Pinned straw:
Did a bit more work this evening and updated the C79 cashflow outlook for FY24
Made the following changes to the cash flow xls of 3 weeks ago:
- @RhinoInvestor is correct around the capex per unit. It is looking to be ~$4.16m. Used the Appendix 4C full year capex for PPE, divided by the 11 units deployed during FY23.
- Went through each of the 4 Appendix 4Cs to work out how many units were deployed in FY23 - 10 units in FY23 itself, 1 was due in 1QFY24, have simplistically assumed that they will have spent capex on 11 units, not just the 10, in FY23.
- Added a line for the baseline MMAP cash inflow for the 20 units deployed in FY23 - this is $31.2m
- For FY24 cash outflows, took the full year FY23 Cash Outflow from Operating Activities in the Appendix 4C, bumped up by 10% - C79 expects operational leverage as more units are deployed, not sure how good this estimate is
- Took the exact Cash Balances from the 4C - Bank Balance + Term Deposits
- C79 has available unused CBA Bank Facility of $21.5m as at end FY23.
The cash position at end-FY24 is now looking to be a SHORTFALL of ($1.3m) vs the earlier calculated cash surplus of $29.8m.
There will be ~$20.2m of debt still available at the end of FY24. This can fund ~4.9 FY25 deployment units, which given the FY24 plan, is ~1 Quarter's worth of FY25 deployment.
Funding is thus in place for ~42.9 (20 FY23 + 18 FY24 + 4.9 FY25) of the 49 contracted units.
The CBA facility size thus seems to make good sense, noting that it is contracted when the interest rate cycle has been on the up. A new loan facility sometime mid-FY24 is probably on the cards when the interest rate cycle should hopefully be on its way down. This should cover FY25 + new contracts beyond the current 49.
I do not see any capital raise occurring due purely to operational funding gaps. Indeed, given the high visibility of revenue, costs and funding needs, it will probably be a huge management red flag if they do not get the funding right ...
An opportunistic capital raise, similar to AD8, could be something to look out for in 3Q/4Q FY24, if the share price spikes to say $10-12 from the current ~$6 as a cheaper/more effective way of raising capital vs debt. This could be based on a better-than-expected revenue trajectory and/or a surge in newly contracted sales or expanded breadth of use of the Assay units.
Am happy that I now have a simplistic cash flow model against which to track the cash position during FY24!
Hope this makes sense.
Remaining very bullish on C79 and looking for the opportunity to top up.
Rudyboy
Enjoyed watching the C79 chat having worked with CSIRO and making them over $5m richer! The main person that drove our project is now Chief Scientist for CSIRO (still waiting for my commission LOL).
Reminds me of a visit I made to a local company here in WA that makes parts washers. Father had started it and built it, son now running it. Been in business about 30 to 40 years from memory and 85% of the units they had built and leased out were still in operation. When I saw the son's PA, I knew they were making huge returns as they generally only have top model PAs here in the middle of Perth.
Company was all private and not selling even though I am sure he could have picked a number.
C79 equipment will last far longer than 10 years IMHO. Looks substantial and much of it will be software updates rather than mechanical changes as the patented process will need to remain reasonably the same. I wasn't really sold on the consumables side. The real issue is how do you profit as a holder? The revenue model is great but the capex is scary. As a five year hold and forget, it will be good. Mr market doesn't have the long term Asian mentality in Australia, more like one month is a long time.
In a couple of years when they have critical mass I think it will be a solid buy and hold.
RhinoInvestor
@jcmleng just reviewing the numbers in prep for Today's CEO discussion and stumbled across note 21 of the Annual Financial Statement
So looks like the assumptions on cost side of growth in the model are about right.
I've also noticed a "Photon Assay Costs" in the financial summary in the Annual results presentation. I'm not sure if its worth taking that off your MMAP in the model and maybe using a monthly Gross Profit per unit of 95.6K instead of the 130K MMAP. It will make the model a bit more pessimistic.
The other thing I hope we get a bit more colour on today is the expected FY24 operating expenses (noting that doubled their Headcount expansions from 30 at FY21 to 55 at FY22 to 116 at FY23). I think thss number could conceivably grow by at least 50% to close to 30m if their HC ramp up was pretty even across FY23 and they continue to ramp a bit more as their install base increases.
RhinoInvestor
@jcmleng I found the point that he expected Headcount to double again this year a bit disturbing actually. That's mainly because they carry the HC number in operating expenses. This number increased from 9.7m to 19.4m last year as they doubled HC and if they double again then that will consume most of the Gross Profit increases from the increase of 20 up to 38 deployed units.
I can understand that it needs to grow with rollout geographically to service the equipment, my main concern is it seems to be linear (actually the ratio of HC to installed machines has been increasing over the last couple of years). I'm wondering where they get to the economy of scale point.