FS makes one good point and that is that we should always be looking at both sides. His posts have managed to get at least a few of us to do so. However he also criticises one broker and some of us of either ramping or of being delusional in our expectations. I don’t know about the broker but some of the posts here certainly do sound like ramping. As for being delusional, I could say the same about his sell sentiment despite all the evidence of rapid growth and acceptance by a leading retailer here and the largest telco in NZ at such an early stage as well as feedback from international telcos that we have undoubtedly the best product on the market and one that is already generating healthy cash flow. We have seen a lot of down ramping as well during this correction. The one thing I do like about down ramping is that it does usually get me to redo my numbers using more conservative assumptions. I did that recently and I posted details showing that even with sales growth slowing dramatically from what we have seen to date in Australia and assuming sales in the UK are at a more modest level than in Australia on a per head of population basis, then simply the shear size of the UK market makes it very likely that the next 12 months will give us very strong growth in sales and profit. My target based on those assumptions is $13 if a prospective PE of 20 is reasonable. Even a PE of 10 gives a target of $6.50. Considering the size of the rest of the European market, the higher target of $13 could easily be reached if sales in the UK are anywhere near what they are here per head of population and similar is then expected from other European markets. Any potential new entrants are likely to take time to develop product and enter the market and the chances are that we will see strong sales and established sales networks for our product first. After that and based on independent research, the shear size of the expected market in wearables and the rapid growth expected, means that many new entrants will be needed to fill the void because we could not possibly grow that quickly to fill the demand. As I see it, completion is inevitable, normal and necessary to meet demand but will not necessarily stop us from experiencing very strong growth. Potential competition is in no way a reason to sell a proven company with essentially a first mover advantage in a high growth sector, especially when they are rapidly building a network of high quality distribution outlets. Ramping by brokers or posters in either direction is also no reason to buy or sell. We have seen the company’s cash position climb back up to $2.5 million in just 2 months (prior to drawing on the convertible notes for the UK expansion) after paying for a big inventory of stock and only selling around a half of it. Cash flow at this early stage looks very healthy. A good reason to buy, not sell. None of the reasons provided by FS in any way justify a sell. They only povide a list of things to watch out for as potential risks as the company grows and we see the sp rally hard from here once again as we enter new markets and watch sales and cash flow grow very rapidly. Thanks to FS for getting me to re-assess and again get reminded of just how much upside remains and is likely over the next 2-12 months.
MWR Price at posting:
$3.16 Sentiment: Buy Disclosure: Held
