Consensus community valuation
14-Jan-2022: Zoono is a company I bought into at the end of August 2020 as a good Covid-19 play and, with the benefit of hindsight, I did not do enough DD on before buying, and I therefore paid way too much. Looking back, I sincerely wished I'd never bought into the company at all, but I did.
I paid $2.28/share, then topped up on a dip at $1.955 within a week (on 04-Sep-2020, the day they went ex-div for their maiden 3 cps dividend, which explained part of the dip but certainly not all of it). At the time I thought they were going a lot higher and that I was taking advantage of a dip caused by the market thinking (prematurely) that Covid-19 was going to be over much sooner than it actually was.
The company had sales that were growing fast, they were paying dividends, they were providing a solution to a pressing need - LONG lasting surface treatments and personal protective solutions (sanitising products including hand sanitising foam) that had anti-bacterial and anti-viral properties that lasted LONGER than other options, but were also 100% alcohol free.
They were also out there promoting themselves and building brand awareness (perhaps "hype" would be a better word, with the benefit of hindsight). There seemed a lot to like, and it also seemed like a good way to get exposure to the limited upside that the pandemic might provide, seeing as there was so much downside impacting so many other investments at the time.
So the reality is that they've pretty much been dropping ever since, occasionally having a small bounce on a positive update or other positive announcement and then resuming their downtrend once again. That maiden dividend at the end of 2020 was their one and only dividend, despite the company's founder and MD, Paul Hyslop, saying here on Strawman (on Ausbiz actually during the Strawman Classic competition) that the company was "highly profitable" and "loved" paying dividends.
There was so much promise, so many contracts that were imminent or only required the final sign-off or whatever. And so much that was NOT delivered. As Covid-19 got worse, so did Zoono's sales. They admitted that the US preferred alcohol-based sanitisers and surface treatments so they were concentrating their efforts elsewhere, they had multiple issues with their suppliers and partners in various parts of the world, and they changed their strategy a number of times. The bottom line is that their sales did NOT live up to the hype, and they were constantly changing their performance metrics, so when they had a market update or a results presentation they highlighted whatever was positive at the time and said the other metrics did not matter and should be largely ignored. This chopping and changing of which key performance indicators mattered (depending on which ones presented the most positive view at the time of the company) was a big red flag to many investors, and Zoono was sold down mercilessly. And with good reason.
However, it has been my argument for over a year now that the selling had been overdone, that they had been oversold, and they should recover, not to the $3+ level they achieved very briefly in July 2020, not even to the $2+ levels were I bought in initially, but they should recover to at least $1/share, possibly higher. However, the share price wasn't listening to that argument at all (or perhaps was and having a good laugh) and just kept going lower and lower, finally bottoming out (I HOPE!!) at 34.5 cps (cents per share) on 6th December 2021. I'm thinking they are starting to recover now. VERY early days mind you, and off a VERY low base, but there does SEEM to be a recovery starting to occur...
I'm sure the rampant spread of the Omicron variant is giving them a boost, and at the end of the day they do produce stuff that does work. I have been using their hand sanitiser and surface treatments for 15 months now, and so have millions of other people, many of whom would not know that the stuff they are using is made by a little New Zealand based company with a listing on the ASX. Zoono products are used by many of the world's major airlines, on trains, in hospitals, in hotels, in schools and other education facilities, in shopping centres, basically everywhere.
Further Reading:
Zoono's 25-Nov-2020 AGM Presentation
Investor Centre - ZOONO Global
Disclosure: I hold Zoono shares both here on SM (one of my larger positions) and also in real life (one of my smallest positions) and I will likely sell out when I think they start trading at a reasonable valuation, which is north of where they are today, but almost certainly lower than what I paid for my ZNO shares. I don't like their management much, which is why I can't see myself holding them longer term, but I do like their products, and their potential.
