Here's the final report on Nova Eye Medical following the completion of our first Stock Spotlight.

Click here

The document contains a link to an updated video summary, but you'll also find that on our Meetings page.

A huge thanks to everyone that participated.

NOTE: I'm considering taking a small position, both here and in real life. But will wait a week or so before doing so. And even then it will be <1% weighting as I'd like to see a bit more evidence of commercial traction. This is a high risk, high return type situation and (for me) makes the most sense as part of a bucket of asymmetric bets.

In prep for tonight's session on Nova Eye, I used Google Gemini's NotebookLM to create this 7 minute video summary.

This only uses material posted on Strawman and does not reference any external content, such as company reports, announcements or broker reports.

Of course, like most AI generated stuff, it's not perfect. But it does a reasonable job of capturing the general vibe of what members have said.

Let us know what you think.

Click the image to watch:

The recording on the interview with Tom Spurling is now up (see members page), and you can access the transcript here: Nova Eye Transcript.pdf

I guess my initial takeaway is that this is a fairly clean thesis as far as med-tech goes. Nova Eye is post-commercialization with strong sales and revenue traction, albeit off a very small base, in its key US market. They have achieved a 40% CAGR over the last six halves while holding only a tiny percentage of the addressable market, which is around 3.5%. Tom noted they would be doing $60 million in revenue at 7% market share, a level he thinks they can capture in the medium term. There are also significant opportunities in other geographies, such as China where they have received clearance recently.

With the business apparently still on track for EBITDA breakeven this current half and no major CAPEX or cost increases evident, we should see strong growth in profits in the coming periods as 70% gross margins drop pretty much straight to the bottom line.

It is also nice that this is a relatively low-cost, quick turnaround surgical procedure without a huge price tag for the patient. There are plenty of potential patients given the high prevalence of glaucoma.

That said, the cash balance does not give them a lot of wiggle room, representing about seven to eight months of runway at the last half-year run rate. However, a working capital facility and recently reaffirmed guidance probably mean they will not need to raise cash. Tom gave the impression that profitability and cash flows were a major focus, even if that meant pursuing slightly slower growth than they could otherwise achieve.

Lastly, as has been noted by others, including Tom, the value of an established sales team that's generating good momentum and with a growing network of references is worth noting.

I have scheduled a call for us to talk through this business on Wednesday the 18th of February at 6pm AEDT. Keep an eye on your inbox or just check out the Meetings page. I am really keen to hear what others think, especially those who can emphasise some of the risks.

Ellex has sold the majority of its operations to French based Lumibird for $100m. Due to settle in March 2020.

This segment relates to ~80% of group sales, and 77% of group assets, and leaves Ellex with just two products: iTrack and 2RT. The business will also likely be unprofitable for the coming years.

In FY19, iTrack accounted for $14.3m in sales (up 29% on pcp) and 2RT with $1.8m in sales (up 49% on pcp). Both have significant potential, but also risks -- especially 2RT which is yet to get FDA approval.

After the transaction, Ellex will have $97m in cash and be debt free. It intends to return the majority of this to investors (maybe a special dividend or buyback) -- the full amount equates to ~67c per share.

Given shares are (at time of writing) trading at 78c per share, the majority of market value is represented by cash. Put another way, after the transaction is complete, the Enterprise Value of Ellex will be ~$16m. Not a lot given the market opprtunity of retained products and the fast pace of growth to date.

Thanks to Alex Hughes from Intelligent Investor for the suggestion. I think it's an interesting prospect.

ASX announcement re sale is here

A well reasoned and balanced Bull Case from Alex Hughes at Intelligent Investor:

Click here