ACR - Acrux Limited

[skc]

Re: ACR - Acrux

Given the chart patterns of recent weeks, with diverging momentum persisting for the last four, nobody can tell me that there haven't been some whispers on private lines suggesting "get out because..."

Level playing field, my tired foot

In any case: My $1.50 alert went off and went by without me buying because the second gradient did not hold as support. No further explanation needed why I don't set automatic conditional orders, but always reserve manual control.

The release date for the FDA committee report was well flagged (see several posts above) so people exiting and not wanting to hold over this event is fully understandable. I think this is one of those examples where you can approach things with TA or FA and arrive the the same place.

Why don't you short it on the break of $1.50? Or do you not usually trade on the short side?

 

[pixel]

Re: ACR - Acrux

The release date for the FDA committee report was well flagged (see several posts above) so people exiting and not wanting to hold over this event is fully understandable. I think this is one of those examples where you can approach things with TA or FA and arrive the the same place.

Why don't you short it on the break of $1.50? Or do you not usually trade on the short side?

Other than the occasional insurance hedge, I do not short. I do take note though of shorting levels where available.

As an indication of who is most likely behind significant price moves, I also use a Broker Report. It's a standard feature of Pulse, the trading platform Open Markets provide:



It's not totally "scientific", but tells me what clients of the "Biggies" have been doing, as compared to onliners.

 

[skc]

Re: ACR - Acrux

Other than the occasional insurance hedge, I do not short. I do take note though of shorting levels where available.

As an indication of who is most likely behind significant price moves, I also use a Broker Report. It's a standard feature of Pulse, the trading platform Open Markets provide:

It's not totally "scientific", but tells me what clients of the "Biggies" have been doing, as compared to onliners.

Yes I think there's tons of money to be made if one could crack the code in broker reports.

 

[BarneyChambers]

Acrux limited are not looking too hot right about now, their share price has crashed over 35%! YIKES

There's an interesting article on it here:

http://au.advfn.com/newsletter/barneyc/637/acrux-limited-crash-over-patent-problems

 

[ReXXar]

I been watching this stock for quite some time.. I first took notice when it was declined to 70cents, it has a strong cash position and generating positive cashflow yet trading around the same level at years ago when it had no products and negative cash flow

Regardless of the litigation, they have crappy product, Eli Lilly is driving the sales by giving rebates to people who buy it, I found this out through checking the testosterone forums, people are not driven by their product due to superior quality but by curiosity and rebate, so their figures on gaining market share is true yet misleading because it is distorted by Eli Lilly

Still, now its trading at 31cents (they're generating more cash than they were when they were trading at $4!!), their EV/MC discount is on the top of my list due to their massive cash and no debt, capital gains tax on ACR is also tax free, I'm ready to pounce on this when the management has some skin in the game, so far their management is completely detached from shareholder interest..

Acrux limited are not looking too hot right about now, their share price has crashed over 35%! YIKES

There's an interesting article on it here:

http://au.advfn.com/newsletter/barneyc/637/acrux-limited-crash-over-patent-problems

 

[skc]

Still, now its trading at 31cents (they're generating more cash than they were when they were trading at $4!!), their EV/MC discount is on the top of my list due to their massive cash and no debt, capital gains tax on ACR is also tax free, I'm ready to pounce on this when the management has some skin in the game, so far their management is completely detached from shareholder interest..

FY14 ACR recorded net operating cashflow of $36m (I think there's some one-off milestone payments)... that's why the share price was ~$4 in early late FY13 (remember market is/was forward looking). But clearly the market incorrectly projected future cashflow at the time and missed some of the key risks.

FY16 net operating cashflow was $16.5m so I agree on that basis ACR appears cheap, not to mention $30m odd cash on the balance sheet vs a market cap of $52m.

The key questions to ask is:
- What's the risk-adjusted sustainable future of Axiron? Will it be lower after further negative developments?
- Will investors actually see any of the cash? Is ACR likely to return this cash to shareholder or will it simply pump it into another venture. If they develop anything medical down the line, you can pretty much consider all the cash expensed in R&D.

Lastly, let's say in 3 years, ACR has a 50% chance of worth $0 and 50% chance of worth $1.5 a share (so there's a positive expectancy of 75c). Do you take the chance? How much will you risk? Remember a positive expectancy will only deliver positive outcome with a large enough sample size over the longer term.

A case can be made for a takeover if you have the capital. Offer 25% premium @ 39c ($65m) cash. You get $30m back straight away. Cut some costs and with 2 years of consistent operating cashflow you've paid yourself back. From year 3 you start to earn a fantastic return on your capital invested... it's worth a punt.

