wagyusteak wrote: Snowballgrowth wrote: wagyusteak wrote: Snowballgrowth wrote: mjn797979 wrote: I did message their investors relations and I got an answer back, Samira was very nice to answer.
I asked general questions about Grupo, its drugs, general guidance and she did give some answers.
Here is a brief recap:
-No financial guidance at this time due to effects of pandemic.
- They don't see an opportunity to cross polinate products from LATAM to Canada and vice versa
- Business dev. team is very busy looking to in-licence and acquire new products for Pan-American ex US territory.
- She underlined that GUD is a partnering organization and they will do what works best for them and partners.
- As far as valuation of Knight goes, she mentioned that they are going from being valued on their balance sheet to valued on their profitability.
- Samira ends by saying they are looking to grow Knight and expect that over time, shareholders will see the greater value.
I appreciate her detailed message, I think its the second time over the years she has replied back to my inquiry.
Lets hope, as current shareholders that we have better days ahead of us.
Thank you for sharing. I like this :
"As far as valuation of Knight goes, she mentioned that they are going from being valued on their balance sheet to valued on their profitability."
For those capable to see the profitability/ growth and pay the right price I guess ... they should make significant $.
I don't expect we make x100 times of our money like we did with Paladin labs in 20 years becasue we started GUD with a much larger capital base. But I think x50 is possible.
I don't know how you see a 50x from here. I'm curious to know. From what I hear most investors don't believe GUD will make $ 40 M ajusted earnings for the next 12 months.. and they made $ 10 M for the last quarter!!
So if we take out the cash, which is about $400mil, our enterprise value right now is about $350 mil. that's less than 2x sales this year. if we do achieve $40M free cash flow next year (for this year we have to adjust for the impact of the covid-19 to get the normal earnings level) and our stock price doesn't change, that would be less than 9x EV/FCF or 11% yield. That's really cheap given the 30 year bond right now is only about 1.5%. Not to say that both GUD and GBT can growth their sales about 20%/year in a normal environment.
Obviously we just closed the deal this year and according to Samira, it's gonna take them a couple of months to reoganize GBT and its culture. I think they will be able to cut some cost and have revenue synergy. Expanding to Mexico will definately help us grow. Now we have a scale that can let us negotiate with the big pharma. As we grow our drug portfolio, sales and marketing expenses will account for less portion of our revenue because the lanuched/marketed products will generate much more money to cover the expenses of the new/or about to lanuch products (it''s like a subscription business model). Our earnings will become much more stable and easier to predict because now we don't have to realize on the interest income from the loan portfolio anymore. Investors hate uncertainties. Unless GUD proves that they can make a nice profit from their drug portfolio, nobody will pay attention to them.
When will be their next acquisition? I don't know. But I do know that with $400mil and the current bubble in the stock markets, I think we will find another opportunity soon. I think GUD can go down more if the bubble busts. But I see it as an opportunity, not a risk of permanently losing capital.
I read a book called "100 baggers" and it mentioned that it takes a great company about 19 years to go from $1 to $100. Obviously, it's easier to grow from $10 mil company to $1 bil company. Our EV right now is about $350mil.
50x of that will be $17.5bil. Assumming that until then we still don't use a single debt to finance our growth, our EV will be $17.5bil. Let's say we trade at a conservative valuation of 3x sales, which means our sales level at that time should be around $5.8bil. I expect our next year sales is about $250mil (if we get the vaccine for Covid-19 and everything is back to normal faster than expected). Then to grow sales from $250mil to $5.8mil in the next 14 to 20 years, the compound rate will be about 25% to 17%, respectively. It sounds hard to maintain that growth level at a long period of time. There will be hiccups here and there and the growth will be bumpy, not constant. But I think it's achievable.