Feedback from US distributers is that brand owners and retailers are not building up inventory for the summer season as there is a reduction in holdiay bookings.
ANO is shipping additional poweder and dispersions to an FDA approved warehouse for a supplier Deveraux Speciatlies to have available to distribute to Canada.
This suggests that there is not currently buyers for existing stock. A proposed capital reduction of up to 7c per share perhaps sounds like a desperate attempt to prop up the share price especially since there was a rights issue very recently and now there seems to be so much money that ANO will propose to give it back?
Corona virus will be temporary and we don't really know how bad it will be. Potentially there will be a northern hemisphere summer season of low sales which would mostly impact this years and next years revenue and profit numbers for ANO.
This will pass.
Investors with a longer term view may well find a buying opprotunity but it is hard to know where the share price could go in the short term.
It is tempting to accumulate a small amount here around $4.50 with a longer term view.
A hard decision to make as better opportunities could present if there is a broad larger market sell off and I want to keep some cash on hand.
Lots of action on the shipment front this month – another 25,000kg + delivery on the 17th to Deveraux, following on from a similar load only a week or so ago. On these numbers and frequency of delivery, management should get close to their revenue guidance for FY20 of ~$30m without too much trouble.
Feeling a little more comfortable about my recently increased valuation now.
10-July-2020: Lev's still buying ANO on-market.
I'm not an ANO shareholder any more, for reasons I gave here at the time I sold, but I do occasionally notice these announcements from them. You can't question Lev's commitment to ANO.
18-Mar-2020: If anybody else has posted a straw about this, I haven't seen it. Both ANO & AIR are currently suspended from trading, following a call on Monday for a trading halt, pending further details of a patent they have just filed for a novel (new) product or product range.
On Monday they talked about "a highly progressed opportunity regarding the development of Oral Care Products (New Products) which could prevent the coronavirus cells multiplying" , but by yesterday they had corrected that to:
“The patent is looking at a range of oral care products that could inhibit the replication of the novel coronavirus inside the cells of the oral cavity / mouth”
So - slow down/inhibit - instead of stop/kill. Still, that is certainly the sort of thing that DOES require a trading halt or suspension until they are in a position to provide further details (especially in THIS environment), so they've done the right thing for sure.
Apparently, AstiVista (AIR) brought this to ANO's attention, and they are approaching it as a joint venture or partnership, with the details of how that works being just one of the things they needed to iron out. Lev, Geoff and Rade are all directors of both boards (ANO & AIR) with one additional director (Laurie Lefcourt) on the ANO board, so the companies are pretty much on the same page you would imagine. Lev is the Chair of both companies.
Similar announcements have been released by both AIR & ANO, but the full details of this opportunity will be released either after market today or some time tomorrow (I imagine) and they should both recommence trading after that release.
Looking forward to reading more about this!
Hmm...I am pretty nervous about the numbers, but ANO have the benefit of the 'Lev put' (what will this cost minority shareholders?). ANO has been hit hard by COVID-19. Key takeaways:
1) Receivables over 61 days has ballooned to $3.4 M, up from $171K in prior year. A key distributor is carrying excess product and is unable to onsell it, and the company has agreed to extended payment terms, which are currently being met.
2) Inventories have ballooned to $6.4 M, up from $1.1 M in prior year. CEO reports sales will be down over the next few months as customers reduce inventory, and ANO are building up inventory in anticipation of a v-shaped sunscreen recovery by Q4 2021.
3) Balance sheet as at the end of year has $260 k in cash. Lev will support ANO's liquidity requirements. The Lev put is in place.
4) ANO has set a goal of capturing 2-3% of active ingredient market share by FY2024. SUnscreen market forecast to be $24 Billion (USD?). If 5% of the market is active ingredients, that equates to a target revenue of around $50 M - Let me know if my estimate is wrong please, as it seems a little lower than I expected.
5) Reportedly increasing competition from Everzinc. This may result in pressure on margins.???
6) Forecast for HY2021 is for it to be better than HY FY2019. No guidance provided, contrary to last year, this may mean revenue is expected to be flat FY2021????
