AVR - Anteris Technologies

[Purple XS2]

I hold a bit of AHZ so have been keeping an eye on it. Very odd that the market hardly reacted to ( first US sales of Cardiocel ).

Trading halt today, cap-raising. Looks like the smart money saw it coming.

Once this episode runs its course, the unseen anvil is lifted. Past cap-raises have been in the form of (at least in part) rights issues, but I have no information about this one. We'll see the fine print soon enough. If it is limited to sophisticated and institutional investors, it saves me wondering where I'll get the money to chip in!

I disclose mountains of Admedus.

 

[Tyler Durden]

Trading halt today, cap-raising. Looks like the smart money saw it coming.

Once this episode runs its course, the unseen anvil is lifted. Past cap-raises have been in the form of (at least in part) rights issues, but I have no information about this one. We'll see the fine print soon enough. If it is limited to sophisticated and institutional investors, it saves me wondering where I'll get the money to chip in!

I disclose mountains of Admedus.

Damnit! Guess I'm the dumb money then

 

[grumstar]

Trading halt today, cap-raising. Looks like the smart money saw it coming.

Once this episode runs its course, the unseen anvil is lifted. Past cap-raises have been in the form of (at least in part) rights issues, but I have no information about this one. We'll see the fine print soon enough. If it is limited to sophisticated and institutional investors, it saves me wondering where I'll get the money to chip in!

I disclose mountains of Admedus.

Is this good news or bad news

 

[VSntchr]

Is this good news or bad news

More will be known when the details are released. But from a basic perspective - AHZ is a growth company and many people are investing based on extrapolative earnings growth from here...and to achieve this, the company will require capital.
The fact that they have done this raising now, despite still having cash on the balance sheet lends me to believe that they have it earmarked for a special purpose (i.e. specific vaccine trial based on prelim results, Cardiocel demand has been identified and capital budgeting requirements have been set)..these are just very quick possibilities that come to mind.

As always with these companies it is speculative and take what I have said above as an opinion only.

 

[grumstar]

More will be known when the details are released. But from a basic perspective - AHZ is a growth company and many people are investing based on extrapolative earnings growth from here...and to achieve this, the company will require capital.
The fact that they have done this raising now, despite still having cash on the balance sheet lends me to believe that they have it earmarked for a special purpose (i.e. specific vaccine trial based on prelim results, Cardiocel demand has been identified and capital budgeting requirements have been set)..these are just very quick possibilities that come to mind.

As always with these companies it is speculative and take what I have said above as an opinion only.

Thank you , Im learning more and more each day

 

[ROE]

yeah wait for the details ...management has been top class so I have faith in them doing good for shareholders...they may even surprise us with some news accompany with the SPP announcement on Monday

 

[Ves]

They are selling smart pump technology now??

http://www.admedus.com/au/2014/05/08/latest-smart-pump-technology/

The Hotcopper crew were also talking about a mob called Gennocea (which Bill Gates put money into) , who have an upcoming IPO. Similar field of vaccinne I believe?? Not sure how that affects AHZ.

 

[ROE]

They are selling smart pump technology now??

http://www.admedus.com/au/2014/05/08/latest-smart-pump-technology/

The Hotcopper crew were also talking about a mob called Gennocea (which Bill Gates put money into) , who have an upcoming IPO. Similar field of vaccinne I believe?? Not sure how that affects AHZ.

This field is fairly new so the more people involve the more data we can gather and hopefully learn from one another and all of us will benefit

 

[DeepState]

...management has been top class so I have faith in them doing good for shareholders...

Hi.

AHZ-AU grows in large part though the acquisition of companies with promising pipeline. I believe it to be a significant part of its value proposition in addition to guiding further development, achieving approvals and marketing successful products.

In relation to strength of management, it appears that their operational ability is good. But in relation to acquisitions, the impairment test required in 2012 saw a $5.4 million impairment charge taken on the books for Celxcel. This was around 50% of equity and approximately equal to an entire year's worth of financing from cashflow. That's a massive miss and has to be regarded as a pretty large black mark on the acquisition front - particularly in relation to risk management of the portfolio. Another test will be required in 2014.

