Okay, we'll take our response in steps:
1."This group does not have the mindset if you build it they will come".
We didn't say that they did. We said that old management team had that mindset. New management team is smarter than that. We said as much.
2."The manufacturing costs you speak of are actually going to be cut as ramped up larger batch sizes will decrease manufacturing costs".
Saying that they will be producing larger batch sizes, in and of itself, means substantially higher production costs. Glad that you agree with us on this one. Freight costs and import taxes will also likely cut into margins. What do you know about the import tax in Brazil? We suggest you do some investigating. You may be very surprised.
3."True, Raw ingredient costs will likely be incurred up front, but most suppliers have decent terms with a show of strength in balance sheet".
Raw ingredient costs have been going up according to conversations that we have had with management.
4."Not to mention a couple phone calls from the new high powered partners".
Yes, let's not mention that because a phone call from them means absolutely nothing.
5."I think it is evident that Rush, Li Ka-Shing, along with the rest of the group would in no way tolerate a $6myn revenue growth year over year on an almost $20 myn capital investment."
Your numbers are incorrect. The investment group put in $15.9 million not $20 million. FY 2014 revenues were $14.6 million. Getting to between $22-25 million in FY 2015 is a YOY increase of 51% on the low end and 71% on the high end.
If we use a $25 million revenue number for 2015, that is a $10.4 million revenue increase YOY. Not a bad return on a $15.9 capital investment.
In addition, they've got a lot of ground to make up since Q1 2015 revenues only increased by a disappointing 20% over the same quarter in 2014 and only 1.3% sequentially from Q4 2014.
During the last two fiscal years the CAGR for revenues came in at 38% in 2013 and the same 38% in 2014. To double that number would be very commendable.
The bottom line is that we think your are being way too optimistic.
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