7) 22 employees on Jobkeeper and no bonuses are to be paid, board and management wage freeze.
8) Sales up to February were running at around $2 Million per month, post February, sales slumped to $0.4 M per month.
9) ANO are expecting the sunscreen market to begin to recover by Q4 2021, and are positioning supplies and inventories for an anticipated ramp up in demand as manufacturers rebuild depleated stockpiles.
It looks pretty bleak over the next 6 months, and if there is a vaccine / or a second European wave doesn't hit hard, there may be green shoots in H2 2021.
DISC - I hold.
ANO expects profit to be 2.5x higher in FY20 compared to the previous year, coming in at around $8.4 million. This is on the back of a 46% lift in turnover.
It also looks as though sunscreen manufacture has recommenced in the US and ANO says it expects an extension to the aluminium oxide supply agreement.
The market has reacted favourably, sending shares over 20% higher.
ASX announcement here
I'm trying to grasp whether the management of this business are completely off the chart nuts who don't care what people think (including the regulatory authorities) or are just so heads-down, bum-up in their business that they don't have time for protocol. Either way the story is difficult not to watch.
Advance Nanotek announces a new patent for an antimicrobial hand, face and body moisturiser. The product contains zinc and hinokitiol as active ingredients and has been sent to MSL Solutions for testing for efficacy against feline coronavirus as they did for the mouth spray. The announcement makes no claims to be a preventative or cure for COVID19.
This announcement reads a lot more coherent and to the point compared to previous announcements.
Sat 18-Apr-2020: Just on @Hackenbacker's "Management" straw about the Ausbiz podcast - here's the link:
That should automatically start playing the latest episode (from Thursday 16 April) which starts off with Julia Lee and Mark Moreland discussing Kogan (KGN). RFT is the 4th stock discussed and that begins at around the 17:30 mark. ANO is the 6th stock discussed and that discussion begins at around the 24 minute mark.
Neither analyst recommends ANO, but Mark's comments are indeed worth listening to, because TeamInvest have looked very closely at ANO, and he clearly explains why despite their obvious potential, they are not suited to being a listed company, because of the way they are run. Mark mentions that one of ANO's directors is actually a member of TeamInvest, but he doesn't disclose which one. Despite that link, as a group (team), they (TeamInvest, who Mark represents) have voted ANO down as NOT being an attractive investment opportunity. Many of TeamInvest's members are either business owners or ex-owners or ex-managers of businesses themselves and they do focus quite a lot on the quality of management of companies when deciding whether a company would make a suitable and attractive investment. Mark suggests that ANO does tick a lot of boxes, including excellent earnings growth, superb industry positioning (being in exactly the right place at the right time), and more, but TI failed them purely on management quality and governance issues, and he gives examples of where they have had concerns.
Julia Lee didn't have much to say, except that their latest announcement fiasco (about the new product patent that might be able to inhibit the replication of COVID-19 in the mouth) was bizarre and that ANO had lost a lot of credibility as a result of that. Howard Coleman and Mark Moreland's TeamInvest however had failed ANO before that episode, based on previous issues and behaviours. Not sure if many people are aware, but our own Strawman used to be a member and spokesperson (representative in the media - on TV) for TeamInvest back before the MF days. While I'm not personally a member of TeamInvest - mostly due to the high financial cost of being a member - I do respect their opinions. They base much of their investing philosophy and process on Warren Buffett's and Ben Graham's pearls of wisdom and beliefs, and their approach is much more in that Value Investing camp rather than so-called "Growth Investing" where valuations and price are less important. You can get an insight into how that plays out by continuing to listen to the podcast when they discuss Blackmores. They don't get every call right, but they manage to screen out a lot of companies that carry higher levels of risk, which is the way I look at ANO.
