Source    Company    Palla Pharma        
                
Current Price    $0.820            
PE Ratio    1.58        based on below calculation    
Div    $0.00            
Div Yield    0.00%            
P/OCF    -        Has a negative ratio because expenses greater than income currently, however income projected to significantly increase    
Fair Val Est St George    $0.964            
ROE    -        Negative return on equity as has not turned a profit - will be high once return on equity moves towards profit margin as projected    
BV yr start                
BV yr finish    $0.49            
Years between    0            
Average change in BV    0.4        Based on the projected profit flowing through to the balance sheet    
Dividend 10yrs    $0.00            
Div growth rate    0            
Discount rate    10.00%            
DCF Divs10    $0.00            
BV10    $14.17            
NPV BV10    $5.46            
Intrinsic V    $5.46            
                
High margin of safety    1    Large        
Probable outcomes    1    
-Bankrupt - 10% There is a probability that the business can't follow through will revenue guidance and it continues to not make a profit, and will eventually go bankrupt
-Slow growth - 30%        
-High growth - 60%        
Competitive advantage    1    Vertically integrated, lowest cost of narcotic opioid drugs on the market, demonstrated by large projected margins        
Low leverage    0.5    Debt is lower than assets. Current assets are 1.5 times as much as total debt and as such is not highly geared. Total borrowings are 13m, with a annual repayments of 5%, being 650k.        
Strong Management    1    Soul Patts owns 20% of the company and the Soul Patts CEO sits on their board. The CEO owns a significant amount of company shares. CEO has a good track record of turning the company around taking it to making a profit        
Circle of competence    0.5    Do I understand the business - based on readings I generally understand the business. Need to learn more though.
    
Low Risk High Uncertainty    0.5    High uncertainty business due to growing nature and currently not making a profit. But based revenues guidance it is projected the company will move into profit into 2021. Making it a low risk business        
5.5/7        
Qualitative Score    78.57%            
                
Based on this intrinsic value and the projected PE ratio, this share is grossly undervalued and has a large margin of safety                
                
Workings                
Based on revenue increasing to 12m per month as per projections in 1YH20 results presentation, this extends to 144m per year. This is projected to happen in 2022                
With gross profit margin increasing to 47% as per 1YH20 presentation, leads to 67.68m gross profit                
Minus 12m of other expenses as per 1YH20 results presentation, leads to NPAT of 55m.                
55m / 125.8m shares on offer = $0.44 / per share