losses. 2 dear 4 me. But time will tell.

Price targets and valuation are two very different things...

[Patient Panda]

I would suggest anyone determined / keen to invest in this sector on the NZX / ASX would be far better off investing in CSL even at its current overvalued shareprice. I think you’d be far better served by a company with a great pipeline of new therapies and drugs that is making a solid, consistent profit with good ROE.

Though I’ve seen several ads on TV for Maxigesic I see it as having very little marginal benefit and basically zero economic moat.

I could be wrong, just my opinion.

[RRR]

AFT is very likely to do better this year. Sales will keep growing and the expenses will come down (R&D and corporate expenses). They might even make a profit. Cash balance has stopped dropping according to the management (good sign always) and they wont need to take anymore debt.

Discl- holding from ipo

[trader_jackson]

Operating cash outflows:
1H17: 10.3m, 2H17: 8.7m
1H18: 7.7m, 2H18: 3.2m
There is no denying that operating cash outflows are certainly reducing rapidly!

Probably operating cash flow positive come end of FY19 + a profit, PE of 10 come 2021?
Just don't tell Mr Market, it still thinkgs this is a WYN-like company!

[trader_jackson]

http://nzx-prod-s7fsd7f98s.s3-websit...680/283829.pdf

Slide 21 is probably why it was marked as price sensitive.

From some quick math, FY23 AFT may have $300m in annual revenues (up from $80m) at current, and I reckon generating around $50m NPAT, conservatively speaking - that would make the current share price of $2.30 extremely cheap - a PE of less than 5 for a company that has consistently grown top line well into the double digits, and has most of those times, been profitable.

I'm looking forward to the profit announcement in FY19 - the first as a listed company.
Wow 2 decades of revenue growth, never a down year since starting up with $50k capital in a taka garage (almost like a ryman of the NZ pharmaceuticals industry, but Mr Market clearly doesn't see it that way - share price down today).
Chances are FY18 is the last time AFT will make a loss, ever... dare I say it.

FY23 ish is probably when the founder and CRG will reduce their holdings (CRG perhaps a bit sooner) - then we'll see all the bullish reports come out from analysts. Until then, while revenues will continue to shoot north, share price will probably continue to go sideways simply due to the lack of liquidity. ASX listing doesn't seemed to have helped much either.

Rest of the meeting was top notch stuff as well.

Disclosure: I'll be trying to buy some more.

[peat]

Random pharmacy in Qld tells me Maxigesic selling very well

i liked the Chairmans address, haven’t looked at the slideshow yet,( operating from my phone )