PAZ Pharma Zen

[Beagle]

Yes a very warm welcome back to my old mate Couta1 who I enjoyed a very good chat by telephone with earlier this week.

Secondly a HUGE THANK YOU you to Percy for his work with this one for which I am most appreciative.

From the annual meeting its was clear their overall goal is to double revenue and earnings in the next 3 years. If this was achieved we would see earnings of about 3 cps in the year ended 31 December 2023 eps for Fy20 1.77 cps x 2 = 3.54 less about 14% for the extra shares on issue as a result of the recent placement = ~ 3 cps. If this targeted growth rate can be achieved we would see earnings growing at an average rate of 20% per annum in FY21, FY22 and FY23.

If this is achievable I there fore value the shares at v = eps x (n + 1g) where eps is historical eps of 1.77 n = no growth rate of a stock which is currently 11 + 1g where g is the average expected growth rate over the next 5 years.
Using this primary vaoluation tool I therefore valued PAZ at 1.77 x (11+20) = 1.77 x 31 = ~ 55 cps.

I emphasize that this is my own methodology to find GARP stocks (Growth at a reasonable price). I accepted that sometimes shares trade above this formula based on other factors and that could have been the possibility that through economies of scale they could have grown their gross margin.

For some time now I have had valuation concerns, (historical PE of 54 at 95 cps and have been reducing my holding as I felt 95 cents was too far above my core beliefs as a GARP investor.
In addition there are liquidity concerns, no dividend and some discount to standard valuation methodology applicable to main board listed companies must be applied to be fair seeing as this is unlisted.

I was underwhelmed by comments at the annual meeting that Aiora was launched just as Covid hit and this hurt their chances of selling through the Daigou channel. This isn't coming back for years in my opinion.

Challenges around Covid with all that implies will in my opinion be enduring for many years. I think there are real risks around the execution of their plans and the above mentioned targets are now very challenging indeed.

It is clear that freight costs, technical installation staff availability, daigou distribution challenges and exchange rate headwinds are issues that are strong and enduring which further exacerbates my valuation concerns.

Finally, hitting 60 in 3 months I have resolved that from this point on if a company is NOT paying me dividends so I can enjoy a relaxed and comfortable semi-retirement it no longer meets my investment criteria.

In summary I feel a huge amount, (if not all), of the growth in the foreseeable future is already baked into the current share price, even at 75 cents (after considering the severity of the impact of these headwinds for FY21), so I completed my exit today.

I sincerely wish holders the very best and once again thank Percy for his extensive input on PAZ.

[stoploss]

Yes a very warm welcome back to my old mate Couta1 who I enjoyed a very good chat by telephone with earlier this week.

Secondly a HUGE THANK YOU you to Percy for his work with this one for which I am most appreciative.

From the annual meeting its was clear their overall goal is to double revenue and earnings in the next 3 years. If this was achieved we would see earnings of about 3 cps in the year ended 31 December 2023 eps for Fy20 1.77 cps x 2 = 3.54 less about 14% for the extra shares on issue as a result of the recent placement = ~ 3 cps. If this targeted growth rate can be achieved we would see earnings growing at an average rate of 20% per annum in FY21, FY22 and FY23.

If this is achievable I there fore value the shares at v = eps x (n + 1g) where eps is historical eps of 1.77 n = no growth rate of a stock which is currently 11 + 1g where g is the average expected growth rate over the next 5 years.
Using this primary vaoluation tool I therefore valued PAZ at 1.77 x (11+20) = 1.77 x 31 = ~ 55 cps.

I emphasize that this is my own methodology to find GARP stocks (Growth at a reasonable price). I accepted that sometimes shares trade above this formula based on other factors and that could have been the possibility that through economies of scale they could have grown their gross margin.

For some time now I have had valuation concerns, (historical PE of 54 at 95 cps and have been reducing my holding as I felt 95 cents was too far above my core beliefs as a GARP investor.
In addition there are liquidity concerns, no dividend and some discount to standard valuation methodology applicable to main board listed companies must be applied to be fair seeing as this is unlisted.