ANO may multibag - and I hope for the true believers who hold them that they do - but the risk/reward equation is not attractive to me any more. I want to have a greater level of faith and trust in management and that they have sufficient regard and respect for ordinary retail shareholders. All shareholders are part-owners of the business. Regular trading suspensions, questionable announcements, and threatening to move your primary listing to the NASDAQ in the USA is NOT (in my opinion) in the best interests of ordinary retail shareholders. And that doesn't even touch the related party transactions, the auditor concerns, and other governance concerns. GLTAH, but they're not for me.
If you are unable to play the video without signing up, you may have more luck if you google various combinations of Ausbiz The Call and Advance Nanotek (or ANO), which is how I found it and watched it the first time. I've since signed up for regular emails from them.
The report by Global Market Insights shows very promising market growth for Nano-Zinc Oxide, namely;
Market size increasing from US$300 mil in 2018 to over $US800 mil by 2026.
- Rising adoption in biomedical fields
- Proliferating cosmetics industry
- Opportunities: Increasing implementation in animal feeding/grazing
Increasing environmental & health issues though this contradicts a recent review by the TGA that found "on current evidence, neither TiO2 nor ZnO NPs are likely to cause harm when used as ingredients in sunscreens and when sunscreens are used as directed."
Seems like the total addressable market for ZnO derived products is likely to grow significantly over the next few years.
Summary overview available here:
Unfortunately the full report is prohibtively expensive!
27-Mar-2020: From the ASX (at 5:03pm, after the market closed): Continued Suspension from Official Quotation
In this update from the ASX (link above), they explain why they consider that a continuation of ANO's suspension from trading is appropriate. They include the query letter that they sent to ANO regarding their draft announcement regarding their new patent for various oral care products that may use various combinations (compositions) of "at least one zinc compound or at least one zinc salt and hinokitiol or a salt thereof". The ASX also include ANO's response (reply) to that query letter, and it's not hard to understand why the ASX regarded the ANO reply as lacking in detail and not adequately addressing all of the questions that the ASX had asked.
Just one example:
"Please advise whether ANO has received any legal advice regarding the statement in the Draft Announcement that: “The initial sales are contemplated on the Amazon EU platform as no regulatory approvals are needed.” If it has, please provide a copy of the advice (not for release to the market). If it has not, please explain its basis for making this statement."
Hmmm. Perhaps they didn't read the whole question?
The ASX felt that they needed to release this announcement (link above) in response to ANO releasing their ANO Business Update announcement the previous day (2:20pm on 26-Mar-2020) in which they do make assertions about the ASX that the ASX clearly felt they needed to address.
Apart from the spelling and punctuation errors in the last line of ANO's response to the ASX - "The balance of information sort by the ASX is in the opinion of the Board is not material." - ...the wording is dismissive and provocative. I think they'll find that they won't get out of this trading suspension until they provide satisfactory answers to the ASX and let the ASX decided what is and is not material.
Another fine mess they've got themselves into. Such promising tech, and such a badly run company - from a communications and regulatory compliance point of view.
Great write-up of the FY20 results from user @WillThrower3 on twitter. Will was the author of the report I posted in my #History straw.
for those interested in the call podcast here is a list of stocks they have discussed since the first episode
April 17 - EOS, AIA, CSR, VHT, AD8, JLG, CBA, MQG, NXT, PGC
April 16 - KGN, IEL, TAH, RFT, IVC, ANO, BKL, GMG, CAR, IDX.
April 15 - FMG, SYR, FDV, JHX, MSB, ALU, REA, NST, QAN, FCL
April 14- IRI, PET, NXS, MIN, ARB, AX1, CCP, APX, TWE, CTD
April 9 - ELD, TYR, AEF, SIQ, BBN, LLC, IGO, M7T, BRG, MMM
April 8 - PNV, AVH, OML, CGF, MLD, EVN, COH, SNL, CPU, LNK
April 7 – MP1, LYC, VAS, FLT, MRM, AMC, STO, HIL, PAR
April 6 - CWY, CAT, LOV, FXL, CGC, RWC, MND, WOR, IFL, AIZ
April 3 - WSP, SYD, EHE, SGR, COL, ASX, MGR, ADH, SIQ and CKF
April 2 – REG, WBC, VOC, SUN, XRO, CUV, WEB, KMD, WAM and TLS
April 1 – ZIP, COH, NCM, ANZ, WES, GEM, RHC, BHP, CBA, EML
March 31 - BIN, AMP, MQG, WHC, NEA, ALL, WTC, ASB, MTR, NEC
March 30 - VAH, QAN, APT, PTM, WOW, JBH, SCG, FPH, CSL, OSH (Premier episode)
Came across this article. Not sure who wrote it but it provide some great insights into how the company got to where it is today, the management team, competitiors and addressable market.
