Source: http://ozstock.blogspot.com
Price($) 0.06
NTA ($) 0.04
P/NTA 1.57
Team 2.1
BurnPeriod 4.16
ProductPipe 15.9
ForeignMarket 7.8
Cash:Debt 20.07
GTG - Genetic Technologies was last analysed here at ozstock in June 27, 2007
(http://ozstock.blogspot.com/2007/06/analysis-gtg-genetic-technologies.html)
Since then a lot has changed for the company. We will start by looking at the figures, followed by a commentary of the company.
The company has a good record of maintaining very low debt. Although most startup biotechs have almost zero debt, relying purely on equity, GTG has ongoing operations and is not a startup. The amount of debt to finance its operations appears to be manageable. GTG has had strong cashflow from operations only for a brief period between Q4 2007 and Q1 2008 which was reflected in its share price which peaked at 55c compared to today's 5.6c. Its price to NTA is about 1.57 which is very favourable by Ozstock's standard while it has enough cash to burn for 4 quarters assuming cash burn is constant.
One of the original core focus of GTG is to license non-coding DNA and obtain licencing income. Its patent portfolio also covers international patents and hence the it reaches into foreign markets, hence the score 7.8. But the non-coding DNA licencing business has recently underperformed. Instead it appears GTG has diversified into related business of Cancer Screening, Animal genetic and fertility management and DNA Testing. This diversity has resulted in the Product Pipe score of 15.9. However, these businesses have yet to reverse the negative operational cash flow not to mention the significant annual losses. It has two research projects RareCellect and ImmunAid in which their developmental stages are not entirely clear.
To be frank, ozstock's interest in GTG was renewed by the recent announcement that GTG won the exclusive distribution agreement with Rosetta Genomics for Rosetta's microRNA testing. There are several key risks to consider in GTG, although its product pipe looks quite attractive. The risks include:
i) Products that have yet to provide convincing turnaround for the company.
ii) Board reshuffle resulting in a new combination of management team.
iii) Diversity of products may result in focussing on product with short term benefit at the expense of better long-term products.
iv) ability to remain a going-concern over the next 4 quarters.
Technical analysis alone has shown the share price hovering between 5c and 6c over the last few months, with the possibility of breaking the 6c in the next week. However, it would be prudent for the fundamental investor to wait for another 2 quarters of result to see evidence of a turnaround by the new management team.
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