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ANO - ADVANCE ZINCTEK LIMITED


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Whilst we focus our attention on the big boys; Dow Chemical & Merck and ponder whether either firm is likely to take a position on ANO given its tiny market cap, a dark horse has emerged in the form of a large pharmaceutical player named Valeant (best known for Zovirax).

 

They demand your attention. You'll see why when you do some research.

 

This firm is aggressively buying up Australian sunscreen brands and has already swallowed "Dr Lewinns" and the "Invisible Zinc" brand, both of which we know utilize zinclear. They also recently purchased Reef sunscreens and the Hamilton brand (have zinc in their products-not sure if its zinclear) and own UV TripleGuard (the 'natural' version is a clear zinc product-again unsure if it's based on zinclear)

 

So how big are they?

 

Does a company with 2.5 billion dollars worth of sales wet the appetite?

 

We have a MAJOR player aggressively taking over some of our best known sunscreens. At least half use zinclear or at the very least have a 'clear zinc' product. I imagine a firm like this would look to standardize/rationalize its ingredients list to realize efficiency gains/pricing advantages.

 

Could this be the major sunscreen manufacturer the firm was been referring to?

 

Might they look to take over ANO at some point to prevent other manufacturers having access to the Zinclear product?

 

Am I drawing a longbow here? Could this have a material effect on Antaria or am I getting excited for no reason? At the very least I imagine this firms immense resource pool and aggressiveness should result in increased sales of Dr Lewinns and Invisible Zinc so we should continue to see local sales rise.....I have a feeling there is more to this...

 

Valeant Pharmaceuticals acquires Invisible Zinc

http://www.beautydirectory.com.au/general/...-invisible-zinc

 

Corporate presentation

http://phx.corporate-ir.net/External.File?...XBlPTI=&t=1

 

Do your own research

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Hi G

 

Nice research!

 

I only became aware the other day about Valeant taking over Ganehill several months back, after the article a few days ago on that silly ruling from Australia's FDA. However, I wasn't aware of what a seriously big player Valeant is in the global market, and I thank you for the stuff you posted on that company.

 

Might they look to take over ANO at some point to prevent other manufacturers having access to the Zinclear product?

 

Your rhetorical question is a good one. In my mind, it boils down to just how unique Zinclear IM might be as a base input in the suncare products market. On this point, there does seem to be a number of producers of micron particle zinc oxide formulations (and nano particle zinc oxide formulations for that matter), but the important point is that the Zinclear IM formulation is becoming established, proven and accepted in the market, which may make ANO an attractive proposition as a takeover target - especially, as you say, given the very small market capitalisation of the company. In addition, ANO is not a one trick pony, and the potential application of its underlying technology to other cosmetic and industrial products could well hold attractions for a global company.

 

Anyway, it could be interesting times ahead over the next 12 to 18 months.

 

cheers

doc-gt

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Hi Doc

 

Further to your last post, you are indeed correct - there are a number of micronized zinc producers. The significant differential with Zinclear is the 'scattered light effect' which produces the illusion that the zinc is transparent. If you compare Zinclear against its competitors (particularly the non-nano bunch), you'll find Zinclear is less white and thus cosmetically appealing.

 

Whilst we are making small steps (with another positive cash-flow period), I was pleased to read that the company expects to capture a 'significant' portion of the US market. A significant percentage of >$200 million sounds promising.

 

Interestingly Valeant has refused to remove the 'non-nano' labeling on its Invisible Zinc products. It sounds like Valeant are going to take the TGA head on. Good on them, I think consumers should be armed with all the facts and make their own decision. This can only be good for ANO.

 

Cheers

G.

 

 

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Hi G

 

Of course it's not guaranteed by a long shot, but two cash flow positive quarters in a row raises the prospect of 2011/12 being the FY in which ANO generates a maiden profit. Now that would be a milestone to savour.

 

Judging by today's rally in the SP, a few others might also be sensing such a prospect, after the solid 4th quarter results and the generally upbeat view expressed by the company for the next 12 months.