 

[ReXXar]

FY14 ACR recorded net operating cashflow of $36m (I think there's some one-off milestone payments)... that's why the share price was ~$4 in early late FY13 (remember market is/was forward looking). But clearly the market incorrectly projected future cashflow at the time and missed some of the key risks.

FY16 net operating cashflow was $16.5m so I agree on that basis ACR appears cheap, not to mention $30m odd cash on the balance sheet vs a market cap of $52m.

The key questions to ask is:
- What's the risk-adjusted sustainable future of Axiron? Will it be lower after further negative developments?
- Will investors actually see any of the cash? Is ACR likely to return this cash to shareholder or will it simply pump it into another venture. If they develop anything medical down the line, you can pretty much consider all the cash expensed in R&D.

Lastly, let's say in 3 years, ACR has a 50% chance of worth $0 and 50% chance of worth $1.5 a share (so there's a positive expectancy of 75c). Do you take the chance? How much will you risk? Remember a positive expectancy will only deliver positive outcome with a large enough sample size over the longer term.

A case can be made for a takeover if you have the capital. Offer 25% premium @ 39c ($65m) cash. You get $30m back straight away. Cut some costs and with 2 years of consistent operating cashflow you've paid yourself back. From year 3 you start to earn a fantastic return on your capital invested... it's worth a punt.

Hi SKC, I really like your forward looking view and thinking in terms of probabilities. Regarding your first question, this is probably impossible to know, not even the management themselves, however there's no reason why it can't plunge further to even more ridiculous levels. I once followed a stock called Richfield International (RIS), it had a NEGATIVE enterprise value (that's right, you will get PAID for buying this company!! Not only that, the PE ratio was something like 0.2, so 2 and half months to make your money back), I couldn't believe when I saw it, I looked at the data for the last 10 years and it had a negative EV every single year! Basically it was accumulating cash year on year and not declaring a dividend, finally got noticed by a PE firm and got bought out a few months ago, causing the share price to spike several hundred per cent.

Which leads to your second question what they will do to the cash, if they don't distribute it and keep accumulating then eventually it will have to become a take over target, and that's the only way shareholders will benefit from the cash if they don't pay a dividend or stock buyback, the key issue is then when, can we afford to wait 10 years like RIS to get noticed?? That's the problem with small caps, bargain situations are scattered everywhere but unless there's some momentum and liquidity starts building it is somewhat risky to just buy and hold waiting for the value to be realised. I very much like your scenario between 0 and $1.50, I definitely agree it has more upside than downside potential. Their new products won't come online until 2018/19, if before that time there's a pick up in volume and management buy stocks for themselves it is probably a good signal to jump in?

 

[skc]

Hi SKC, I really like your forward looking view and thinking in terms of probabilities. Regarding your first question, this is probably impossible to know, not even the management themselves, however there's no reason why it can't plunge further to even more ridiculous levels. I once followed a stock called Richfield International (RIS), it had a NEGATIVE enterprise value (that's right, you will get PAID for buying this company!! Not only that, the PE ratio was something like 0.2, so 2 and half months to make your money back), I couldn't believe when I saw it, I looked at the data for the last 10 years and it had a negative EV every single year! Basically it was accumulating cash year on year and not declaring a dividend, finally got noticed by a PE firm and got bought out a few months ago, causing the share price to spike several hundred per cent.

I have looked at RIS numerous times. It's a Chinese company so there's little guarantee that the stated assets are actually there. I doubt MVT actually got what they thought they bought... given the fact that the major shareholders / insiders were happily sell their holdings to the bidder.

Take a look at SBB... according to the books it's a profitable menswear company with ~6-7c cash per share. Last traded price was 1.6c. No one believes the story and certainly don't expect a takeover anytime soon

Which leads to your second question what they will do to the cash, if they don't distribute it and keep accumulating then eventually it will have to become a take over target, and that's the only way shareholders will benefit from the cash if they don't pay a dividend or stock buyback, the key issue is then when, can we afford to wait 10 years like RIS to get noticed?? That's the problem with small caps, bargain situations are scattered everywhere but unless there's some momentum and liquidity starts building it is somewhat risky to just buy and hold waiting for the value to be realised. I very much like your scenario between 0 and $1.50, I definitely agree it has more upside than downside potential. Their new products won't come online until 2018/19, if before that time there's a pick up in volume and management buy stocks for themselves it is probably a good signal to jump in?