I was underwhelmed by comments at the annual meeting that Aiora was launched just as Covid hit and this hurt their chances of selling through the Daigou channel. This isn't coming back for years in my opinion.

Challenges around Covid with all that implies will in my opinion be enduring for many years. I think there are real risks around the execution of their plans and the above mentioned targets are now very challenging indeed.

It is clear that freight costs, technical installation staff availability, daigou distribution challenges and exchange rate headwinds are issues that are strong and enduring which further exacerbates my valuation concerns.

Finally, hitting 60 in 3 months I have resolved that from this point on if a company is NOT paying me dividends so I can enjoy a relaxed and comfortable semi-retirement it no longer meets my investment criteria.

In summary I feel a huge amount, (if not all), of the growth in the foreseeable future is already baked into the current share price, even at 75 cents (after considering the severity of the impact of these headwinds for FY21), so I completed my exit today.

I sincerely wish holders the very best and once again thank Percy for his extensive input on PAZ.

Thanks for that Beagle , I was the beneficiary of some of your selling .
I hear you loud and clear .
If this heads South or flatlines , no worries we heard you .Please don't turn this into another A2.
Re the Diagou channel. I'm not too worried I think they are going to make more money from their bulk sales to smoothie makers and the likes , plus affectionate Beagle owners in the future
with dried pet food treats...

Cheers

S/L

[Beagle]

Naturally I reserve the right to post other relevant thoughts that I think might help others in their understanding of this company. Lessons have been learned from the ATM fiasco.

I am still very much in the PAZ zone (Percy Appreciation zone) and really appreciate how he has helped me on my investment journey.
I hope this does really, really well but there are serious challenges ahead apparent to me. More than happy to show my support with continued ordering of the two Aiora products I mentioned yesterday which I think are really good. In fact I am sure the blackcurrant one is exceptionally good for your eyes and blood pressure. Doctor was very happy with my blood pressure today (it is normally up at this time of year with work pressure and me being a fat lazy dog with a strong dislike for regular walks in the winter, so I don't do them).

[couta1]

Thanks for the welcome back comments although it will be in a very limited way and mainly on this thread(Not worth commenting on the A2 thread even though I still have a stout holding)
I see no reason to sell any of these shares after today's report unless you need the money or its an estate selldown, in fact i added another good number today and would have bought all of Beagles plus a few more(I have the latest shareholder list so i know. Lol)This is my only true long term investment and I have a number in mind that I want to hit and still have a bit to go.
There will come a time when you won't be able to buy these at current prices so over the next while is the time to buy or add IMO.

[Czechmate]

I have been trying to buy using their latest offer keeps rejecting my info despite being clearly correct.

Frustrating and a sign of poor marketing nous?

Also who thought up the truely forgeble name of Aiora?

Just saying,
I am not selling but having some doubts about their offering.

[percy]

I have been trying to buy using their latest offer keeps rejecting my info despite being clearly correct.

Frustrating and a sign of poor marketing nous?

Also who thought up the truely forgeble name of Aiora?

Just saying,
I am not selling but having some doubts about their offering.

I tried ordering ,but made mistakes.Wanted 2 Bone + joint bottles, and code did not work.Thought ordering one bottle I would get the free one.Had to order two.
Tried again and went to pay ,entered code then the correct amount [$29.99] came up.Arrived this afternoon.Great buying at $15 each.I use for my worn out hip,while number one daughter uses for her hair,and gets stronger nails..
Was in Bargain Chemist Eastgate this morning.Buy one Aiora product and get a different one free.I brought a Vascular =Vision for the wife,who has trouble with her eyes.Paid $27.99 and received a free Bone + Joint.Great buying at $14 each.
AiOra name was designed for the Asian market.Those markets like to buy the same product that is available in NZ.I think aiora means good health.
PAZ supply ingredients to US and Europe,so at this stage the AiOra products will not be sold in those markets, so as PAZ does not compete with major bulk ingredient customers.