Well worth a read.
02-Apr-2020: I've already posted a straw with a link to today's announcements from both the ASX and ANO. However, here's the body of ANO's announcement (it ain't real long):
Retraction of Announcements
The ANO Board requests that if we can’t agree, we retract all announcements since 16 March 2020, except for the patent application, ANO Business Update 26 March 2020 and the Appendix 3Y, from the ASX platform and have the suspension lifted.
The ANO Board advises that patent application #2020900820 was filed on 17 March 2020 with joint 50 / 50 ownership between Advance NanoTek Limited and Astivita Limited. There is not likely to be any material positive impact on sales with this patent application #2020900820 in FY20.
--- ends ---
As it turns out, the patent was for products including mouthwash that have not been tested at all for their effectiveness to inhibit the replication of any virus, let alone COVID-19. In fact there have been no tests at all. Tests - on a cat - or cats - were planned to be conducted within the next three weeks apparently, but have not yet commenced.
Further, the "inventors" of this "invention" are listed as Dalia Mizikovsky and Joseph Mizikovsky. ANO confirmed that they are "...obviously relatives of Mr Mizikovsky." Can we safely assume they mean Lev?
Joseph is also the CEO of Astivita (AIR).
When asked by the ASX about ANO’s understanding of Dalia and Joseph's qualifications and experience in the research and development of anti-viral products for ingestion by human patients, ANO's reply was:
Dalia Mizikovsky – Bachelor of Advanced Science, majoring in Biomedical Science. Currently completing her Honours in Developmental Biology at UQ (GPA 6.7) and has been employed by ANO since 17 April 2019. Joseph Mizikovsky – has completed 2 subjects at the London School of Economics, and is currently studying a Bachelor of Business, majoring in marketing at QUT and has been employed by AIR since 26 September 2017.
And that mouthwash was not meant to be ingested except in very small quantities.
Looks like Joseph has some catching up to do. Still, many fine inventions have been thought up by people with little to no relevant qualifications. This could be one of those.
All in all, considering that this latest stoush is due to both AIR and ANO requesting a trading pause and then a trading halt back on March 16th while they sorted out the IP ownership split for a "highly progressed opportunity regarding the development of oral care products which could prevent the coronavirus cells multiplying", a request for further details by the ASX does seem entirely reasonable in the current environment.
In one of their latest responses to the ASX, ANO argues that the ASX did NOT request this level of detail with a previous patent announcement that they made, and the ASX pointed out that the announcement in relation to that other patent was not even regarded as market sensitive by ANO - let alone feeling the need to request a trading halt. Fair point. Of course that prior patent announcement also did not have anything to do with COVID-19 and didn't use the word "coronavirus". This one did. That tends to get people's attention at the moment. We now find out that the whole thing is based on the supposition or hypothesis that it "...could inhibit the replication of the novel coronavirus inside the cells of the oral cavity / mouth” (from the 17th March "Clarification" announcement). I say supposition or hypothesis because there has been no testing done yet to back up that theory or possibility. They do however plan to test it on a cat (or cats) in the next three weeks - or begin to.
Doesn't sound "Highly Progressed" to me, but I guess everybody has a different interpretation of what that means. ANO's interpretation was clearly not the same as the ASX's.