I should clarify that the $0 and $1.50 range and the percentages mentioned were numbers plucked from thin air for illustrating the valuation framework only...

 

[ReXXar]

I have looked at RIS numerous times. It's a Chinese company so there's little guarantee that the stated assets are actually there. I doubt MVT actually got what they thought they bought... given the fact that the major shareholders / insiders were happily sell their holdings to the bidder.

Take a look at SBB... according to the books it's a profitable menswear company with ~6-7c cash per share. Last traded price was 1.6c. No one believes the story and certainly don't expect a takeover anytime soon



I should clarify that the $0 and $1.50 range and the percentages mentioned were numbers plucked from thin air for illustrating the valuation framework only...

I wouldn't automatically devalue them being a Chinese company (it is Singaporean), I have met several Chinese businessmen who are very low-key with high integrity. One thing I never understood was why their account receivable turnover was reducing consistently every year, anyways thanks for SBB, I'm going to have a look now. With stocks trading like RIS and SBB, it seems we should just raise the money ourselves and buy it outright!!

 

[ReXXar]

I have looked at RIS numerous times. It's a Chinese company so there's little guarantee that the stated assets are actually there. I doubt MVT actually got what they thought they bought... given the fact that the major shareholders / insiders were happily sell their holdings to the bidder.

Take a look at SBB... according to the books it's a profitable menswear company with ~6-7c cash per share. Last traded price was 1.6c. No one believes the story and certainly don't expect a takeover anytime soon



I should clarify that the $0 and $1.50 range and the percentages mentioned were numbers plucked from thin air for illustrating the valuation framework only...

OK I had a look through SBB and now I understand what you mean by the risk of the assets of these Chinese companies, I think the issue here is to ascertain whether the cash SBB holds are in Australian banks or Chinese banks, I couldn't find this out from their financial statements, but it appears to be in China? If so I would steer clear away from this stock but if its held in Australia then its definitely worth further investigation.

A lot of these Chinese companies are highly cashed up, its probably with Chinese government's corruption crackdown so they're listing on the ASX and can transfer the money out of China at a moment's notice, so to separate the wheat from the chaff I think we must ascertain where these cash on being held, any thoughts?

 

[skc]

OK I had a look through SBB and now I understand what you mean by the risk of the assets of these Chinese companies, I think the issue here is to ascertain whether the cash SBB holds are in Australian banks or Chinese banks, I couldn't find this out from their financial statements, but it appears to be in China? If so I would steer clear away from this stock but if its held in Australia then its definitely worth further investigation.

A lot of these Chinese companies are highly cashed up, its probably with Chinese government's corruption crackdown so they're listing on the ASX and can transfer the money out of China at a moment's notice, so to separate the wheat from the chaff I think we must ascertain where these cash on being held, any thoughts?

You can forget about SBB. The founder holds a controlling stake so if he sells to you below the net cash backing, you know something is wrong.

The money is in China as the company records currency effects on cash every report.

Looking again at RIS, it looks like MVT didn't pay below cash backing. It paid something like cash backing + 3x earning. Which is probably not that different to acquisition of a privately held business.

I don't believe a Chinese company can transfer money out of China that easily just because they are listed in Australia. If that's the case everyone would be doing it, and not just a handful. Especially since SBB has no operations in Australia aside from some accounting, director and annual listing fees.

Back to ACR... definitely not as bleak as a Chinese fraud, but the range of possible outcome is pretty huge.

 

[ReXXar]

You can forget about SBB. The founder holds a controlling stake so if he sells to you below the net cash backing, you know something is wrong.

The money is in China as the company records currency effects on cash every report.

Looking again at RIS, it looks like MVT didn't pay below cash backing. It paid something like cash backing + 3x earning. Which is probably not that different to acquisition of a privately held business.

I don't believe a Chinese company can transfer money out of China that easily just because they are listed in Australia. If that's the case everyone would be doing it, and not just a handful. Especially since SBB has no operations in Australia aside from some accounting, director and annual listing fees.

Back to ACR... definitely not as bleak as a Chinese fraud, but the range of possible outcome is pretty huge.

Yes you're right about MVT, I think my calculation was also in that range, I actually emailed MVT on the day they announced the full takeover (was it 34 cents?) to confirm if my calculation was in the ballpark, surprisingly their director came back to me straight away and clarified they will only get access to 90% of the cash, since they're only bidding for 90%. It appears they've done their due diligence in the prevailing months after they launched on-arket bid at 20 cents, so I'm sure they got what they wanted.