PS You are lucky your spelling only has to be excused on a Friday night..!...lol.

[Czechmate]

Excuse my spelling it is Friday night!

[iceman]

Y

Challenges around Covid with all that implies will in my opinion be enduring for many years. I think there are real risks around the execution of their plans and the above mentioned targets are now very challenging indeed.

It is clear that freight costs, technical installation staff availability, daigou distribution challenges and exchange rate headwinds are issues that are strong and enduring which further exacerbates my valuation concerns.

Thanks for your valuable thoughts and calculations Beagle. I am well content and happy with progress and will not be selling any anytime soon. I totally agree with the issues you mention above about COVID related costs and restriction negatively impacting PAZ. But sadly I think the current strict border closures and movements of people and freight are doing much more economical harm than most people in NZ seem to realise and will be seen in financials for almost all exporters in importers in the next couple of years,. I suspect it will be quite ugly for many.

[couta1]

Any panic sellers will have the weekend to contemplate the outlook in the result before offering up their shares for sale, Friday announcements can be a good thing. Lol

[Beagle]

https://usx.co.nz/uploads/paperclip/...pdf?1596659417

https://usx.co.nz/uploads/paperclip/...pdf?1628191018

Just a couple of things I want to highlight as a numbers man and nuances around the differences between the press release last year and yesterday.

Last year's announcement was quite clear about not just EBITDA but also net profit before tax, see first link above. This years information release made no mention of the profit or loss but only referred to Trading EBITDA. Note they have not used the phrase Trading EBITDA before, see second link above.

How did I interpret this yesterday ?

Firstly it should be noted that last year the difference between EBITDA, (not trading EBITDA) and net profit before tax was ~ $1m. If we assume the same level of expenses between the EBITDA line and net profit line this half, (its likely to be much higher in my opinion, see below), then Trading EBITDA of $776K less ~ approx $1m in expenses below this line means it is likely they made a material net loss before tax for the 6 months. I think it is "unfortunate" that did not make this clear and will leave it to others to speculate as to why they didn't want to announce what the real loss was.

Now back to the new use of the term "trading" EBITDA. It would appear there were some material costs associated with the capital raise and they have been keen to exclude them from the EBITDA figure by use of the new phrase "Trading EBITDA". These are likely however to have to be disclosed below the EBITDA line and before the net profit / loss line rather than treated as an extraordinary item so this is likely to add to the net loss it would appear the company incurred in the first half, which could be a material figure before being exacerbated by capital raising costs.

Not trying to talk it down. Its just that not everyone has the skills of a bean counter or understands the nuances of financial reports or reporting methodologies so I just want to make these things a bit more transparent, (seeing as the company itself appeared for reasons best known to itself), to release the information in a less than completely transparent way. Please make your own assessment of why they chose to do this.

Finally I observed (speaking of numbers), that they talked yesterday about 45 shipping containers awaiting shipment, down just 5 from the 50 shipping containers they talked about being a major problem back at the annual meeting. So in the last two months and one week they have procured a solution for just 10% of this new plant that desperately needs to be shipped here. (Refer back to the points I made yesterday about the execution risks in their growth strategy).

Not trying to antagonize anyone on here. I just want to make sure people are aware of these things so they can decide what to do about it, if anything for themselves.

Last year there was not a further release of information between 6 August 2020 and the capital raise of 15 January 2021, more than 5 months. From this we can infer that nothing further may be forthcoming for quite some time and investors are quite probably deliberately left in the dark perhaps until they report the full year results in March / April 2022 ?

Isn't that concealment of highly relevant financial information for a very long time ? Surely investors deserve to know the real loss for the six month period so they are not disadvantaged compared to "insiders" ?
No company on the main board would be allowed to conduct themselves in such a way. I guess this highlights the extra risks on investing in the unlisted market. Maybe our resident shareholders association CEO expert might take an interest in this ?