- 2 June 2011
I dont think ive seen a cash flow statement yet show a decrease in cash held due to the investment in short term deposits. I wonder if management have a plan to utilize the growing capital in the long run if they continue retaining cash profits, will it be used to fund internal growth or other. Are they going to need significant capital to fund increases in production ? There spending a decent whack of cash on marketing but thats fairly understandable at the point in product development there at. They seem to be converting about 20%+ of revenue to pre tax profit, im most interested if the margins are going to be scalable.
Biggest call on cash will be the ramping up of headcount to deal with the expected step wise increase in sales. Even this could be financed out of existing cash flow. There is a capital spend of about $6-8m for the new generators in the Us and Germany, buy even these could be from cash flow based on 40% sales growth.
Gillman and the board are very conservative with funding and will tend to retain a large buffer. However if they can't use this to generate a return on capital in excess of 20/25% then it should be paid as dividends.
If they do start to see the step wish growth that HH spoke about then they will have some huge exes in bringing on another 8 to 10 generator cores, and another huge increase in field support staff over the next 3/5 years. Lets hope this is the reason why they are conserving cash!
As I mentioned in a previous post, if they can get the trail result that gives them 'standard of care' status then 30 or 40,000 doses PA is more than doable, within 3/4 years. Unless Bayer et al take them out before then
On a 80% gross margin this would be one very profitable business.
80% gross ? You sure ?
I guess it depends on how you define gross - example from Coca Cola, 2006
Consolidated Statements of Income
Net Operating Revenues $ 20,088
Gross Profit $ 15,924
Operating Income $ 6,318
Income Before Income Taxes $ 6,578
Net Income $ 5,080
SRX has a declared operating margin of 30%, close to Coke. What do you think the Gross margin is? My 80 % is a shot in the dark. With a sales value of about $15k US$, my call is that the core product, including production costs in a generator is not more than $3k. Would be interested to hear of any technical dudes that can put some numbers on production costs in a generator.
The capital costs of the generator at $4m (give or take) is less than $100 a dose based on a 5 year life. The costs of the Strontium is very cheap (Cost, pure: $100 per 100g on one web site). The beads are also very cheap. So where is the cost of this product? I think $3k is about right, but happy to be corrected for missing analysis.
Marketing, field support, training, transport, research and development, head office etc etc take the lions share IMO.
Long term holder.
Yes, once including admin/QA/regulatory and marketing expenses etc margin on sales appears to be just a tick under 30%
Appear to be selling a dose for a tick over $13k and then earning a tick over $3.5k of direct EBIT after all expenses
The million dollar question can it be maintained while they dramatically increase number of doses. Has the company or board made any specific targets for dose numbers as they progress up the treatment phase ladder?
You mention 30-40,000 is this coming from anywhere?
30,000 doses at 13k a pop would put revenue at $390million? There not cheap for me yet but even now there at a market cap of about 650-700million. Is this level of growth in revenue realistic?
Held SRX in my SMSF but took profits way to early about a year ago and have regretted it ever since, back in today at $10.21. While SRX is not cheap I really like the quality of the balance sheet and the growth.
It's definitly exciting but I think there is a real risk with a company that is essentially a 'one trick pony' in the technology space. TBH im just not interested unless this dives down a bit more then what it has already. This is just so risky for me I need it to be a real bargain to feel comfortable with anything sizeable in it.
Some companies are nice to have a stake in for more reasons than one.
Anecdotal evidence continues to increase anticipation of the trial results.
SRX may become unprecedented for an Aus Bio stock – It may also not live up to expectations or it might get bought out before realising its full potential – maybe somebody will discover an outright cure for cancer and SRX is dead in the water. Risk and reward both high here for share holders but a very exciting product for patients – capitalism doing good.