Altitude Share Discussion Threads

[sja123] 10/10/2016 15:24

You have to remember that the 50:50 deals they are striking is because there are no upfront costs to these companies for site set-up....they are in effect allowing them to use their software, which has taken years to develop and perfect, for nothing in order to share profits with the distributors....

The distributors must believe that taking sales online will cut costs for themselves and ultimately, grow their businesses, enough to warrant the 50:50 deal or they wouldn't be interested....

Although some of these figures seem ridiculously large, it's introducing a disruptive technology to a market which is already massive, with enough profit to go around for all concerned....

Much of the $22b market is presently constituted with catalogue sales and the like...this is bringing it into the 21st century...Click2Ship.....online....customizable on the fly....nothing like the industry at present....

All IMO etc

[melf] 10/10/2016 15:11

SH, I think 38% is perfectly reasonable in terms of gross profit how we understand it. You buy a t-shirt for $5 and sell it for $6.90. that would appear to me to be a normal mark up. What we don't know is how GP is determined as part of the agreement. For instance, does it include staffing costs and marketing? Usually, as far as I understand it, GP is calculated as revenue less cost of goods sold, with adjustments for opening and closing sock. In which case FOUR's GP margin is 38%.

[sheep_herder] 10/10/2016 15:03

Melf, thanks for that. It still can't be right though. If I put 38% margin in for Aprinta and assume we get 4100, or 10% of the distis signed up next year, and if each disti has 3 customers with £4200pcm, then I get EPS that is over twice today's share price. :-)

Edit - to get an EPS of 80p you only need 4100 customers giving Aprinta £56K revenue per year each.

[melf] 10/10/2016 14:35

I've been looking at FOUR's 2015 accounts with regard to ascertaining their margins.

Firstly (all these figures are in dollars - not that it matters)....

The accounts show revenue of 497m and 465m of operating expenses giving an operating profit of 32m.....there's your 6%.

However, importantly, the 465m of operating expenses include a whole host of costs including staff costs and marketing. The actual costs of "purchase of goods for resale and consumables" was 308m.

Therefore the gross profit (as we know it) was 497m - 308m = 189m. Giving as GP margin of 38% (189/497).

38% does seem a reasonable margin to me. I think much depends here on how the GP is calculated according to the agreements.

SH....if we are looking at 50% of 38% that's fine by me :-)

[sja123] 10/10/2016 12:31

Doing a little research on promotional product distributors margins....seems quite complex and with no definitive answer but I came across the following:



"The distributor will resell with a 30 to 40% markup over these figures"

"The distributor sells the product for another 25% or so"

Both these possibilities are well above 6% margin!

All IMO etc

[ihatemms] 10/10/2016 12:26

Yes Sh - as regards creation of web-sites the FAQ said that they could create hundreds of web-sites for customers within 24 hours - so ramp up will be very fast. I think once they've proven on b testing etc, and initial customer platforms are working fine the roll-out will be extremely fast.

BTW - I think we'll have news of more distribution deals b4 the end of November. Distributors will not want to be left behind (behind Aprinta, AIM etc.) with modern Click to Ship working and will want to get onto ALT's plaforms ASAP.

[sheep_herder] 10/10/2016 12:19

Yes, I think that's an important fact, that there is no cost barrier for the end customer to sign up. The FAQ's that were posted stated that it takes seconds to enable a customer website so I think we could see a fast ramp up of customers signing on. Just gotta sit back and wait for some real numbers now. Going to be very hard waiting until the FY results.

[sja123] 10/10/2016 12:14

Indeed SH....some very big numbers if you extrapolate....and just on these two deals!

Suffice to say, on low estimates of take up and with nothing else known, it would appear to be well undervalued still, even after it's progress to date...

(Bearing in mind, there is no up front costs to apply the software and take business online, I would say take up would be a no brainer for these companies!)

Can't see any reason to part with my holding for a long time...as long as the plan unfolds as it would seem....

[sheep_herder] 10/10/2016 12:10

I have to say I don't believe my numbers. The 33% margin to Aprinta can't be right. If I put in a similar margin to FOUR of 6% then it looks much more reasonable.

