Somehow my desktop doesn’t allow me to post on HC. Not sure...

Somehow my desktop doesn’t allow me to post on HC. Not sure what’s happening so I just type on my phone to lay out my thinking.

First of all, report itself.

Upside first - revenue has grown significantly (market should have known already from interim quarterly report, so no surprise)

Downside

- marketing goes up without matching revenue growth.
- business is stilll losing money
- director fee is not matching growing revenue

But again, same as revenue, market should have known already from interim quarterly report, so no surprise again.

The only surprise for me is not seen organic products progress in the report. I thought the management would likely to give us something with the report. Oh well, they might use another seperate report to serve the purpose.

Next step , are we expensive at this stage ? My thinking is definitely no. Why ?

Valuing a spec stock is completing different to a profit generating company. If you are only reading profit loss to value a small cap, I reckon 99% of the stocks on the market should be valued less than 0. The market is forward looking, it needs to factor in all things happened, happening & will happen. The fact that we already made so many progress in the IF market (pointed out by 8horse) needs to bring the valuation up. The SAMR certification is particularly important to us as due to agreement we have signed with multiple parties in China, including a state owned one, we will have guaranteed revenue of exceeding $140 mil upon approval- see comment form company’s Ann early on :

“Further to our announcement of 6 April 2018, WHA has passed technical evaluation for State Administration for Market Regulation (SAMR, formerly known as CFDA) accreditation for China. WHA is now waiting for formal approval and attainment of SAMR, on receipt of which revenue is projected to reach in excess of $140 million over a 42-month period in the China market”

Most importantly, this has no sacrifices of cash burning. So much lower risk. Why am I paying lots of attention on this ? Because first of all revenu is very important to value a spec company as very few of them makes net profit. Please see what is our peer doing - BUB. I have attached their result as below & highlighted most important things to consider:


You can see , yes their revenue went up significantly in 2018 , but is this truly what you want as a shareholder ? COGS went up significantly , employee cost rocketed from 1.8mil to over 12mil (this makes you even wonder if our company is under paying employees!), goodwill impairment is a disaster ! They acquired a new business for $80m & immediately wrote off more than half of it? To me , the cost of boosting $13mil revenue is way toooo high & integration was badly executed.

So again , are we too expensive ? BUB’s EV is more than $300mil, ours is less than $200mil. What does it tell you ? I reckon we are too cheap given what we have done without damaging shareholder’s value. So either BUB needs to come off by 50%, or we should go up by 50% or we meet in the middle.

Some might argue both of BUB & WHA are too expensive, then what about KTD ? Much less advanced but still valued more than $100mil. So I guess it’s an sector valuation thing, not for any particular company.

Hopefully my explanation helps. Again , please excuse me if there is any typo as I’m using a phone.

PS, I have written to the company , trying to ask them to quickly give us some update on organic products as I heard we have made much already !.