In relation to the proposition for the share price, the RBS Morgans analyst report of 25 October 2013 seems to have been a strong catalyst in addition to achieving the CE mark for CardioCel in Europe in August 2013 and achieving first surgeon approval use on 8 October 2013. However, just for a reality check, RBS Morgans are assuming 25% penetration of the entire cardiac repair market in four years. Not all cardiac repairs will be suitable for this technology, I imagine, making this assumption for a dominant and permanent position in the heart tissue repair market appear even more aggressive at first glance. Also, the gross margin is assumed to be 80% where as the consolidated statements show that gross margin is more like 50% for the product suite. They do not offer rationale for this assumption.

It is interesting to see the share price peak out at the time of the US approval of CardioCel. A case of buy the rumour?

Just FYI.

 

[ROE]

"The majority of the loss is attributed to the impairment of goodwill of $5.4 million. The goodwill resulted from the merger between Allied Healthcare Group Limited (formerly bioMD Limited) and Allied Healthcare Group Investments Pty Limited (formerly Allied Medical Limited). This transaction was accounted for using provisional accounting in the prior year. The fair value of intangibles from the transaction has been increased and this reduced the value of goodwill previously calculated. It was resolved by directors that the remaining balance of goodwill was impaired." from FY 30/06/2012

Also Celxcel is what CardioCel product today, the write off in goodwill is just a cleaning exercise, I dont think it is a black mark against management.

CardioCel will sure generate far more revenue than what is written off in good will.

 

[DeepState]

"The majority of the loss is attributed to the impairment of goodwill of $5.4 million. The goodwill resulted from the merger between Allied Healthcare Group Limited (formerly bioMD Limited) and Allied Healthcare Group Investments Pty Limited (formerly Allied Medical Limited). This transaction was accounted for using provisional accounting in the prior year. The fair value of intangibles from the transaction has been increased and this reduced the value of goodwill previously calculated. It was resolved by directors that the remaining balance of goodwill was impaired." from FY 30/06/2012

Also Celxcel is what CardioCel product today, the write off in goodwill is just a cleaning exercise, I dont think it is a black mark against management.

CardioCel will sure generate far more revenue than what is written off in good will.

Hi RoE

You are obviously free to do your own thing and I know you will. Just wanting to clear up my understanding as you are clearly closer to this:

From Note 11 of the FY11/12 report:

"The fair value of patents and goodwill from Allied Healthcare Group transaction were calculated on 24 June 2011. In the current year
the directors obtained an independent valuation of the intellectual property held in Celxcel Pty Ltd at the time of acquisition. The
valuation of the ADAPT tissue engineering technology has increased the fair value calculated for intangibles at 30 June 2011 by $3.5
million. This in turn caused a reduction in the goodwill value. The Directors took a conservative approach when testing goodwill for
impairment. At the date of impairment test despite positive testing of products, no product had received regulatory approval for sale.
Based on this the Directors believed no value could be placed on future earnings from these products at this time. On this basis the
Directors consider the goodwill impaired."

So, the value of goodwill was reduced in 2011 and reclassified as intangibles by $3.5million for the accounts as at 30 June 2011. But, directors wrote down the remaining goodwill by $5.4m for the 2012 accounts after getting an independent valuation for the IP. This implies that what they were prepared to pay for it at that date probably exceeded its carrying value at the time as they judged to be the case in true and fair accounts. As at 30 June 2012 that goodwill was (after transfers between intellectual property and goodwill) regarded as true and fair. It was, after all, the directors of the company that elected to write down the goodwill.

So, one year and a bit after merger, the goodwill of the combined entity was written down by a great deal by directors who are charged with giving this a fair value. You can rightfully argue that this goodwill was just carried forward from pre-merger. But this writedown suggests a change of mind of carrying value on the basis of impairment. This is an indication of overpayment to the shareholders of the acquired entity. The total consideration was $8.6m. I think that is somewhat significant when a writedown of that level relative to acquisition expense is so large.

Operationally, management has delivered on CardioCel. No argument.

I think you don't mean revenue, but PV (after tax profit on CardioCel) being in excess of the goodwill writedown or acquisition cost plus development expenses etc.. I think you are absolutely right. So I guess it worked out well in the end.

 

[galumay]

AHZ announcement re share placement,

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01516889

 

[galumay]

AHZ announcement re share placement,

http://www.asx.com.au/asx/statistics/displayAnnouncement.do?display=pdf&idsId=01516889

Further to my link today, I have been having a bit of a think about the placement, to 'sophisticated and professional investors' - its obviously played its part in the drop in price and lack of volatility of the last few weeks, given that Twiggy alone holds such a large percentage of issued shares its always going to effect the market.

I guess we will have to wait and see the details to understand how much dilution will occour through the private placement and the share purchase plan.

