Originally Posted by
Beagle
Yes a very warm welcome back to my old mate Couta1 who I enjoyed a very good chat by telephone with earlier this week.
Secondly a HUGE THANK YOU you to Percy for his work with this one for which I am most appreciative.
From the annual meeting its was clear their overall goal is to double revenue and earnings in the next 3 years. If this was achieved we would see earnings of about 3 cps in the year ended 31 December 2023 eps for Fy20 1.77 cps x 2 = 3.54 less about 14% for the extra shares on issue as a result of the recent placement = ~ 3 cps. If this targeted growth rate can be achieved we would see earnings growing at an average rate of 20% per annum in FY21, FY22 and FY23.
If this is achievable I there fore value the shares at v = eps x (n + 1g) where eps is historical eps of 1.77 n = no growth rate of a stock which is currently 11 + 1g where g is the average expected growth rate over the next 5 years.
Using this primary vaoluation tool I therefore valued PAZ at 1.77 x (11+20) = 1.77 x 31 = ~ 55 cps.
I emphasize that this is my own methodology to find GARP stocks (Growth at a reasonable price). I accepted that sometimes shares trade above this formula based on other factors and that could have been the possibility that through economies of scale they could have grown their gross margin.
For some time now I have had valuation concerns, (historical PE of 54 at 95 cps and have been reducing my holding as I felt 95 cents was too far above my core beliefs as a GARP investor.
In addition there are liquidity concerns, no dividend and some discount to standard valuation methodology applicable to main board listed companies must be applied to be fair seeing as this is unlisted.
I was underwhelmed by comments at the annual meeting that Aiora was launched just as Covid hit and this hurt their chances of selling through the Daigou channel. This isn't coming back for years in my opinion.
Challenges around Covid with all that implies will in my opinion be enduring for many years. I think there are real risks around the execution of their plans and the above mentioned targets are now very challenging indeed.
It is clear that freight costs, technical installation staff availability, daigou distribution challenges and exchange rate headwinds are issues that are strong and enduring which further exacerbates my valuation concerns.
Finally, hitting 60 in 3 months I have resolved that from this point on if a company is NOT paying me dividends so I can enjoy a relaxed and comfortable semi-retirement it no longer meets my investment criteria.
In summary I feel a huge amount, (if not all), of the growth in the foreseeable future is already baked into the current share price, even at 75 cents (after considering the severity of the impact of these headwinds for FY21), so I completed my exit today.
I sincerely wish holders the very best and once again thank Percy for his extensive input on PAZ.