The Advance NanoTek Limited (ASX:ANO) share price reached an all time high of $4.94 last month, following its April investor presentation and sales update. Since then the company’s share price has pared back down to $4.35, as at the time of writing.
But before we ask what’s next, let’s back up a little…
What does Advance NanoTek do?
Advance NanoTek develops, manufactures and markets products based on a range of proprietary advanced material technologies and manufacturing processes. The company’s commercialised products include metal oxide powders and dispersions of zinc oxide. The company’s main products include a transparent zinc oxide based broad spectrum UV absorber (ZinClear) and an aluminium oxide pigment (Alusion). The company is also working with a range of Australian universities to further develop applications of its IP portfolio, including patents in solar battery technology and 3D Zirconia.
What’s next for the company in 2019 and 2020?
At the April investor presentation Advance NanoTek revised up its total sales estimate for FY19 from $10.5 million to $12.6 million. Reflecting its strong sales figures, the company also presented healthy profit levels – approximately $1.8 million profit after tax in the March 2019 quarter alone, and $3.4 million profit after tax for the total year to date.
At the investor presentation the company also introduced a range of strategic initiatives for the next few years, including-
- Increase zinc powder production capacity – the company plans to increase its production capacity from 30 Tonnes per week to over 40 Tonnes per week. This equates to a manufacturing capacity of 2,200 per annum from late 2019, well in excess of its current order intake.
- Product and revenue diversification – the company is looking to increase its range of end products, beyond its current range of sunscreens. It has also committed to developing additional powders and dispersions using alternative natural ingredients.
- Secure zinc carbonate supply- the company has increased the number of zinc carbonate suppliers from 3 to 5, to ensure the continuous supply. As a result, the company is expected to be unaffected by the Zinc production shortages currently experienced by its European and US competitors.
- Grow European distribution network – the company is looking to improve the performance of its product distribution in Europe by increasing the number of European chemists, signing up to six new distributors and developing new dispersion specifications designed for targeted markets.
So, is this an opportunity to buy in?
Advance NanoTek’s shares are currently trading with a Price/Earnings ratio of almost 80, much higher than the average for the industry. However with revenue in FY18 up 40%, and net profit after tax up over 168% compared to previous year, you can understand why. So what is the company’s intrinsic value?
Interestingly, earlier in the year Advance NanoTek’s Managing Director Geoff Action made clear “the board does not foresee a $10 share price due to capacity limitations and the current size of the zinc market.” With the company’s new plans to increase capacity, does this change anything or perhaps everything?
See what the Strawman community is saying about this stock, as well as the current consensus valuation:
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