For unbiased consideration, below are the usual set of updated charts displaying trends in CDY’s quarterly financial parameters.
The plot of the Company’s quarterly cash inflow amounts again shows how currently they are dependent upon the timing of major contributions like research expenditure refunds or QVC million dollar day proceeds. Another tall blue column on the next chart can be expected for this current quarter when the latest QVC proceeds flow in from Japan.
A smoother impression of cash inflow trends is given by the second chart, in which they are summed on a rolling four-quarter basis. This shows consistent growth at an average rate greater than 30% per annum. Revenue growth is similar.
The standout feature of quarterly expenses is obviously the abnormal $2.1M associated with the IKON legal adventure. It shows clearly the potential cost of poor legal advice, which hopefully is a lesson learned. Although about $1M of this amount is attributable to delayed advertising payments, a donation of $1.1M to the legal fraternity can only be described as unjustified. Ignoring this, the obvious drop in normal operating expenses is encouraging. Staff costs continued to show a steady rise, which can only be expected for a company in early growth phase.
Cash in the bank remains at a very comfortable level, and as the announcement states it is about to be boosted by the $1.5M in receivables. It also should be boosted by net amounts resulting from continuation of the December profitability over the coming months. In September the CEO stated that month-on-month profitability can be expected to commence from December onwards. If so, the bank account will begin to increase rather than diminish. So far so good.
This raises the question of how representative is the December monthly profit of $278K? If this can be maintained (even without growth) throughout 2019 this would generate an annual profit of $3.34M. Applying a conservative P/E ratio of 20 to this figure would justify a market cap of 3x times the present (current P/Es for the healthcare majors BKL, RMD, COH and CSL range from 30 to 42). Hopefully there is nothing abnormal about this $278K figure.
Progress on the midkine front remains tardy. I would be more inclined to believe that a serious effort is being made to push this along if I was able to open the ‘2018 MK Symposium’ tab on the Company website and not read that those wishing to present at the meeting should submit an abstract by 15 December 2017. We can only look forward to the benefits deriving from a successful application for orphan drug classification.
The half-yearly at the end of February will provide information in greater detail than can be expected from a 4C
CDY Price at posting:
27.5¢ Sentiment: Buy Disclosure: Held
