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Avecho Biotechnology Ord Shs V.AVE


Primary Symbol: AVEFF

Avecho Biotechnology Limited is an Australia-based biopharmaceutical company. The Company develops and commercializes human and animal health products using its drug delivery system called Tocopheryl Phosphate Mixture (TPM). TPM is derived from vitamin E using patented processes. The Company's segments include Production and Human Health. The Production segment manufactures and sells TPM and Vital ET for use in drug delivery and cosmetic formulations. The Human Health portfolio covers delivery of pharmaceutical products through gels, injectables and patches, including conduct of research and development activities. The Company's products pipeline includes Weaner Pig Starter TPM Premix, Poultry TPM Premix, Dairy TPM Premix, Daptomycin, Propofol and Veterinary Applications. The Company is also developing TPM to enhance feed efficiency and the health of livestock. Its TPM products are commercialized under license: Voveran TPM Gel, Instanac TPM Gel, Vital ET, and Ashland TPM.


OTCPK:AVEFF - Post by User

Post by TallerCraigon Nov 01, 2017 8:52am
316 Views
Post# 26886635

Q3 Preview: Continued 100%+ Rev Growth w Margin Expansion...

Q3 Preview: Continued 100%+ Rev Growth w Margin Expansion...Sorry for leaving you guys as the share price has recovered but I figured my fellow bulls could take over.  I cant figure out how to get back into my Darkhorse account so I took my talents to twitter as TallCraig_85 and have come back to my roots at stockhouse given earnings season firing up.
 
Rig Count
Average rig count over the course of Q3 is still going to be up 5%ish QoQ and close to 100% YoY (REVENUE GROWTH IS STILL OUTGROWING RIG COUNT GROWTH – MARKET SHARE GAINS!!!)

Revenue
Looking for continued 100% Revenue growth in the 45M – 50M dollar range.  I think the analyst estimates may actually be a little high here.  The strong CAD is going to be a big head wind with the loonie getting over 0.80USD  in Q3 with 95% of revenue from US sources. (Telling that on the Q2 call that June which had the highest monthly revenue had the lowest EBITDA generation due to having to add a lot of variable labour). The more stabilized the business comes they better they will be able to respond with labour and subcontractors and grow revenue profitably.
 
Gross Margin
This is were the rubber hits the road. Last 4Qs (Q3: -7.46%, Q4: 0.39%, Q1: 7.46%, Q2: 11.10%). All about reduction of subcontractors and growth in asset utilization. Should see continue progress with both. Target of 12.50% w upside to 15-20% range when all equipment gets reactivated by 2H 2018(still 15-20% of fleet to activate).
 
Selling General & Admin
As a percentage of Sales last 4Qs (Q3: 13.73%, Q4: 13.44%, Q1: 10.92%, Q2: 9.58%).  This is direct correlation with new management being able to right size the business and grow revenues and maintain cost discipline.  Targeted range of 4.8 -5.0M.
 
EBITDA
Looking for EBITDA in the 5.0M – 5.5M range but deep down I am thinking you could see an adjusted EBITDA figure closer to 6M in EBITDA if they get a strong hold on subcontractor pricing and any further pricing increases in growth basins in Texas.
 
DEBT REPAYMENT
You will see a significant net debt reduction in the Q with timing of the ramp of Q2 sales being collected. You are going to get a net debt figure below 70M by yearend and a run rate EBITDA figure of 24M for a net debt/EBITDA of <3x!!! Think about that for a second, from walking bankruptcy to a balance sheet in healthy operational condition in under a year.
 
On Valuation
Forecasting Revenue of 202M with EBITDA of 28.5M with net debt down to 50M.  Putting a 6-8x EV/EBITDA target on my estimates gets me to a target price range of 2.15 – 2.85/share or 2.50/share at the midpoint or over 300% upside.
 
FEELS GOOD TO BE BACK!!!

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