26-Feb-2022: Update: I sold all of my Zoono shares on the morning of February 1st 2022 after reading their December 2021 quarterly report (which they released late on 31st January while I was at work making hommus). I have explained why I sold elsewhere, but the short version is that I decided there was not much likelihood of achieving a higher exit price, and the longer I waited, the lower they would probably go. I got 28 cps IRL, and 28.5 cps here on SM (the closing price that day, Feb 1st), a LONG way below what I paid for those shares. They closed on Friday (25-Feb-2022) at 22c, and they're going lower!
There isn't a barge pole long enough! Not for me. Any more. I was a slow learner with this one. But I did learn. Eventually.
It's not just about the share price either - it's about the woeful performance of the management and the declining fundamentals. There just isn't anything left to like with Zoono now, except the products. And I am still using those. But I use a lot of things without wanting to buy shares in the company that makes them. Cars, dishwashers, multivitamins, Roundup weedkiller. There's so much more to an outstanding investment than the products that the company produces. In this case, the products they produce is the ONLY thing about the company I do still like.
Disclosure: As of Feb 2022 (and all time beyond that month), I am NOT holding any ZNO shares.
I'm so old I remember when Zoono was considered investible. Now looking at the results just makes me want to throw up my mouth a little bit.
Per below they spent half their revenue on consultants, most of which on legal fees...
The CEO has stated one of their priorities for the remainder of this year will be considering how "to tailor its messages for the different market segments". I'd suggest a priority might be considering how to right size their business because right now they're living a champagne lifestyle on a beer budget.
[Not held].
I was having a grumble about Zoono over in the "September Meeting Thoughts and Feedback" forum thread, of all places, and thought I'd better create a straw about it under Zoono Management instead.
11-Sep-2021: I hold Zoono, and I paid way too much for them. They peaked in July 2020 at around $3.20/share and I then started buying ZNO shares at $2.28 at the end of August thinking that they had had a healthy pullback. I then bought more (all in RL) at $1.95 in September. One year later they are now down to 46.5 cents/share ($0.465). While I clearly overpaid, it's also fair to say that Zoono have poor management and more competition than they care to admit; their products are based on a chemical that Dow Corning originally produced in the 1970s ("Dow Corning 5700"), a “siquat” (silicone quaternary ammonium compound) – called 3-(trimethoxysilyl) propyl dimethyl octadecyl ammonium chloride. One Zoono fact sheet calls it “3-trihydroxysilylpropyldimethyloctadecyl ammonium Chloride” and then “3-trihydroxypropyl silyldimethyloctadecyl ammonium chloride” (later on in the same fact sheet), but it’s identical to what was originally called Dow Corning 5700. It is used today by a variety of companies, including Aegis Microbe Shield, as well as Polser’s AMB technology, PreventX 24/7, SPADA, Medicaltex and Saniguard 9000. I read a piece recently that raised a number of concerns about their CEO/MD (and founder) Paul Hyslop - see here: Steve Bishop and The Most Dangerous Detective - ASX COVID COMPANY APPEARS TO HAVE MARKETING BUGS -
My Hyslop certainly has an interesting past. According to this - Paul Hyslop | Business News - he has also spent time as a commercial flying instructor and Airline pilot, having flown commuter planes for Eagle Air, owned by Air New Zealand. Almost reminds me of "Catch me if you can..."
He has repeatedly said that Zoono is a unique product and that he developed it for sale due to identifying an unmet need, suggesting that what he has developed is new and better than anything else out there, and there really wasn't anything out there before that does what Zoono's products can do. That is clearly rubbish. I have very little conviction in Zoono now, however I think they still look rediculously cheap for what they do (long-lasting and alcohol-free sanitising solutions for surfaces and personal use during the worst global pandemic in over a century), so I'm looking for a higher exit point.
I've decided to give them until the end of February (2022). If they've turned the company around by then, in terms of converting some of that potential into actual growing sales and profits (both are shrinking at this point in time), then I'll reassess, otherwise I'll be out, if I haven't sold them already before then. Management at Zoono has been a huge disappointment.
