Citi has forecast sales of $21.4m for FY2019 however I think actual cash receipts (revenue) will be a bit lower than this. The September quarter revenue was $2.4m (down from $3.4m in the June quarter). I’m guessing that December quarter revenue will be around $4m and should increase on average $1m per quarter after that (obviously it will be less linear than that but I’m talking about on average), so that would give revenue for FY2019 of $17.4m. LVT has recently confirmed quarterly costs of $11m and we know that the cash balance was $32m at the end of the September quarter. So assuming and based on the above, the company’s quarterly cash balances going forward would be:
$32m
+ $4m - $11m = $25m
+ $5m - $11m = $19m
+ $6m - $11m = $14m (end of FY2019)
+ $7m - $11m = $10m
+ $8m - $11m = $7m
+ $9m - $11m = $5m
+ $10m - $11m = $4m (end of FY2020)
+ $11m - $11m = $4m (end of September quarter 2020)
So this would see them at cashflow breakeven at the end of the September quarter 2020 and would mean that the company does not need to raise funds at all as cash would build up from this point in time. I don’t actually think that it will play out that way as they will probably increase operating costs a bit as the business ramps up, but certainly the scenario above is far from impossible and illustrates that any calls for an “imminent” capital raising are unfounded.
Even if pretty much the worst case scenario unfolded and the company had to raise say $20m at $0.20 in a year or two, it wouldn’t change the company’s capital base enough to make a meaningful difference to where I see the stock in five years from now. And remember that the company has raised capital three times and each time it has been at a higher level than the previous raise, with the last one being done at $0.59. To get the next one done at $0.70 or so the stock price will need to be at $0.90 or so – I think they will achieve this or better!
LVT Price at posting:
29.5¢ Sentiment: Buy Disclosure: Held
