Forum Archive Index - June 2002

["G Stolwyk" <stolwyk@wave.co.nz>]

June 8, 2002:  Amended Ozestock post 308. Disclaimer: Outcomes may be different than projected. I am not a financial advisor. Readers are not asked to buy, hold or sell ASC, ASCOA or any other ASC options;  to do so will be entirely at their own risk.

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FORECAST OF ASC AND ASCOA PRICES ON 30/6/2004 ( when ASCO convert  to shares at a cost of 20 cents).

 

1. Capital structure  and possible reconstructon.

At last count, ASC had 305 mill. shares and some 125 mill. options. Currently ASC is 34 cents while ASCOA is 20 cents.

 

A previous table of options was issued. Some will convert prior to 30/6/2004 but at a reasonable high price which in turn could buy back the same number as issued.  There is one lot to convert on 31/12 / 2003 @ $1.75.

 

Several options are due on 30/6/2004.  The Annual report will refer to the *average* number of shares during the year and  the effect of a few hours these new shares arising from options being active on June 30, 2004, is negligible.  

 

Any new options will tend to have a later conversion date and therefore, I shall use  305 mill. shares deemed to be existing on 30/6/2004.

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2. Company forecast to June 30, 2003:

 

http://stocknessmonster.com/news-item?S=ASC&E=ASX&N=216131

 

EGOLI: May 23: Management presentation.

 

The company is in very good shape. On May 23, the company assumed a 40% revenue growth (pcp) for H2, 2003 while the NPAT was forecasted to grow from $5.6 mill. in the year to June 30, 2002 , to $23.2  mill. in the year to June 30, 2003, " subject to margins being maintained". 

 

 Please note that 65% of customers come from the US  and the rising exchange rate could affect this $23.2 mill. profit unless revenues or margins or both rise.

 

Sofar, no adjustment has been made for the year to Sept. 30, 2003. It is assumed that 65% of profits come from the US for the period 1 July 2003 - June 30, 2005.

 

The NPAT margin on revenue increases strongly from 4.7 % to June 30, 2002, to 10.5 % in  to June, 30, 2003. (Based on revenues of  $118.8 mill  and $220 mill.). These margins should further improve in the next 2 years.

 

3. Key statistics.

3.1 Forecast of  Revenues and NPAT.

ASC mentioned a 40% (pcp) growth in revenue for H2 ' 03. That is a phenomenal growth with plenty of oomph.

 

 ASC forecasts revenue of $220 mil. in the year to June 30, 2003. I am forecasting growth increases of 27% and 20% in the following two years ie. $279 mill. to June 30, 2004 and $335 mill. to June 30, 2005.

 

The NPAT margin to improve from 10.5% in the year to June 30, 2003 to 12.5% and  13.5% in the next two years. The profits to rise from $23.1 mill. in the year to June 2003, to $31.4 mill. in the year to June 30, 2004 and $39 mill. in the year to June 30, 2005:

 

 ( Based on $A= US 61 cents in 2003 and 63 cents in 2004). It is proposed that ASC cannot compensate for these higher exchange rate numbers because of competition.

 

3.2 E/S, P/E and prospective ASC and ASCOA option prices. 

The ASC options convert on June 30, 2004, when the NPAT is projected @ $ 31.4 mill..  Item 1 mentions 305 mill. shares. So, on that date, E/S will be 10.3 cents and 12.7 cents on 30 June 2005.  P/E: 3.3 on 30/6/2004 and 2.7 on 30/6/2005, based on the current share price of 34 cents.

 

 Cash levels have shown this to be a successful company. I would allocate a P/E of at least 12 and this  will result in a ASC price of $1.24  and an ASCOA price, 20 cents less to $1.04 on 30/6/2004.

 

 Similarly, on 30/6/2005, the ASC price is projected @ $ 1.52 and the ASCOA price @$  1.32.

 

 I don't believe that the P/E is excessive once the company becomes known.

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4. The effect of Cash levels and the spending of same.

These will amount to  some $60 mill. on June 30, 2004). This will be a powerful indicator to healthy share prices and ASC could become a target at some stage.

 

The money can be spent on dividends, buybacks (my preference)   and takeovers or on a combination of two or all of these. At present, this cash will earn interest.

 

Assume a scenario where all the money was spent on buying back shares at an average price of say 75 cents. That would buy some 66 mill. shares and this reduces the number of shares by  some 21%.

 

 In that case, ASC share prices will rise by a similar or higher amount than already given in item 3.2. (The effect will be less if some options were converted).

 

I believe a lot of cash will be spent on judicious takeovers and this in turn will strengthen the share price as well.

 

5. Summary: I project an ASC share price of $1.24 and an ASCOA option price of $1.04 on 30 June 2004. It is likely that the cash levels-see item 4, will have a further strengthening influence on ASC share prices and consequently option prices.

 

However, based on the current ASCOA option price of 20 cents and an expected $1.04 on June 30, 2004, the increase would be a potential  420%  during that close to 2 years period -costs excluded- compound rate: 127%!  As mentioned, cash levels will offer powerful support.

 

I would suggest that once the June 30, 2003 results are in and found to be satisfactory, ASC could be looking for a NASDAQ listing. They would be fools if they don't!

In that case, please ignore given P/E's and returns!!!

Those are my opinions,

 

Gerry Stolwyk

ASCOA holder.