 

I will be interested in what the annual report has to say on key issues for the next 12 months, such as capital management, as a couple of $million in the kick is not a particularly solid platform to underpin a company which now seems to be on a tangible growth path.

 

Anyway, it could well be an interesting ride over the next year or two.

 

cheers

doc-gt

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  • 3 weeks later...

TRADING HALT - CAP RAISING ANNOUNCED.

 

If this is a general cap raising with no news attached it might be time to bail. However, if this is specifically related to increasing capacity to service a large prospect this may well be the turning point we have been waiting for.

 

Fingers crossed.

 

G.

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Hi G

 

The company has been foreshadowing capital management priorities for some time now, so I guess a capital raising comes as no particular surprise.

 

Personally, I'm hoping it will be a placement rather than a rights issue.

 

The former is usually quick and "clean". The latter can be quite time consuming, costly and distracting for management from the business at hand (although I understand that many would favour a rights issue on the basis that it is more equitable for all existing investors).

 

Anyway, we shall soon see.

 

cheers

doc-gt

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An underwritten non -renouncable rights issue to raise $3 million and a share placement to raise $1.5 million

 

http://www.asx.com.au/asxpdf/20110822/pdf/420jwb7xkxh9nf.pdf

 

When I said previously that I was hoping it would be a share placement, I never dreamed that the price set would be less than a third of the last traded price. Hmmm - much to think about, but the initial reaction is that at such a deep discount, I'll have to take up the rights.

 

cheers

doc-gt

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Absolutely appalled with the discount. No wonder Debra hasn't bought any shares.

 

I appreciate the need to maintain a comfortable level of capital, but there was nothing in the report to suggest something significant was in the wings that would require 4 million dollars.

 

The mood of that report was hardly bullish...

  • Orders on hand have reduced from 1 million to 800,000
  • The big US launch has been delayed (perhaps terminated?)

 

Sorry but for that sort of discount I would expect more details and some real news to support the aggressiveness of the price offer. A new Zinclear variant does nothing for me.

 

If I can get a good price tomorrow, I'm out.

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I just spoke with CFO Deana who explained to me that the company has let many quality opportunities go because they did not have the capital to pursue them. Raising $4.5m at this time will allow them to expand the business significantly in areas apart from Zinclear.

 

I asked if they had consulted the other substantial shareholders and her reply was they spoke to the 3 largest, and 2 of the 3 would be participating and are in favor. The third cant because it is the university and hence is not in a position to participate. My comment to her was that they clearly are in possession of additional information that has not be relayed to the rest of us as I can not see how raising $4.5m at a 57% discount is in shareholders favor.

 

Deborah is going to call me back when she gets in.

 

Kiril

 

I hold.

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Deborah called me back, and I had a good chat with her.

 

Let me state that from the BRR interviews, she sounds like a scientist reading a script. However in real life, I found her very commercial and business minded, in spite of her scientific background.

 

Long and the short of it, they are aware that Zinclear is a huge success, but it is never going to make us super wealthy due to the size of the market.

 

Hence the board is looking to ramp up the production of some of the other products we own. Firstly just moving our capability to powder product on the zinclear, this different medium will be a multiplier of our Zinclear success, as the market is 4 times larger. This will only take 12 months before our bottom line is seeing the benefit....and as all of the business from China and India is in the powder format, we are crazy for not moving this way.

 

She also talked about our new product opportunity with Zironia Powder- Advanced ceramics. She described this as the game changer for ANO. We need to invest in having the 3rd party market evaluation complete, and this will be done out of the UK. She explained we can do this in bits and pieces, or we can do this properly, which takes money.

 

The board met with the 3 largest shareholders and they are 100% behind this. The board had to make a commercial decision also about diversifying the shareholder base. Whilst the large holders are behind the plan and will participate in the rights issue, we can just offer the entire raising to them, as they wanted all shareholders to have the benefit of participation at this discount.

 

I plan to take up my allocation.

 

Kiril.

 

I hold. My single largest holding now is Intermoco (INT).

 

Please be aware that anything I post regarding INT is biased. DYOR.

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