PEB - Pacific Edge Ltd

[twotic]

Looks like they have Twotic, http://www.edisoninvestmentresearch....y/pacific-edge

Makes, their valuation range now $0.42 to $3.57

From present SP that’s, -47.5% to +346%, just a little more upside than not.

Cool thanks!

As a largely irrelevant aside, when I contacted one of Edinson's analysts to ask for the source of some of their info, the analyst very confidently replied they came from conversations with CEO Donald Darlington (or something similar) I had a quiet chuckle.

[MAC]

Of course the interesting thing about that Edison valuation range, $0.42 to $3.57, is the two key sensitivity analysis variables giving rise to it, “price point”, and, “market penetration”.

Want to know how Pacific Edge are doing, and where to place them in that range from the pending report ?

1. Then look for an indication of present price point beyond the $550 per test proposed by Pacific Edge in 2011, noting that both Forbar and Edison expect it to rise over the next few years, and,

2. Assess progress against plan for market penetration in 2019, and a reaffirmation of the five year goal.

And no, for the cynical and FA challenged, very early sales at FY15 do not tell you anything about the ultimate market penetration potential. The pending sales figure matters bugger all.

“Our sensitivity analysis suggests a value range of NZ$0.42-3.57/share depending on price and penetration in the US; in our base case we assume pricing of US$650 and 10% market penetration for Cxbladderdetect. Pacific Edge is at the start of the commercial roll-out and, as such, there is still considerable uncertainty as to the full sales potential in the coming years. We consider the chief variables are the level of market penetration that can be achieved, particularly in the US, and average pricing. Our base case is on the conservative side in both regards, therefore we expect significant upside potential on our forecasts if Pacific Edge’s performance exceeds our cautious expectations”

[skid]

Of course the interesting thing about that Edison valuation range, $0.42 to $3.57, is the two key sensitivity analysis variables giving rise to it, “price point”, and, “market penetration”.

Want to know how Pacific Edge are doing, and where to place them in that range from the pending report ?

1. Then look for an indication of present price point beyond the $550 per test proposed by Pacific Edge in 2011, noting that both Forbar and Edison expect it to rise over the next few years, and,

2. Assess progress against plan for market penetration in 2019, and a reaffirmation of the five year goal.

And no, for the cynical and FA challenged, very early sales at FY15 do not tell you anything about the ultimate market penetration potential. The pending sales figure matters bugger all.

“Our sensitivity analysis suggests a value range of NZ$0.42-3.57/share depending on price and penetration in the US; in our base case we assume pricing of US$650 and 10% market penetration for Cxbladderdetect. Pacific Edge is at the start of the commercial roll-out and, as such, there is still considerable uncertainty as to the full sales potential in the coming years. We consider the chief variables are the level of market penetration that can be achieved, particularly in the US, and average pricing. Our base case is on the conservative side in both regards, therefore we expect significant upside potential on our forecasts if Pacific Edge’s performance exceeds our cautious expectations”

Your actually placing your faith in an outfit that has rated a co. at somewhere between .42-3.57 which they established by talking to the CEO of that co??(and got important facts wrong to boot?)--They might as well said --They are going to do better or worse(or maybe stay the same)

Why would the price rise?(If it happens that they are not making enough sales-then perhaps the price should drop)

Market penetration--Thats gauged by the sales (that you say are unimportant)--I would venture to say the market will disagree with you if thats the case.

[skid]

One week out from sales report--I challenge anyone to dispute the fact that the sales will not have a noticeable impact on the SP one way or the other--just for the record.

[MAC]

Not at all, I do my own analysis, thanks very much, although I don't disagree with Edison's findings as I've replicated them to my satisfaction.

All pre-profitable companies have market parameters yet to be confirmed, nothing new about that, sensitivity analysis is not new either as an investor’s tool for measuring valuation ranges.

What one must note about the Edison $0.42 to $3.57 valuation range is thus;

“Based on progress to date in the US market, Pacific Edge management’s target of Pacific Edge NZ$100m in sales by FY19 for the group looks attainable. However, we err on the side of caution and model revenue of NZ$100m two years later in FY21”

The goal of Pacific Edge is $100M in revenues by 2019. The Edison valuation range is based on a later 2021 outturn.

Also of note is that they have not yet included the value of the melanoma and colorectal products.

“We do not include additional pipeline products in our forecasts. We forecast sales into the US, New Zealand and Australia only and do not include added value for the technology of the company”

[twotic]

Your actually placing your faith in an outfit that has rated a co. at somewhere between .42-3.57 which they established by talking to the CEO of that co??(and got important facts wrong to boot?)--They might as well said --They are going to do better or worse(or maybe stay the same)

Why would the price rise?(If it happens that they are not making enough sales-then perhaps the price should drop)

Market penetration--Thats gauged by the sales (that you say are unimportant)--I would venture to say the market will disagree with you if thats the case.

Botch ups aside the remainder of their empirical analysis looks pretty sound.

The indicative range is probably fair given the uncertainty that exists - you just have to put some of it in context.

One thing I feel that would have been prudent is extending the sensitivity analysis to include lower values of the test price. IF KP entertain the idea of CxBladder I suspect they will negotiate a reduced price.

Other than that the Edison report looks reasonable - IMO the key is to be aware of the risk, determine the probability of those risks for yourself, revise the likelihood of the SPs within the indicative range and possibly the range itself, and of course understand Edison is being paid to write the report and put their SP target and all else in context.

[winner69]

not so sure about the range being fair......given the risk and uncertainty and sales performance to date me thinks 0-$3.57 is a better indication

Started reading that and thought you were going to $0 to $1

[BFG]

One week out from sales report--I challenge anyone to dispute the fact that the sales will not have a noticeable impact on the SP one way or the other--just for the record.

*Wonders if MAC is willing to take up the challenge...*

[Balance]

One week out from sales report--I challenge anyone to dispute the fact that the sales will not have a noticeable impact on the SP one way or the other--just for the record.

How is it possible to tell?

Unless the sales numbers are released first day, and then progress commentary next day?

[klid]

Balance Yes true, how to differentiate... How would you know the balance of the two as far as impact to SP.
But if the commentary is what Miner posted before... repeating the same old stuff without too much new info - which I entirely expect it will be, then you can make some educated conclusions/guesses I think.

In reply to KP... If KP wanted a reduced price I would tell them to go jump in a lake, hopefully so would the major shareholders and board. I really don't think they would try anything stupid like that. Not worried.