Hi chaddy36
My previous investment in RAP was mainly driven by the following:
- attractive risk-reward proposition at that time. Share price was very low, no volumes and no interest
- it was a backdoor listing managed by Otsana Capital, an entity that I rate quite highly
- in principal endorsement from the Gates Foundation
- it was developed in the University of Queensland and not somewhere dodgy
I didn’t know much about Brian Leedman initially, but I was aware of Tony Keating (RAP’s CEO). In regards to Brian Leedman, I only had one phone discussion with him before. My impression of him is that he is quite a salesman. He sold me the dream that Resapp would handsomely reward all investors and etc, and I bought into that. He doesn’t come across as someone who is bothered with details– for example, why Resapp used different methodologies when presenting the results from one test to the other.
In hindsight, I should have heeded the warning signs that were flashing before me and/or not worried about me coming across as ignorant by asking some questions that just seem so obvious. The rest is history when the first full test trail in US was discounted due to errors in administration, recording and etc.
Ego, pride, greed… they all played a part in my disappointing investment in RAP. Yes, I did exit with a profit but I could have exited with a lot more.
Now… back to Alcidion.
In short, some of the key reasons underpinning my investment in Alcidion are (I also might have touched on more in some of my previous posts):
Management and Board
Obviously Nathan Buzza was one of the main reason underpinning my initial investment in Alcidion (Brian Leedman wasn’t involved with Alcidion back then). Nathan’s track record and etc speaks for itself. However, it was evident that a new direction was required as the strategy adopted back then via attendance at conferences wasn’t gaining much traction.
A long-standing previous concern that I had with Alcidion is that they had some fantastic products but it is of little use if they can’t market and sell them. Also, they have to bring retail investors along on that journey – sell the story so to speak. Both Ray and Malcolm are smart people but I really do not think they are equipped to fulfil this role. What we really needed were a new investor and institutional engagement strategy to implement alongside a new commercialisation and marketing strategy. I think the company recognises this and hence the Hence, the appointment of Kevin Moynihan, Geoff Rohrsheim and Rebecca Wilson.
The appointment of these people will not guarantee success but they would give us a pretty good shot at success via opening doors that would ordinarily be closed to us no matter how hard we knock on the door. They bring the know-hows, credibility and etc. Taking a company from R&D phase to commercialisation is a whole different ball game. I am confident that the pieces are all starting to fit together. Where it would leads, I don’t know.
As I mentioned previously, I have spoken to both Ray and Malcolm previously and my gut feel is that there are honourable individuals and would do the right thing by shareholders. At no time did they promise me riches beyond my wildest dreams. What they did convey is that they can only do so much about the daily shareprice movements and all they can do is to manage the business to the best of their abilities. In the end, that is all us as shareholders could ask for isn’t it?
It was also telling that a staff member of Alcidion told me that the company was watching every dollar spent closely and hence did not provide anything beyond basic drinking refreshments at the last agm. Confirms my thoughts that Ray and Malcolm's interests are aligned to ours (given that they are both the largest shareholders) and every dollar counts!
Technology
As I previously indicated, healthcare spending is one of the top 3 expenditure items for all governments. Here, you can get one of the most bang for dollar via technologies that can improve productivity, patient outcomes, efficiency and etc. All signs via reviews by Productivity Commission and experiences elsewhere in New Zealand and etc are all pointing towards the same direction. To me, it is no longer a question of if but when ehealth is adopted widely in Australia.
A contact of mine who was previously involved with LBT innovations also had positive comments about the technologies underpinning Alcidion’s products. This gave me another layer of comfort on top of Alcidion’s involvement with Monash, Calvary and MidCentral District Health Board.
As Subs previously pointed out, Monash is seen as a leader in their field. Being accepted and endorsed by them is a great selling point. We already have working products adopted by reputable hospitals, we are not developing prototypes or undertaking clinical trials or awaiting FDA approvals.
Risk-reward proposition
I keep banging on about this. But if your fundamental analysis is thorough and appropriate due diligence has been carried out, it is then all about your entry price. If the entry price is low, your risk exposure is somewhat minimised via margin of safety.
Take my previous investments in Resapp and LBT Innovations as examples. I was fortunate enough to exit both positions with a profit despite the turmoil that affected both companies. If I had bought in much later at a higher price, I would have little margin of safety and be deep in red.
Assessment of risk-reward proposition can ultimately be very subjective, depending on risk profiles and etc. I will therefore leave it for you to assess it yourself. But let’s remember that Alcidion is a company with low market cap, clean balance sheet, low share price, low risk of dilution via capital raisings, cash reserve and etc.
Potential rewards, in my view, includes potential and/or further commercial deals with Calvary, Monash and Health Districts in New Zealand. Perhaps more commercial deals via the Oncall acquisition, expansion in new markets, further deals in the out of hospital setting (dark horse and potential lucrative niche for the company in my view) and potential involvement in the new RAH???
Risk, in my view, includes poor execution of commercialisation strategy, poor penetration into the public hospital sector and other targeted markets and poor uptake in the high value predictive analysis and advanced metrics focus. I am also a little hesitant about the company’s plans for expansion into international markets such as UK and US. I would like to established a solid foothold in Australia and NZ first before such international expansion is contemplated as it can be cash draining and resource consuming.
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