PAZ Pharma Zen

[Beagle]

Fascinating watching the price discovery evolve. Now bid 70, offer $1.00.
Honestly I am not sure how to value the shares now. A while back I guessed they could double normalised* eps again in FY20 to about 2.5 cps (*adjusted for Covid effect).
Since then the currency has worked against them and freight costs so maybe at a wild guess, (which is all it is) normalised eps might be 2.2 cps for FY20.
What I think investors should be focused on is eps for FY23 and if the company can triple sales by then I would think earnings will also at least triple, possibly quadruple.
Really hard to value high growth companies that grow eps at a phenomenal rate. Might have to mull that over for quite a while (but will definitely not be selling) !

[Joshuatree]

Re $147 mill mkt cap already plus ops etc. At $1 mkt cap re $208 mill.

[Sideshow Bob]

also liked the emphasis on pet treats / pet food. Booming industry.

I wouldn't get too excited too fast on the pet treats/pet food. While there has been tremendous growth in petfood/treats (Tux biscuits or Jellymeat anyone??), it is also a hugely crowded market and will take significant resources and marketing to get to some critical mass. PAZ are also relatively late to the party, and doesn't appear to be a bolt on to any business with existing customers or channels.

Presumably will be freeze-drying? Makes sense as makes for a high-quality end product, with excellent attributes - albeit at a relatively high cost of production. The positive aspect will be through their own facilities - as contract FD capacity in NZ is heavily tapped out at least currently. So PAZ can manage production, cost etc, and an advantage over some others. The only small issue may have is managing inedible product and technical/pharmaceutical/edible grade product through their factories - albeit not insurmountable with time/physical separation. I would imagine relatively simple product to process, with a regular/frequent freeze-drying cycle.

It also leverages off current raw material relationships - another positive. However at the same time, some of these suppliers will have existing (pet) business for this material - and some of these suppliers are starting their own forays into petfood market and going downstream - ie Meateor/Alliance, Progressive etc.

Believe me, there are many, many companies in and outside NZ who are producing pet treats/food in NZ. Many are small-fry, contract processing in NZ - and focusing on the marketing/sales, and some are overseas entities. At Pet Fair Asia for instance, there would have been at least 6 mainly Chinese companies, who are all processing in the same factory in the Bay of Plenty, and probably another 10 all processing through a canning plant in Gisborne. That would have been amongst the probably 800+ petfood/treat brands that were there.

Now I'm not poo-pooing the idea, just trying to temper expectations. There is potential out there, that takes time and investment, and probably a little luck. I just can't see what their competitive advantage is (freeze-drying isn't enough) - or whether trying to fill up their capacity while they can. I would think they've also probably looked at Aroma and them starting pet treats a couple of years ago. NUTREATS - 100% natural animal nutrition from New Zealand Ziwi and K9 have been success stories, but also have been a slow burn over a long time that has needed plenty of investment along the way.

For my mind, their existing nutraceutical products are where they have much more of an advantage, can add more margin and can build more differentiated consumer products. Pet treats/food are more challenging to get above the noise and carve out a niche - a challenge but doable.

[macduffy]

Thanks, Bob, for that reminder that pet foods/treats is a crowded and competitive space.

[stoploss]

" Pet treats/food are more challenging to get above the noise and carve out a niche - a challenge but doable."
Don't worry we have a vociferous Beagle on our side
In all seriousness thanks for bringing some reality to the challenges. I think they have said that one of the new sites and plants will be used for the petfood so maybe it will be exclusive
and that way avoid contamination.
Another entrant to the market recently as well
https://www.rnz.co.nz/national/progr...et-food-market

[stoploss]

50,000 Through @ 70 cents
Left
.65/1.00 75K*20K

[Sideshow Bob]

" Pet treats/food are more challenging to get above the noise and carve out a niche - a challenge but doable."
Don't worry we have a vociferous Beagle on our side
In all seriousness thanks for bringing some reality to the challenges. I think they have said that one of the new sites and plants will be used for the petfood so maybe it will be exclusive
and that way avoid contamination.
Another entrant to the market recently as well
https://www.rnz.co.nz/national/progr...et-food-market

They can produce out of edible product - but would be more costly. Makes sense to have some standalone/separate facility, especially with MPI. They manage meat products/shellfish etc now, so not a major.

Indeed, another new entrant. Partnership includes an Entrepreneur of the Year, and it isn't Moon or Achten......

Progressive that I referred to, so own the raw material, own the primary production, own the freeze-dry process etc. Then they have what the likes of Moon & Achten can bring to market the product. Between them, sure would have deep enough pockets to have a decent crack.

Not to mention Nood, which is another of the Mowbray's business - to go along with nappies, vitamins as trying to shake up the sector.

But noted on a vociferous Beagle, who will no doubt bark wildly until we all feed our pooches PAZ products!!

[percy]

But noted on a vociferous Beagle, who will no doubt bark wildly until we all feed our pooches PAZ products!!

Should PAZ add the same ingredients, I am achieving with their Bone +Joint AiOra tablets,to their pet food, I think it will not be just the Beagles,but all the Worlds' Labradors who will be barking with joy...
Is it true Labradors have a loader bark than Beagles?

[peat]

The market has responded unusually to the issue of up to 45 million convertible redeemable preference shares at 40c
Normally the market price would move towards the new issue price

And what are the terms of convertibility etc. I guess its a bit unclear - and we will have to assume 1:1

[percy]

The market has responded unusually to the issue of up to 45 million convertible redeemable preference shares at 40c
Normally the market price would move towards the new issue price

And what are the terms of convertibility etc. I guess its a bit unclear - and we will have to assume 1:1

Yes 1;1
35 mil at 40 and [option] balance of 10mil between 40 and 45 cents.[Not sure the term of the option].
Lock up is for 3 years.
Not mentioned is the fact directors have also agreed to lock up their shares for 3 years, with a max of 5% of their holdings being able to be sold.
This means 50% of PAZ's stock is locked up.

I would point out there are a number of large shareholders who are unlikely sellers.