We probably should start a thread and build a list of small caps that's just accumulating cash, good to meet another investor whose looking at this.

Regarding to ACR, its largest shareholder Allan Gray has been selling consistently until now after it tanked, that gotta be painful.. What's interesting is that he sold substantially more AFTER ACR announced dividend suspension causing the share price to plunge even further, so obviously the he and the new management are not even communicating, this is why I say the new management is completely detached from shareholder interest, any thoughts?

 

[skc]

We probably should start a thread and build a list of small caps that's just accumulating cash, good to meet another investor whose looking at this.

I think there are a few floating around. Do a search on "cigar butt", "net net" or "Ben Graham" to see what you find.

I am not really into this sort of stuff but plenty of others are.

Regarding to ACR, its largest shareholder Allan Gray has been selling consistently until now after it tanked, that gotta be painful.. What's interesting is that he sold substantially more AFTER ACR announced dividend suspension causing the share price to plunge even further, so obviously the he and the new management are not even communicating, this is why I say the new management is completely detached from shareholder interest, any thoughts?

Isn't it wrong (and probably illegal) if Allan Gray was to know about management's intention for dividend ahead of other shareholders?!

When fund managers get it wrong in the small caps they usually just dump without much care of whether the price depressed by their action makes any sense. The end of the line signalled by a significant XT can sometimes result in violent short term bounces.

 

[ReXXar]

I think there are a few floating around. Do a search on "cigar butt", "net net" or "Ben Graham" to see what you find.

I am not really into this sort of stuff but plenty of others are.



Isn't it wrong (and probably illegal) if Allan Gray was to know about management's intention for dividend ahead of other shareholders?!

When fund managers get it wrong in the small caps they usually just dump without much care of whether the price depressed by their action makes any sense. The end of the line signalled by a significant XT can sometimes result in violent short term bounces.

Yes it is wrong, however for a small company like ACR one would assume the new management would develop some relationship with its only institutional shareholder left that still holds (15%?) of the company? Also more often than not it seems major shareholders makes a major move before significant announcement, yes it is insider trading, but hell everyone does it. Look at the companies with major announcements and the management buying/selling a few weeks just before, they're usually never wrong, I've lost count how many times management starts buying just before major dividend announcement. Ross Dobinson who founded Acrux sold most of his shareholding at the peak, looking back that was the only advance signal that something ominous was coming. I found his previous statement saying he did not believe US ruling on the labeling would have a material effect on Acrux operations, what a load of BS..

 

[Rainman]

ACR is currently trading at 30% discount to net cash.

 

[greggles]

Acrux Limited has announced that it has submitted an Abbreviated New Drug Application (ANDA) to the FDA for a generic version of Jublia® and this has been accepted for review. The FDA has confirmed that Acrux's submission date for its ANDA corresponds to the first date on which an ANDA with a Paragraph IV Certification could be submitted, making Acrux eligible for 180 days of generic market exclusivity on final approval.

Jublia® is an antifungal drug indicated for the topical treatment of infections of the nail and US sales exceed $280 million per year.

The ACR share price is up 12.90% to 17.5c on the news, extending its rebound from a low of 14c in late June.

 

[tasmanian]

My tip for this weeks monthly comp. ACR could just keep consolidating around these levels or could be the start of a new uptrend. Worth keeping an eye on.

 

[tasmanian]

Looks like we got the breakout!

 

[peter2]

Two years since the last post . . .

That break-out didn't go very far and prices drifted lower. The weekly chart shows that this "pump and dump" price action happens regularly.

The daily traded volume is too low and I shouldn't post companies like ACR but I have included it in my small cap micro cap portfolio. The weekly chart has been trending higher quite nicely and I hope it continues or suddenly spikes higher. I won't mind.

One aspect of interest is that ACR is classified as a PDF (pooled development fund)

Must remember this when I cash out with outrageous profits.

 

[greggles]

Lift off today for ACR after it announced that the US Food and Drug Administration (FDA) has approved its generic product based on Perrigo's Testosterone Topical Solution, 30mg/1.5mL.

In October 2020 the Company announced that it has entered into an exclusive sales, marketing and distribution agreement with Dash Pharmaceuticals and that Dash will be responsible for the commercialisation of the product in the United States, including the coordination of commercial manufacturing and management of marketing and distribution.

The ACR share price spiked 54.5% to 25.5c this morning after the announcment, reaching an intraday high of 32c but subsequently easing back as sellers took control.