Great Lakes Graphite Inc GLKIF

RE:Per share value analysis

[Newton1234]

Thanks for reposting here, GoingBroke. As I mentioned on CEO.CA, I find SH hard to use. Especially on my mobile. Have computer handy now so will share link to post where I first described this model with round numbers,

https://ceo.ca/glk?40183783d2fb


As for 10% profit margin, I don't know. It might be less! At some point it becomes too low, like 5% net income surely isn't enough for whatever business development efforts NovoCarbon has put into arranging these deals? I'd suspect it's more like 15-25% net margins when you have the deals secured, but the onboarding process takes a long time. A lot of samples sent to potential customers and tweaking specs to get stuff just right. If you can get it just right, then you have another problem -- delivering it at scale! With high levels of quality control. Running a high-quality operation is expensive. Some of those costs can get passed along to buyer, especially when it's "new markets". Keep in mind what GLK says about being the only graphite producer in North America? How does that change the business development conversations -- I think it means that both sides can admit there's potential for win-win outcomes without losing some negotiating power. Mature markets seem more cutthroat than growth ones.  

Anyway, super curious to see about "continuity" of GLK 2019 sales into future years. If it's just a one-off sales, then the whole P/E valuation trick gets a bit contentious. There needs to be some sense that the E earnings part is reliable.  

Could do a PEG model, too. Price Earnings Growth model.  P = E / (r - g).  What's typical discount rate, r=10%? And what's a growth rate for earnings? It has to be lower than the discount rate for the model to work, but 8% might be a place to start. In that case, your same $3M earning number in 2019 gives you a price estimate of $150M (3/(0.1-0.8)). Maybe not altogether unrealistic, but pretty far "out there".  Anyone poke any holes in this any of this stuff?

The $30M revenue target for 2019 is pretty exciting for GLK. Getting that off 3 sales is wild. Would love to hear some guidance around margins on those sales, hopefully they'd give GLK some net income when all is said and done. We will see soon enough : )