Q2 Estimates, future:
Sorry I haven't had the time to present the tracking data I have
accumulated. But I have looked at them and would like give an
update. I have also considered other bits of information -
specifically the 12K pieces sold in May as gleaned from a Chris
Kelly post that Yankee unearthed and kindly posted here.
bad news first: the Boots on-line sales have stopped growing and
have fallen. The fall coincided with amazon starting to sell
actipacth directly at amazon.uk. Actipatch is now on the vendor
central of amazon which means that amazon buys inventory from the
Bielcorp and sells it, instead of just fulfilling orders for
Bielcorp. They are effectively distributing the product directly
to consumers. This is a very important step - the vendor central
status is achieved only by invitation by amazon. More
importantly, the margins for this channel are good - amazon keeps
margins as low as 5-10% (I will assume 20% for amazon in the
following) and I have learnt that an additional 15% expenses are
involved. So, for all amazon.uk sales Bielcorp revenue is ~ 70%.
That is $21 per piece sold. CEO Whelan indicated in one of his
interviews that the cost including shipping is < $5. On amazon
sales Bielcorp makes $21 in revenue and $16 in profit (75%
profit/revenue ratio). On Boots, I expect the numbers to be worse,
I estimate that Bielcorp's revenue per piece is ~ $15 and profit
$10. It is hard to track amazon sales except if you are lucky as
they never run out of stock and always show > 999 for stock (this
is the max you can place in the cart). However, once in a while
they run out of stock and it shows shipped in 3-4 weeks. By
tracking how often this happens I can get a lower limit on the
sales. This has happened once in 20 days for the Back product so
the lower limit for back is 50 per day. Muscle and Knee add up to
be 1.5 times Back on Boots - assuming same ratios, the lower limit
to amazon sales is 125 per day. However, there are other sellers
on amazon, the biggest is Natural Origin. They sell about
30 a day on an average. Once when amazon ran out of stock, I
noticed that the Natural Organics sales shot up - the demand
having moved to them. This was 140 per day, just for the Back
product, for 2 days. I would then say that ~ 150 per day of the
Back patch is being sold by amazon which would mean 375 for the
three products. Add to this the sales from the other amazon vedors
and other non-Boots pharmacies (many in UK now carry Actiatch:
Weldricks Pharmacy UK, Pharm Assured, Wessex Pharmacy, Killearn
Pharmacy, Development Phasrmacy, Horner Pahrmacy etc.). So I
estimate that the non-Boots sales is ~ 4000 a day. These sales
have higher margins and revenues. Now coming to Boots, going from
the Chris-Kelly data point, we have 400 per day (12000 in 30
days). So, we are talking about 800 per day of sales.
Now let us add all this up: assume average revenue of $15 per
piece and $12 for gross profit. 800 per day is ~ 70K pieces per
quarter. The revenue would then be 1.1M and gross profit ~ 800 K.
I consider the expected revenue and profit to be in this ball park
for the coming Aug 15 report. Depending on how well Canada or if
Braun placed an order, these can be higher. I do not expect the
revenue to be below 600 K and profit to be below 400K. Taking out
ball park 800 K gross profit, how are we doing for operating
profit ? The company burns ~ 800 K per quarter including interest
costs. I again submit that that we are very very close to break
even.
As for dilution: based the the volume I have seen (from last
quarter the average daily volume is ~ 19M after removing
dilution), it looks like they added 1 - 1.5 billion shares.
Bottom line:
revenue: 600K - 1.1M
gross profit: 400 - 800 K
operating profit (loss): 0 - (400K).
OS : 8 - 8.5B A/S 9B (my guess).
I am leaning towards the higher end for revenue for profit and
thus lower end for loss. We are close to break even. If they had
to pay the Goodwin Procter Law company during Q2, there would be
more expenses (and thus more loss), but this will be one time.
Where does this all leave us ?
The above numbers indicate the following:
annual revenue: 4 M
annual gross profit: 3 M
Let us assume the sales and profit double in the next 12 months.This is easy - the sales growth has been > 5 x in the last 12 months.
Forward 12 months revenue: 8 M
Forward 12 months gross profit: 6 M
Forward 12 months operating profit: 2 M
For a company doubling its sales and income, a P/E multiple of 100 is easy. market cap: 2Mx100 = 200M
PPS: 0.02 (200 M/10B)
This will be the fair price after Q2 results.
This does not include FDA final ruling and potential approval, Canada or B. Braun and the rest of the wide open world.
Disclaimers: as always do your own DD and cross check others'. I have described how I come to my conclusions. Even if I am only half way correct, the fair PPS after Q2 is 0.01. The biggest uncertainty is the lack of a clear plan for how the outstanding debt will be retired. If all of it is converted to equity, the OS will double. But I think only a part will be converted.
Therefore, folks: place your bets. I have put in as much as I can afford to lose. After next week one may be chasing the stock.
I agree that all of this is my educated guess, based on whatever information I can find. I can be wrong. Based on the Q2 numbers, I will update my thinking re-evaluate and post me assessment here.
I will try and post some plots in the next few days if I find time. In the mean time, may I invite you all to mull the above numbers, criticize the, shoot them down with logic and reason ? That will help us improve the estimates and gain better clarity.
And thanks!
