PET 0.00% 2.5¢ phoslock environmental technologies limited

You are being optimistic. We break even from existing operations...

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    You are being optimistic. We break even from existing operations at $7-8 million. The Chinese options deal suggests $20 million in revenue equals $3 million in profits in China. Remember the nature of the business is changing so you cannot use the margin on the current business for the new Chinese business. The only information management has given us on Chinese margins is the options deal.

    That suggest $15 million in sales in 2017-18 (with break even on non-Chinese sales and $7 million from China) earns $1 million profit. If the revenue in 2018-19 is $20-25 million the profit is probably only $2-3 million. My profit calculations are half yours. Note costs are upfront and cash receipts lag in a rapidly expanding company, so cash flows will lag EBITDA.

    Using Andrew A's number we would have 432 million shares on issue next year, plus the 45 million performance options the following year. So at 16 cps the PE is 69 next year and 25 (at $3 million profit) in 2018-19 on these numbers. That depends on management delivering of course and it may prove difficult to get money out of China on the experience of other companies. Whether you consider the current share price of 16 cps cheap or expensive is up to you.
 
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