26-Mar-2020: ANO Business Update
ANO Business Update
ANO continues to produce zinc oxide and one of our large customers in the US has reconfirmed their prior orders for 80 MT plus for April, May and June. We are sending additional final products (powder and dispersions) to the US and Europe and will continue to do this on a weekly basis. Despite two countries temporarily closing production facilities, we have raw material in stock and in transit and have placed additional orders from our supplier in a third country. We will have sufficient raw materials to meet future zinc oxide orders well into the next year if current trends persist.
We have today received two new orders from Merck which doubles their orders for calendar 2020 to $3.2 million. Again, we have placed significant orders for raw materials and are investing in spare parts to ensure we have continuous supply of Alusion to Merck over the next 12 months.
Zinc Gluconate Production
ANO is looking into the production of zinc gluconate with lab trials about to start. Given the current worldwide shortage, ANO will look to distribute this product to Europe, where no TGA approvals are required, as soon as possible.
COVID-19 – Remote Setup
Software has been installed successfully by SenterpriSys Limited to allow key functions within the business to be completed by staff from home if required.
Collection House Limited (“CLH”) & ASX
Many of our shareholders may be unaware that our Chairman is currently in court with the ASX and CLH as a result of the ASX publishing a market release for CLH which was defamatory towards our Chairman. Further, CLH remains voluntary suspended. More concerning is that the issues raised by our Chairman appear to be the reasons CLH has extended its voluntary suspension for now 2 months.
ANO believes this is in part one of the reasons we are having difficulties and delays with the ASX at present.
In addition, we confirm to the market that the ASX have raised rumours in regards to margin calls by Directors on Wednesday morning, 18 March 2020. The Board confirms to all shareholders that there are no margin loans in place by any Director.
Update on Suspension
It is astonishing that the ASX would seek to impose forced suspension of ANO’s shares for what can only be understood to be a result of the brevity of some responses (which were in the Board’s view the appropriate factual responses to ASX’s questions). The ASX has offered no clarification as to why the brevity is not acceptable to them nor have they tried to reframe their questions to elicit a different answer.
So, shareholders are aware, some of the questions raised by the ASX were technical in nature and in, the Board’s view, only capable of answer by reference to the patent and the scientific papers referred to therein. It is not appropriate for the Company to attempt to summarise for the ASX matters of such a technical and scientific nature, at the risk of being accused of not effectively summarising the matter. The only appropriate response in the Board’s view is to direct the ASX to the source documents where all the technical detail is available. Of course, this is the Company’s best guess at the ASX’s concerns as it has to date not offered any additional guidance on which responses are deficient or why.
In light of the current situation between our Company and the ASX, and given 70% of our sales are in the US and our market capitalisation is in excess of $200 million, the Board is going to investigate listing on NASDAQ. We apologise to our shareholders and the Board will attempt to resubmit our announcement to have our suspension lifted as soon as possible.
Geoff Acton (B.Com CA)
--- ends ---
AUsbiz TV has a podcast each day where they review 10 stocks by 2 analysts. Yesterday Thurs 16 April was the turn of Advanced Nanotechnology. There was a fairly daming report about management integrity to the point of one analyst questioning if this stock should even be publicly listed. I don't own it but was wondering if anyone has a response?
01-Apr-2018: 9:37am: ANO: Suspension Update
The war continues...
I have updated my valuation for ANO, slashing my TP, and explaining why I'm going to sell as soon as they begin trading again (assuming they begin trading again)...
Amended Appendix 4E
Well! An interesting preliminary FY19 report from ANO to say the least!
At first glance it is a disappointing miss on guidance only provided 31 May (and re-iterated 12 July after the period end), but digging deeper the result is quite strong with the severe share price reaction likely attributed to the enigmatic communication from management. While I agree communication is best described as amateur, I don't question the integrity of ANO's management and may write a straw about them in the future as I feel those who are new the stock don't appreciate the position the business was in when Lev and Geoff assumed control.
Looking at the result closer, revenue of $12.26m was a miss to original forecast of $12.60m. However, the breakdown shows Zinclear revenue came in at $11.06m compared to $10.50m guidance while Alusion revenue of $1.20m missed guidance of $2.10m. That is a substantial miss to guidance, but the future of ANO is the Zinclear product, and the beat in that product vastly outweighs the miss in Alusion in my opinion.