Paul Hyslop at Zoono has a track record of positive spin, of talking up opportunities as though they were always a matter of when rather than if, of overpromising and underdelivering, and of burying bad news deep in company announcements.
In some ways he's still acting like the "NZ Car Salesman of the Year" that he apparently was a few years back, before he started Zoono, but that stuff doesn't work with an ASX-listed company that should be trying to build and develop investor confidence in the company. The market can have a long memory sometimes (not all of the time), and especially when a company has consistently underperformed against their own guidance, and I think Zoono has a LONG road back if they're going to regain the trust of the market. I'm therefore no longer considering Zoono a buy and hold stock; I'm really just looking for a higher exit point.
To be clear, I'm not anchoring to my buy price or where they've been before. I do not expect to make a profit on Zoono now, or to breakeven, certainly not on my original buy price. I admit that buying them when I did was a big mistake, and I'm going to book a loss on the investment. However I'd like to exit at a point at which the share price is not relecting maximum pessimism, i.e. I'd like to see the SP rise to a bit more of a reasonable level. I do not expect the SP to reflect all of their upside potential, but I would like a share price that isn't pricing in SO much more downside.
I invested in Zoono in August and September 2020 during a period in which, with the benefit of hindsight, the opportunity was still clearly being overhyped, despite the pullback from that $3.20 level back to that $1.95 to $2.28 area where I was buying. I was too focussed on the upside and not looking hard enough for the downside risks. Even at $1.95, there was still way too much upside already priced in, and that's all come out of the share price now as management have consistently failed to deliver (in the past year and a bit) on all of that potential that had been highlighted previously. Lesson learned.
In summary, I'll be selling out at a loss, but I'm looking to exit on a positive market update and a better SP. I'll be booking a substantial loss when I do sell, but I think I can still get out at higher levels than where they are today, because at below 50 cents/share ZNO looks stupid cheap to me even with the poor management that they have.
Additional: You might find the following chart interesting – the table below (at the bottom of this straw; click on it to enlarge it) shows the “Excess mortality” or the extra number of deaths since the pandemic began. Australia is last on the list. We have had LESS deaths than normal. The date shows the date from which the measure was started and is the date on which that country hit 100 cases in 2020. The measures taken to combat the pandemic have saved lives here that might otherwise have been lost due to the flu.
These measures include lockdowns, travel restrictions, social distancing, and mask wearing, as well as the extra cleaning and sanitising that people have been doing at home and workers have been doing in businesses. Like wiping down shopping trolley handles, doorknobs, lift buttons, seats, poles and other stuff on public transport, stair rails, etc. with sanitising solutions such as Zoono's products. Also people using cards instead of cash. And people washing their hands more and shaking hands with other people less. And using hand sanitiser a LOT more. Just the extra awareness of personal hygiene and how germs and viruses spread has been beneficial in less people getting sick from some of the things (like the flu) that would normally have killed more people.
That said, we should all still get vaccinated. I've had my two AZ shots, my wife has had her two Pfizer shots. Denmark has just lifted ALL restrictions because more than 80% of the Danish population above the age of 12 has had the two shots.
In February 2021, the Operations Leadership at Microsoft, CBRE and SBM executed a trial of Zoono’s Microbe Shield Surface Protectant on its newly renovated Redmond, WA campus, which spans over 15M square feet and houses 125 buildings.
In this trial, the parties were seeking to determine if Zoono could deliver a superior result and keep surfaces “cleaner longer” than their current protocol of cleaning and disinfecting.
This trial used ATP as the standard of measurement. Environmental contamination is measured through the detection of Adenosine triphosphate (ATP), which is found in the cellular make-up of living organisms.
SBM, who led ATP testing with an independent third-party, identified two Microsoft buildings for testing – Building 36, which serves as traditional employee office space and call center, and Building 33, a highly- trafficked public Mass Vaccination Center.
