Analysis - PLD - Portland Orthopaedics

PLD - Portland Orthopaedics

Price($) 0.2
NTA ($) 0.06
P/NTA 3.54
Team 5
BurnPeriod 5
ProductPipe 27
ForeignMarket 3
Cash:Debt 13.33

Since the company brief on PLD on this blog a few months ago, I'm finally blogging its analysis here. Note that I still hold shares which I bought at 33c, still believe it is way undervalued.

Portland Orthopaedics designs and manufactures a range of orthopaedic products. Its 3 family of products are DTC, Equator Plus and M-Cor. The latter two have recently gained approval and is selling in the US, though it is still seeking approval here. The number of products already reached market in addition to products in the pipeline has earned PLD a very high product pipe index of 27.0

The primary market for PLD appears to be the US. The advantage is that this occurs a big market but the surge of the Australian dollar is a drawback. Its plans to venture into China and Europe are still progressing. In the US PLD has taken over its own distribution after former distributor Plus Orthopaedics was acquired. At this point, its distribution appears to be going smoothly with increased annual sales revenue of almost 400%. Based on current market penetration, the foreign market index of 3.0 is on the low side.

In terms of cash flow, the last quarter Operating CF loss is almost halved the previous quarter, despite decreasing receipts. This is a good sign if it is able to maintain low operating outflow. Based on the current quarter burn rate and the cash left, it can survive another 5 quarters.

Annual cash flow figures shows an increase operating loss by $3m. Although receipts doubled from $2.4m to $5.7m, payments to suppliers and employers doubled from $5m to $10.8m. Management acknowledged a once-off cost of over $1m but this does not explain the increased loss of over $2m. The write-off is a write-down of stock of the DTC product being superceded by the M-COR product range.

Other financial aspect include a very healthy cash to debt ratio of over 13 times. Its price to NTA is about 3.54 times is considered moderate, or not too expensive. In terms of trend however, PLD has been in a decline since mid June 2007. Technical investors may wait a while more until the price stabilised or swing up before buying.

Recommendation: Hold until downtrend flattens or swing up.



CashFlow Current 06Q2 06Q3 06Q4 07Q1 07Q2 07Q3 07Q4 08Q1
Cash at Start 3897 844 3,652 2,595 4,554 2,685 7,133 5,182 3,897
Receipts 1666 513 461 491 788 789 1,244 2,108 1,666
Operating CF -636 (1,263) (993) (1,041) (1,790) (1,331) (1,909) (1,173) (636)
Investing CF -30 (9) (55) (165) 0 (155) 22 (1) (30)
Financing CF -53 4,081 (9) 3,165 (79) 5,934 (64) (64) (53)
Net Change -719 2,809 (1,057) 1,959 (1,869) 4,448 (1,951) (1,238) (719)
Net Adjustments 0
Cash at End 3178 3,652 2,595 4,554 2,685 7,133 5,182 3,944 3,178