PEB - Pacific Edge Ltd

[Schrodinger]

This stock has a market cap to revenue ratio of more than 1000 think about that

[baller18]

Hence my opinion, that if they have not sold 16,000 - to 20,000 then the financial model is flawed.

Hey Hancocks, thanks heaps for your posts again.
Then wouldn't you have been concerned from the last report when they only had like three sales? If PEB commenced sales in mid july...
Shouldn't the last report had something more like 1000 sales to back up their financial model?

[MAC]

Mac, did you really just say the first sales report is not important? How would you justify a valuation like the current mcap with say, 100 sales HY in the current climate of revaluating growth stocks worldwide?

That comment doesn't stack up one bit to me! This is a company and its not differebt this time!

A bit of FA is good for you, it lowers the stress levels.

If you run sensitivity analysis on your DCF like I do prior to the announcements you will find that any result between 1,000 and 5,000 sales makes no meaningful difference at all to the valuation of the stock. This is because the discounted cashflows of the $100M level revenues brought forward dwarfs the anticipated FY14 result. Hence it's not really that important within the big picture, increasingly though this will change going forward through HY15 reporting and beyond.

It's a market of stocks and stock picking pays off, the overall sector may routinely oscillate above and below fundamental value, but for a long term investor that matters little, it's but a distraction and an opportunity to have a smile at trader behaviours.

Some think the goal of $100M in revenues in five years (or 10% market share) is a ambitious, others like myself perhaps think it may be a little conservative in a market that's growing 3% per annum.

But, we have to value a company by some logical means and most including myself run valuations on the long term goals and any guidance provided directly by the company.

[Snow Leopard]

I especially liked this line in the update:

"PEDUSA has set an ambitious sales target for its start-up year in 2013 which it expects to meet"

does that actually mean:

"PEDUSA has set an ambitious sales target for its start-up year in 2013 and we think they don't have a snowballs chance in hell of getting near".

Best Wishes
Paper Tiger

[I once worked for a company where the sales target was set by adding up how many units each salesman said he would sell in the next year. They never came close.]

Comment on the 13-Jun-2013 Investor Presentation: They said they would sell a lot.

You can ignore the Tiger sarcasm (at your peril) if you wish.

Best Wishes
Paper Tiger

[psychic]

Hey Hancocks, thanks heaps for your posts again.
Then wouldn't you have been concerned from the last report when they only had like three sales? If PEB commenced sales in mid july...
Shouldn't the last report had something more like 1000 sales to back up their financial model?

They started the Sales push July, the report was Sept 30. We are not selling kebabs here - there will be a long lead time so we may as well suck it up and wait.

[MAC]

Hi MAC, Pacific Edge were on the ground and promoting Cxbladder well before and during the laboratory build; so they did not just start making the urologists aware of the product last year. They also introduced the LUGs (Large Urology Groups) to the product by way of the user program, of which two LUGs signed up. They are now (March 31^st) 8 months into a 60 month to achieve a $100 Million target so I’m expecting 8-10% (~16,000 - 20,000 tests) otherwise the uptake is far too slow and I would be suspicious of the financial model. If it is only 5,000 I would be very disappointed.

Well ok, that provides us all with a range 1,000 through 20,000. And so, thus it would seem there is indeed something to be said for companies that issue numerical guidance.

I’d like very much to be proven wrong actually, but I just don’t think enough, if any, of the new sales staff made it onto the ground prior to the end of the reporting period.

I take your point Hancock’s about the user programmes probably rolling straight over into ongoing sales contracts or even widening out across the associated HMO organisations, and if I recall there were around 2,000 tests performed within the US user programmes last year.

I need to brood on this matter a little more.

[psychic]

Sorry, had not seen Hancocks repsonse.

[benjitara]

I simply don't expect anything like 16000 tests at this point in time and I wouldn't be selling if they only had a few hundred on the board. PEB still haven't established their absolute market in the USA yet so how we can make predictions on their projections given they haven't put the biggest relationships in place yet I'll never know. I'd like to see a couple of thousand tests done maybe, but I'm not worried about tests, I'm more interested in having a viable market at the moment.

[MAC]

I simply don't expect anything like 16000 tests at this point in time and I wouldn't be selling if they only had a few hundred on the board. PEB still haven't established their absolute market in the USA yet so how we can make predictions on their projections given they haven't put the biggest relationships in place yet I'll never know. I'd like to see a couple of thousand tests done maybe, but I'm not worried about tests, I'm more interested in having a viable market at the moment.

I guess what we are all chit chatting about is the very front end tip of an exponential curve. It's like dragging a short rope behind one and trying to estimate all the little twitches at its end.

The key though as investors is to keep doing the homework, analysis, work up a solid model and hold to it as long as the fundamentals remain positive. Traders and their obsessive wee nasdaq blips come and go like the seasons, but the shareprice gravitates to fundamental valuation, probably with increasingly with less volatility for PEB as time goes by and profitability and sales grow.

[Snow Leopard]

...
(a) A reason for the delays with payments hitting the books. (didn’t show in the report)

(b) That the LUGs (Large Urological Groups) migrated from the User Program to paying customers. (several hundred urologists)

(c) That sales have been made by PEDUSA.
...

PEDUSA (& Others) is 100% owned by Pacific Edge and thus the report is a consolidation of the activity of all the parts of the Group.

I would expect that every test sold in the period by any part of the Group to an external customer appears in the revenue line and and as a cash (if paid) or trade receivable (if not yet paid) asset.

Best Wishes
Paper Tiger