Within each building, test locations included high-touch surfaces, such as: door handles, light switches, chairs, tables, podiums, kitchen counters, toilet seats, toilet flush switches, and bathroom stall door handles.
In both Buildings, an initial pre-treatment ATP reading was captured to determine the baseline – or “normal” – level of contamination. The surfaces were cleaned, then treated with Zoono via an electrostatic sprayer. Zoono was only applied once, at the beginning of the test cycle, and treated surfaces received regular cleaning/disinfecting throughout. ATP readings were collected twice a day for five full weeks.
Results
The addition of Zoono decreased contamination levels by roughly 75% at Buildings 33 and 36 to levels considered “Clean” and “Food Safe.” With just one application of Zoono, Microsoft surfaces stayed, on average, well within the “Safe Zone” throughout the entire test period.
09-June-2021: Well regarded UK and AU funds purchase 7m shares in Zoono
Zoono Group Limited (ASX: ZNO) advises that London based independent investment management boutique, Sterling Investment Management Limited (Sterling IM), has purchased two million shares in the Company from founder, Paul Hysop’s, family trust for AU$0.70c per share, being the approximate average price for the last 7 days. The total consideration paid was AUD$1,400,000.
In addition, Regal Funds Management Pty Ltd (Regal), a multiple Australian award-winning fund manager has purchased 5m shares at a price of AU$0.70 per shares for AUD$3,500,000. The total sale consideration was AUD$4.9m, less brokerage.
Paul Hyslop, through his family trust, still holds approximately 60 million shares (approx. 37% of ZNO) after these placements and remains by far the largest shareholder of the Company. Mr. Hyslop has no plans to sell any more shares in the medium term but appreciates that having well-regarded UK and Australian funds on the register may potentially attract more interest from the UK and Australian investment community.
Regal is a specialist Alternatives investment manager. Founded in 2004, it is one of Australia’s leading investment managers servicing a wide range of institutional and induvial investors. Regal purchased 15.3m shares in Zoono in February 2020 and since then have increased their position overall. Following this acquisition, Regal hold around 12% of the Company.
--- ends ---
I hold ZNO shares. While the quantum of the shares that Paul Hyslop has sold over the past 18 months could appear alarming, and could well be viewed as a red flag, I would note the following:
- Paul still holds 60m shares, so the 7m that he has just sold was just over 10% of what he held prior to those two share sales.
- ZNO has traded between 68.5 cps and 74.5 cps during the past few weeks, and 70 cps (the sell price in this instance) is actually around the average share price over this period, or a little above the weighted average price. Over the past month there have actually only been 4 trading days when Zoono closed at a price over 71.5 cps (being the 18th May, and the 3rd, 4th and 7th of June). The closing price on the other 18 days has ranged been between 64 cps and 71.5 cps. You could argue that they traded briefly above $1/share in April, but they also traded at below 60 cps in March. The price has been very volatile. Also, when you do block trades of volume like this, it is commonplace to accept below market prices, because if you were to sell those shares on-market, it would put downward pressure on the share price so you would end up with lower prices for most of your shares anyway.
- There is some merit in Paul's claim that allowing Regal to build a significant (12%) stake in the company and also introducing a new UK-based institutional shareholder (Sterling IM) to the registry may attract further interest from other institutional and retail investors. I note that UBS have just become substantial shareholders again (with 5.35%) but I further note that UBS are notorious for shorting, and/or loaning their shares to short sellers, so having UBS on your register is not always a positive thing. Although it could result in a short squeeze if Zoono come out with another positive market update.
- Paul has given assurances in this announcement that he has no plans to sell any more Zoono shares in the medium term. If he now sells more shares within the next few months, I would see that as a red flag given that he's clearly indicated that he has no plans to do so.
- Prior to this sell down, Paul's 67m ZNO shares was worth around A$47m and was - by far - his largest single investment. Selling around 10.5% of that position to diversify his exposure - and/or to monetise some of that asset - would seem to be a very reasonable move given his massive exposure to a single asset, even though he has been the driving force behind the creation and development of that asset. After all, he now (after the sells) still owns around A$42m worth of ZNO, being 37% of the company.
