PEB - Pacific Edge Ltd

[Whipmoney]

Whip..

The TA discipline works exactly the opposite scenario to your way of perceiving it.

Yes it is true you may suffer losses ...but it is the gains which far exceed the value of your losses...

It is extremely rare to see a stock go belly up without any TA sell signals... The whole methodology of the TA discipline is the ability to escape without suffering big losses....the ability to quit your losses early on with the sell signals thereby 90+% of the time they are relativity small losses (10-15%) and TA lets your much more common gains keep on running ... some of them end up being extremely big gains and sometimes some continual upward price movements can last for years...Phaedrus using a similar medium term TA discipline had FBU for 7 years (a six bagger in total).

Two words... Pike River.

[skid]

Mmm it's like i'm a trader but on short-term positions I would probably say that I've had closer to a 30% success rate....

In terms of Long-term positions, well I guess closer to a 100%.

Total return over the last 12 months > 70%.

I guess what let me down was over-thinking/churning my positions in a vein attempt to mitigate the 'downside' potential of suspected "down-trends".


For the record thought, I wasn't scoffing at Hoop getting it right 70% of the time.. I was just pointing out that it can only take a single bad trade/position to wipe out a significant amount of your capital.. in which case a 70% success won't necessarily equate to "guaranteed" (i.e. 100%) outperformance.

I mistakenly thought you were building a case for not useing both TA and FA--apologies

[skid]

Two words... Pike River.

That was a pretty unusual situation--I guess some would argue FA should have caught that--I guess every sector is somehow exposed to the unexpected--plane crash--Ebola--fire at the lab or some contaminant or lab error resulting in a suet --guess there will always be the unexpected remote possibility you cant plan for.

[MAC]

Gross margins are absolutely important !

Gross Margin = (Revenue – COGs) / Revenue

What gross margins provide analysts with is not only a feel for the underlying relative efficacy between products, but it also it provides the basis for determining and calculating forward EBITDA.

Margin analysis is everything in determining forward free cashflows and therefore valuations for molecular diagnostic companies.

Molecular diagnostics, RNA based at least, are very very low capital propositions indeed, once the laboratories are constructed and equipped and the assay software has been developed, there is virtually no capital outlay post product launch.

That's where Pacific Edge are presently at with Cxbladder, they have pretty much invested the capital now and are presently ramping revenues.

The ‘cash burn’ as you call for molecular diagnostic stocks is not proportional or linked to sales or customer numbers like it commonly is with IT tech stocks. It’s a different sector and a different business model.

The lab and sales staff are hired at the get go, right at beginning, and pretty much hold steady in number from that point in time as revenues ramp and grow.

COGs for Cxbladder is presently around $10M, it will go to, by my estimate, to around $19M and hold there when they finish hiring, they have 7 sales staff yet to hire.

At FY19 their goal is $100M in revenues, COGs by my estimation (for Cxbladder) are likely to be around $19M max, EBITDA circa $80M, NPAT quite conservatively at $50M.

[winner69]

Gross margins are absolutely important !

Gross Margin = (Revenue – COGs) / Revenue

What gross margins provide analysts with is not only a feel for the underlying relative efficacy between products, but it also it provides the basis for determining and calculating forward EBITDA.

Margin analysis is everything in determining forward free cashflows and therefore valuations for molecular diagnostic companies.

Molecular diagnostics, RNA based at least, are very very low capital propositions indeed, once the laboratories are constructed and equipped and the assay software has been developed, there is virtually no capital outlay post product launch.

That's where Pacific Edge are presently at with Cxbladder, they have pretty much invested the capital now and are presently ramping revenues.

The ‘cash burn’ as you call for molecular diagnostic stocks is not proportional or linked to sales or customer numbers like it commonly is with IT tech stocks. It’s a different sector and a different business model.

The lab and sales staff are hired at the get go, right at beginning, and pretty much hold steady in number from that point in time as revenues ramp and grow.

COGs for Cxbladder is presently around $10M, it will go to, by my estimate, to around $19M and hold there when they finish hiring, they have 7 sales staff yet to hire.

At FY19 their goal is $100M in revenues, COGs by my estimation (for Cxbladder) are likely to be around $19M max, EBITDA circa $80M, NPAT quite conservatively at $50M.

Aren't you somewhat confused with this COGS figure and subsequent Gross Margin.

COGS are the actual direct cost of the tests they sell. All the other stuff you mention like sales people etc are expenses, not COGS

Look at the Edison report financials for 2016e to see what I mean. Revenues of 14439 and cost of sales (COGS) of 1990 to give a Gross Profit of 12449 - a Gross Margin of 86%. Sounds about right eh.

Not shown as a line in their financials are cash expenses of 11029. Take that from the Gross Margin and you get EBITDA of 1420.

Get the gist why I think you appear to be a bit confused.