 

[Tyler Durden]

It closed at 11c today.
I thought it held up fairly well given the announcement.

 

[DeepState]

It closed at 11c today.
I thought it held up fairly well given the announcement.

$8m at $0.1 = 80m shares issued
VWAP of 10.8 closely matched close of 0.11
Volume of 9.6m is only a about 12% of new share issuance. Expect selling pressure to continue for a while yet.

 

[galumay]

$8m at $0.1 = 80m shares issued
VWAP of 10.8 closely matched close of 0.11
Volume of 9.6m is only a about 12% of new share issuance. Expect selling pressure to continue for a while yet.

Not sure the volume would have anything to do with the private share issue, but I guess some might have bought thinking they could flip for a quick 10%. I would have thought it more likely it would attract money that saw a bright future for AHZ with the extra working capital as it starts to move into the 'profitable company' stage of development.

I wont be surprised to see them hang around the 10c mark until the next bit of good news though.

 

[craft]

Further to my link today, I have been having a bit of a think about the placement, to 'sophisticated and professional investors' - its obviously played its part in the drop in price and lack of volatility of the last few weeks, given that Twiggy alone holds such a large percentage of issued shares its always going to effect the market.

I guess we will have to wait and see the details to understand how much dilution will occour through the private placement and the share purchase plan.

IMO there is only limited possible logical conclusions to draw when money is raised via a placement rather then a renounceable rights issue.

The money is needed urgently. (poor growth planning or financial difficulty)

Management view the share price as OVERVALUED at the issue price.

Management does not have all holders interest at heart and have raised via a placement either because majority holders have indicated they would not support a rights issue or to 'favour' investors who get access to the placement.

Management doesn't understand the valuation impacts on existing holders of selling the companies shares non-proportionally.

 

[TheUnknown]

Down further today... A good buy at 8 cents i reakon 10k worth.

 

[galumay]

IMO there is only limited possible logical conclusions to draw when money is raised via a placement rather then a renounceable rights issue.

Interesting commentary, as always, craft. So which one do you believe is the motivation in this case? Or have you no real interest in AHZ and just passing commentary on the possible reasons?

I personally consider the first option quite possible, maybe the cost of expanding into Europe & USA is greater than they expected and in order to generate the potential sales they need working capital quickly.

The second option is possible, but seems less likely to me, and would have raised its head earlier.

Again possible, especially to allow a large investor to gain a position off market, but then why bother with the SPP, and I cant see why existing large shareholders like Twiggy would not want a rights issue again. (although I am not fully cogniscant of the reasons a large holder might favour one over the other.)

I have learnt in life that over estimating management competence is a very common error, but even a cynic like I would assume that AHZ do understand the effect of non-proportional dilution!

 

[DeepState]

Not sure the volume would have anything to do with the private share issue, but I guess some might have bought thinking they could flip for a quick 10%. I would have thought it more likely it would attract money that saw a bright future for AHZ with the extra working capital as it starts to move into the 'profitable company' stage of development.

I wont be surprised to see them hang around the 10c mark until the next bit of good news though.

Not sure how you can say it is not to do with flippers when there has been a spike of volume that is many multiples of the daily figures for months and the share price has compressed. In any case, well, you've hit the 10c now!

VWAP today and close at 10c
Further volume of 9m

These are flippers pushing it down. The fair price of the stock, only allowing for the raising, which was tiny relative to capitalization was to be at the pre-announcement price less a fraction. There has been no other news. Markets are good. The stock is going down despite heavy disclosed order imbalance to the long side.

In relation to moving from unprofitable to profitable, it is often a sell signal. See the peak price was around when US FDA approval was received. That's essentially the move to profitability there as far as the market is concerned.

Valuation for these types of companies is a joke (in terms of establishing fair price), but RBS Morgans attempted it and their assumptions are, IMO, unreasonably bullish for reasons that aren't supported. BUY....you know. Their valuation was $0.20, but a stack of that was related to the recent product release. Huge margin and take-up assumptions which have large swing factors on valuation if you run the numbers. Admittedly partly offset by a probability of approval of 80% before it was known that approval would be received from US FDA. So their valuation looked rich at $0.20. I'm not saying that adjustments can bring it down to $0.10.

Nonetheless, you are witnessing uneven pressure on the stock price which should evaporate in a few weeks. If you like the idea, it may represent an opportunity for you. The queue is deep!




Disclaimer: I am not a holder of AHZ.