Friday 16 November 2018

PKK Will Be Beating Its Forecast


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 PKK released its Q3 results, and I am rather pleased. For once, the company looks like it has under-promised and over-delivered.

Q3 3-Month & 9-Month Period Financial Highlights:

3-month period9-month period

For 2018, the company forecasted $1.1 million in revenue and $3 million EBITDA loss in its last investor presentation. Barring a complete collapse in the business it will beat substantially on revenue and is extremely favourable to beat on EBITDA, though Q4 tends to be the time where extra expenses get booked for small companies as the auditors assess things like the need for write-offs.

The above table has four different sections to it. The first section compares the full year 2018 forecast versus Q3 YTD. Just to hit the forecast, PKK needs only $178,000 in revenue and have an EBITDA of -$1.5 million. We can confidently say that PKK will do better than that in Q4.

The second section shows what 2018 would be if Q4 was an exact repeat of Q3. Under this circumstance, revenue of $1.65 million would be over $0.5 million above forecast with a beat on EBITDA of $1.2 million.

Section four shows my revenue estimate based on note 4 of the financials which shows $19.1 million in loans outstanding that are at an average interest rate of 15.4%. Multiply that over three months and revenue is $737,000. The company had over $1 million in cash to loan out but I am assuming that ASFC will not be at full loan capacity and ~95% sounds about right.  I'm also adding in $10,000 in non-ASFC revenue as a pure guess to come up with about $750,000 in revenue. I'm guessing that costs will go up too so I put in a -$300,000 EBITDA loss, but this is just pure guesswork.

Based on my estimates I think PKK will generate $1.7 million in revenue and beat its forecast by $0.6 million. The company said that it is not updating its 2019 forecast, but this Q3 result surely puts those numbers into doubt in a good way.

PKK forecasted $148,000 in EBITDA on $9.3 million in revenue in 2019. It is hard to judge the feasibility on the revenue number at this early stage, but if the company was only $236,000 EBITDA negative on $710,000 in revenue, one could make the argument that EBITDA profitability will come sooner than Q4 2019.

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