So on your $100m of revenues and 80% Gross Msrgin we get $80m. Take off your $19m of expenses but lets say $20m and we get Ebitda of $60m. There still will be the D and A and maybe if PEB are paying tax by then (don't know that) so a bit of T and as such I would think NPAT would be a lot less than your $50m

My model has a Free Cash Flow of $35m in the year they achieve $100m revenues. That's probably why my DCF valuation is a lot less than yours.

[MAC]

Yep I follow that thanks, and concede too that by pure definition and the precise accounting of costs, COGS will include lab staff and the manufacture of the test kits but not the field sales staff or distribution costs (well postage and handling).

I'm not sure Edison are using a strict apportionment of what should be inside or outside of COGS either actually, they seem to have at FY16 anyway, too little inside and too much outside, COGs in the first year of profitability shouldn’t quite yet be 86%.

It is my confusion though with an apology, perhaps Edison’s also, but on that understanding and through the apportionment of overall holistic costs more precisely, it should be more like;

FY19 $100M revenues, $80M gross profit, $75M EBITDA, $50M NPAT

I’m comfortable with that.

Do note though Winner that the only significant capital outlay would be at FY20 for a lab extension, Pacific Edge have a purchase option on the second half of the floor within the building they occupy in the US, that’s an ambitious sign in itself.

They do need as I understand additional lab equipment for every 40,000 tests when ramping up, but that's sundry capital, thousands, definitely not millions, it's a very very low capital model indeed.

Not much to depreciate on that basis either then, the US lab cost $6M to establish in 2013.

[Snow Leopard]

Yep I follow that thanks, and concede too that by pure definition and the precise accounting of costs, COGS will include lab staff and the manufacture of the test kits but not the field sales staff or distribution costs (well postage and handling).

I'm not sure Edison are using a strict apportionment of what should be inside or outside of COGS either actually, they seem to have at FY16 anyway, too little inside and too much outside, COGs in the first year of profitability shouldn’t quite yet be 86%.

It is my confusion though with an apology, perhaps Edison’s also, but on that understanding and through the apportionment of overall holistic costs more precisely, it should be more like;

FY19 $100M revenues, $80M gross profit, $75M EBITDA, $50M NPAT

I’m comfortable with that.

Do note though Winner that the only significant capital outlay would be at FY20 for a lab extension, Pacific Edge have a purchase option on the second half of the floor within the building they occupy in the US, that’s an ambitious sign in itself.

They do need as I understand additional lab equipment for every 40,000 tests when ramping up, but that's sundry capital, thousands, definitely not millions, it's a very very low capital model indeed.

Not much to depreciate on that basis either then, the US lab cost $6M to establish in 2013.

That is going straight to the pool room.

Best Wishes
Paper Tiger

[Mista_Trix]

Whip..

The TA discipline works exactly the opposite scenario to your way of perceiving it.

Yes it is true you may suffer losses ...but it is the gains which far exceed the value of your losses...

It is extremely rare to see a stock go belly up without any TA sell signals...The whole methodology of the TA discipline is the ability to escape without suffering big losses....the ability to quit your losses early on with the sell signals thereby 90+% of the time they are relativity small losses (10-15%) and TA lets your much more common gains keep on running ... some of them end up being extremely big gains and sometimes some continual upward price movements can last for years...Phaedrus using a similar medium term TA discipline had FBU for 7 years (a six bagger in total)

PEB share price performance has keep TAers out of this stock more often than in it...

EDIT: just read your last post...Yes the gains with your discipline is similar to the common basic medium term TA discipline one would expect at the moment...

What medium term signals are your preferred ones Hoop?

[Baa_Baa]

What medium term signals are your preferred ones Hoop?

With respect MT, Hoop appears a patient soul, diligent and generously sharing as well, though why would he not simply refer you to the chart that he posted and recently referenced again, which has the medium term indicators on it along with his buys and sells? If you study that chart you will see that apart from his last sell which he noted as better opportunities with less risk elsewhere, the previous trades coincide with the indicators he chose to perfectly announce the time to buy and the time to sell .. which he did. If you need a clue, look at the DMI and align that to the price, then look at whether the other indicators confirm. Hoop patiently explains this time and time again.

[skid]

That is going straight to the pool room.

Best Wishes
Paper Tiger

Its hard to watch isnt it,PT

He's been trying to make people feel better about losing money ever since last Feb(in other words ,all the way down) with assumptions--''ramping up revenues''--no one knows if they are ramping up revenues(enough to meet their projected growth curve)-----far to few IMO attached to those kind of statements.
Whats the point of have alot of different ''sausages'' in your machine if you (potentially)cant sell them.
Even having the best product is not enough to assume success in the real world of medical commercialization--thats not down ramping -its reality.
If you take that on board and still want to chance an investment to support ,for better ,or worse,a Kiwi co.,then thats fine--but lets keep it real.