AFT Pharmaceuticals

[winner (n)]

Well it certainly is different this time..lol.
Av buy price $3.00.Closed tonight at $3.72 ....up now a handsome 24% in 3 months and momentum is building...

Wow ....100% annualised return

Good effort ...and more to come no doubt

[lorraina]

Wow ....100% annualised return

Good effort ...and more to come no doubt

I must having been sleeping with the light on, or drinking Red Bull, or something in October as I also bought a very small holding in RKT Rocketdna on ASX.
Small company supplying drone services to very large companies.Well paid 1.4cps and they finished up tonight at 3.3cps up a lovely 135%..
Leave you to work out the annualised return....lol

[OnwardsNupwards]

OnwardsNupwards.  Welcome to the forum.  You could have a good point but maybe that's already factored into the share price ?

I prefer to take a wider lens than Lorriana has above and note the company started making money in 2020, 12 cps.  If they hit the average (note there's only 2 analysts covering it) eps forecast for FY28 of 24.95 cps over 8 years that's a CAGR in EPS of 9.58%.  Forward PE is 23 so I make the PEG ratio 2.4.

Using my standard GARP valuation value finding formula of no growth PE of 8.5 + 1 PE extra for each 1% CAGR growth that gives a suggested good value target of (8.5 + 9.58) x forward EPS of 15.62 = $2.82.

https://www.marketscreener.com/quote/stock/AFT-PHARMACEUTICALS-LIMIT-27329668/finances/

On visible earnings this screens well outside my good value GARP valuation criteria and I'm also noting the very low dividend yield so its probably not for me.

For others, the $64,000 question is, to what extent might earnings be currently suppressed through R&D and expansion costs that have to be expensed ?
Just out of curiosity, what percentage of their sales are Maxigesic, the effects of which can easily be replicated with a combination of two cheap generic brand products ?

Hi Basil.
valuation is the key question.  because of all the short term costs from AFT's investments I think it is v. hard to value.   eg, what is its underlying earning power on an sustainable / enduring basis.  By that I mean when the earnings are not suppressed by the short term investment bubble it seems AFT is experiencing.  the MD has been v clear that it is occuring, but how much $m are we talking.  it is hard to guess.  SO what is the right number to put into your graham formula??  I think a 9.5% growth rate for the next couple of years could well prove too low.  two examples of this.  First, revenues are forecast to grow fast than that rate - with positive operating leverage, earnings should grow faster.  second, current earnings would be higher if the company invested less for the medium term. 

all that said, the analysts have been burned before with their AFT forecasts, and it is hard to get a handle on the true earning power of the company.  an investment in AFT does require some faith - which is a little uncomfortable.  but there are so few NZX companies with good medium/longer term growth aspirations. 

In the interests of full disclosure, I should add that I got set in AFT last year (when you could buy at prices below and at your $2.82), and the share price has run well of late.  I've tried to buy more recently, but the price was a bit rich.

GLTAH

[Rawz]

I agree AFT is a bit hard to value, especially using Basils method which works nicely with the likes of TRA and HLG etc. but I'd say little point using it with AFT given the investments they are making for the long term.

This is why I have been looking at revenue- and bang on about their 15year 14% CAGR which is stepping up to 20% annual growth based on their revenue forecasts.

Kinda like Amazon back in the day.. no point in looking at EPS right now. (I'm certainly not implying AFT is an Amazon).

One thing I would say is if the share market was to close down for the next 10years and you had to have your portfolio in one stock, AFT would have to be at the top of the list. How bout that