10 year ramp to 10k distis, each with 3 customers making monthly revenue of £4200 gives me an share price ramp of:

£2.45 £5.74 £9.03 £12.32 £15.61 £18.90 £22.19 £25.48 £28.77 £32.06

[martinthebrave] 10/10/2016 11:54

Just bought a few more ALT & G4M. I am now officially "full" of both!!

[melf] 10/10/2016 11:32

I'd love to see Edison do some number crunching on this.

[sheep_herder] 10/10/2016 11:23

Ha, in my numbers in my last post, the Aprinta number I pasted are actually the EPS estimate.

[hitsha1] 10/10/2016 11:18

Is this just based on two deals they have made.

[revoman] 10/10/2016 11:08

This is what the WH Ireland note says under Valuation:

"Existing business activities (without C2S) valued at 47p on a SOTP basis

Click2Ship low adoption scenario adds >32p to this = 80p/ share

More plausible mid-term adoption scenario based on industry data sees fair value of the C2S business of 272p = >300p/ share

All the above scenarios represent substantial upside from current share price"

[sheep_herder] 10/10/2016 11:06

sja123, yes, the AI Mastermind deal does at least have full visibility of the numbers but if I put that into my spreadsheet then it doesn't make any sense. ;-)

I'm using the same model of a linear ramp over 10 years to bring on the 1000 distis. Yearly revenue of £161,000 each. Same margins and costs and I get an share price ramp using an PER of 40 of:

£1.05 £2.94 £4.82 £6.71 £8.60 £10.49 £12.38 £14.26 £16.15 £18.04

And if I do the same for Aprinta with each disti with 3 customers spending £4200pcm to cover 3 staff costs I get:

£1.88 £3.79 £5.69 £7.60 £9.50 £11.41 £13.31 £15.22 £17.12 £19.03

Those values need to be accumulated with the AI Mastermind ones. Now I can't see why we're not at 300p already.

[sja123] 10/10/2016 10:57

I think the AI Mastermind distributor pcm calculation gives a closer idea to what Aprinta must be earning....

[sja123] 10/10/2016 10:55

I believe the upcoming value expectation is clear by the amount of director buying here....they know how much more this is worth!...

[sheep_herder] 10/10/2016 10:52

sja123, thanks for putting your margin calcs, that matches what I have in my spreadsheet aside from the costs of c.£1m.

Can someone who has seen the WHI note please say what the timeframe for their 300p target is? If it isn't 12 months or less then we must be missing something in these numbers. Or is Varley's £5 target for next Christmas?

Edit - P.S. I guess a distributor would have at least 3 staff so they have to be making minimum wage in the order of £1400 pcm for each staff member. So the numbers of 500-700 pcm are ridiculously low.

[sja123] 10/10/2016 10:20

"a five-year agreement with Philadelphia, PA based AI Mastermind, a leading buying group serving more than 1,000 promotional product resellers representing over $200 million in annual sales in North America (the "Agreement")"

$200m sales annually for 1000 distributors
$200,000 per dist annually
$17,000 avg monthly sales!


100 dist = $20m per annum sales
33% profit = $6m
50% to ALT = $3m = £2.4m
ALT 80% profit margin = £1.9m

Assuming 10% of AI Mastermind take up the software solution, that adds almost £2m per annum profit to ALT on top of the Aprinta deal...

Sheep-herders figures assuming £700 pcm income from Aprinta distributors...
AI Mastermind are averaging £13,500 income pcm from their distributors....

Go figure!

All IMO DYOR etc

[sheep_herder] 10/10/2016 09:32

Why do you need "more meat on the bones" value king?

Edit - a £3 share price can be hit if FY17 numbers come in at £5.5m. That's only £34m revenue to Aprita which represents 10% of their distributors taking in only £700pcm in orders.

[melf] 10/10/2016 09:20

Yes, the exchange rate is really on our side at the mo. The quicker the click to ship kicks off the better.

[value king] 10/10/2016 09:15

Agree Malcommm. SCSW did mention that Varley was trying to do a deal that was bigger than the one with Aprinta. I am not sure where into the stratosphere ALT get propelled if that gets announced. The W.H Ireland note was only a stop press in the last issue and i would think they will put more meat on the bones of that potential 300p target at the next issue.

[malcolmmm] 10/10/2016 08:52

well SCSW has had quite a few gems, cant ramp but I bought a recommended share at 127p not so long ago , now well over 400p so cant complain. Hoping these will do as well