To clarify, I used to be very wary of founder sell-downs, but I have learned that it isn't always a red flag. To give just one example, I sold out of Nick Scali (NCK) shortly after Anthony Scali sold half of the Scali family holdings in NCK to one of their Chinese suppliers. NCK were trading at around $6.80 at the time of that sell-down (in May 2018), and I sold out at slightly lower levels (closer to $6.20) after they followed that up with a Profit Guidance downgrade/warning in October 2019). Apart from the February-March 2020 Covid-19 swan dive down to $3.08 and the recovery between April and July 2020, it's been mostly up since then, with NCK trading as high as $11.95 and closing yesterday at $11.05. The lesson I learned was that Anthony Scali wasn't selling down due to personal concerns about the future prospects of the company that he managed, rather he was monetising some of the investment of time and effort that his family (particularly his father Nick) had made over the years to build up the company. What's the point in making millions if you can't spend any of it? Anthony Scali is still the Managing Director and CEO of Nick Scali Furniture (NCK) and his private company Scali Consolidated Pty Ltd is still NCK's largest shareholder, with 13.63%. What's more important is that the company continues to outperform and the share price continues to climb higher.
The same can't be said about Zoono unfortunately as their share price has been very choppy and their graph shows a very different SP trajectory than NCK's does. Part of that is to do with Paul Hyslop's salesman background, and the way he presents results and news, always trying to accentuate the positive and put positive spin on everything. His worst habit is changing their reporting metrics to suit the numbers. The market would much prefer the truth, even if it's bad sometimes, rather than his "smoke and mirrors" approach. Running private companies is a different proposition to the scrutiny that comes with running an ASX-listed company, and I would like to see Paul Hyslop get his head around that and improve his game as a manager, particular in regard to communicating news and results with the market.
I have personally lost a fair amount of confidence in Zoono, or rather in their management, however I don't see this share sell down as anything particularly nasty considering the quantum of shares sold as a proportion of Paul's previous holding (10.5%). My view is that Zoono is worth substantially more than where they are trading currently, despite the misteps of their management, and I'm loathe to sell out here. However, I also realise that it could well take significant time for the company to convince the market of its true worth and potential once again. So there is also opportunity cost to consider. Is the money I've got invested in Zoono shares the best place for that money? My answer at this point is that as part of a well diversified portfolio - and considering that ZNO is not one of my larger positions in the 2 RL portfolios that I hold them in - that yes, it is a good risk/reward trade-off. However, I continue to monitor the company's progress closely.
I'll be very interested to read their FY21 full year report in August and to see how much their dividend is this time around. Their report should give me some idea about how long this investment thesis is likely to take to play out.
09-May-2021: From Zoono (ZNO) on LinkedIn:
Our partner Fine Hygienic Holding is going GLOBAL and their products just landed on the shelves in Germany at REWE Istas in Cologne and Erfstadt.
Fine Solutions. A FHH Company utilises ZOONO's innovative technology to further develop disinfectants and sanitising products, and their range is expanding as we speak!
Their range includes Hand Sanitiser that lasts up to 24 hours on the skin and Surface Sanitiser that lasts up to 21 days on surfaces.
Well done to the team!
#zoono #innovativetechnology #sanitiser #sanitation #germfree #antibacterial #antimicrobial #germprotection #handsanitiser #surfacesanitiser #healthandsafety
[I hold ZNO shares.]
As the vaccines roll out around the world, increased travel and flight bookings should further increase Zoono's B2B revenues, at least with the airlines. Every Qantas and Jetstar passenger receives a FlyWell kit which includes 2 x Zoono hand & surface wipes. I received 2 kits (4 wipes) this week on my first company flight since COVID began. The airports are starting to look busy again as life starts to return to normality in Australia! :)