However, while Zinclear is the growth engine for ANO in the future, Alusion still remains a very profitable product in the present with my estimate from backworking past results of 80%+ gross margins. This meant that NPBT of $3.38m missed guidance of $4.10m. Without further commentary from management it is difficult to asses whether the miss on Alusion guidance was simply deferred to FY20 or if Merck are winding back their orders which were expected. Given the forecast from management in the investor presentation is for only $2m in Alusion revenue in FY20 it suggests that the expected growth is not materialising.
That is disappointing, but again it is easily overshadowed by the growth of Zinclear. Management have forecast Zinclear revenue of $28m, or accelerating growth to 150%. PBT margin in FY19 was 28% (up from 17% in FY18) and will expand strongly again with the forecast revenue growth. I will update my valuation straw in the near future but my expectation for $8-10m NPAT looks like an easily achievable target.
The other main negative of the report was the poor operating cash performance. Operating cash of $262k meant the business ended the period with $353k cash in the bank. While the operating cash result is not good, it is entirely attributable to a sharp increase in inventories and prepayments for supplies to service the explosive growth expected. However the low cash balance does raise the spectre of a capital raising to manage working capital through this period. While I won't discount the possibility, I would prefer management to use a working capital facility to manage this period of growth. It is worth noting that we are now ~6 weeks past the 30 June date of the balance sheet without a capital raise, suggesting the working capital issues may have passed. Also, the graph on the first page of the presentation shows no further major capex plans until 4Q20.
Finally, the last question which may not be answered until the final audited annual report is how the ~$500k bonus paid to Geoff to compensate the execution of his options has been accounted. If it has been expensed through the P&L (which I suspect is the case given it was a cash bonus) it has created a one-off impact to this result which will need to be adjusted to determine underlying margins to apply to the forecast revenue.
2/7/18 Unexpected Delays
ANO announced that unfortunately they are still experiencing delays with the start of production in the US. Largely these delays have centred around equipment designed for Australian electrical standards not being certified to be used in the US and requiring modification. Obviously not great news, but operationally the business appears to be doing well.
Consolidation of the Australian manufacturing into one site is now complete with delays partly caused by "unexpected increases in sales" which is not a bad thing. Certificates and approvals now in place for operational efficiencies to be fully realised in FY19
Management provided unaudited guidance for FY18 of 35% revenue growth and $1.5m NPAT. Both figures were slightly above my expectations which is good but a strong FY19 to drive the share price is still predicated on full US production to meet the higher demand expected over the next few years.
Small business that manufactures nanoparticles, primarily zinc oxide (ZinClear) and titanium oxide (Alusion). Bull case centres around the potential of zinc oxide nanoparticles in sunscreen and general cosmetics as protection from both UV A and UV B rays. Zinc is the only natural substance that reflects both, with most sunscreens containing a mixture of chemicals to absorb the rays.
There is a growing consumer and regulatory campaign against chemical sunscreens as consumers prefer natural or organic products and environmental bodies argue that the chemicals used have negative side effects on marine life such as coral bleaching. While zinc has always been known as an alternative natural solution, in its pure form it doesn't absorb and remains opaque on the surface of the skin (think lifeguards or cricketers with zinc under their eyes or on their lips).
However Advanced Nanotek is one of a handful of companies worldwide producing zinc nanoparticles which achieve the full spectrum UV protection with the desired outcome of applying invisible on skin as the particles are smaller than the human eye see. While there were initially some fears that nanoparticles could cause harm if they were absorbed through the skin, all clinical testing so far has proven no known side effects. These fears are slowly being overcome, and consumers desire for a natural, organic product that applies transparent is taking over.
FY18 has been a transformational year for the business as they prepare to ride the large tailwind behind them. Manufacturing has now been outsourced to the US, new supplier agreements have locked in a more consistent, pharmaceutical grade product and the company has lodged for the IP of their own range of OEM cosmetics that can be white-labelled by customers.