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Hi, folk, back from hols. Had time to top up SEO at 18p on Thursday. Good posts here. Thoroughly agree with bos, who in turn agrees with SEO strategy, and andysmith that this is a great deal for SEO and enables them to control their growth. A key point from andy is that growth should be exponential! It could be said to be exponential squared because the actual market penetration is likely to be exponential; whilst to that you need to add the impact of royalties/ license fees in susequent years, plus the impact of other products.

However, I would like to guage what an appropriate cap. should be in the light of the deal:-

(1) SEO say revenue in the first year 'will be considerably in excess of 5m'. Can we assume that the pricing will be held at the quoted 40K with 30K royalties in subsequent years? My assumption is that this will be the case because most of these costs will be borne by ASDA suppliers and the key factor in ASDA'a negotiations will have been exclusivity (note that they have negotiated an extra month with the three extra trials at suppliers). That would appear to mean 150 sales in the first year. ASDA refer to several hundred machines. However, the first year runs from May and SEO's year ends in September so this year is not that significant. The important year for the sp of SEO is Oct 2005 - Sept 2006. Its reasonable to assume 200 ASDA machines in that year. Perhaps we can add 200 Walmart plus 400 other. That would make 800 machines or 32M revenue. Add 5M royalties from sales in current year that would pretty well drop through to the bottom line. There should be pbt (tax 0 anyway) of 10M and pe of 13 at current price.

(2) The exponential argument could mean sales of 100M in 2006/7, pbt of 30M and pe of 4. Actual projected pe a year from now should be not less than 20, implying an sp around 1 and a cap. of around 800m.

(3) These figures could be taken as cautious. The machine popultation is said to be 50,000 including 20,000 in Europe. Many of the major suppliers will supply the other majors including ASDA so will be easy prey for follow-on sales in relation to their other lines of business. Yet we are talking about only 3500 machines in the first two and a half years. That could be doubled or tripled. Then we have other processes and products.

The questions for the packaging pundits are: (1) do you beleive that SEO pricing structure will have stood up in the current negotiations? (2) will most supplier supply the other majors also? (3) do you see the other potential applications as being as important? (4) do you buy off the above ballpark figures? (5) how quickly do you expect the expansion curve to be established and understood in the market?

If these are anywhere within the right ballpark, then SEO is a multi-bagger from here in the next year; it is an ACCUMULATE situation; the last thing that any of us should do is to rush to take profits. Other views please before Tuesday!

Eric

Good, well thought out, well expressed post, Eric. Your reasonaing makes good sense, as always. Even if there is a degree of hasty profit taking now and the next few months are not as rewarding as we all would hope, I tend to think the sp can only go one way overall and that is NORTH in the long run! With a 4-day bank holiday, surely institutional buyers will be eagerly waiting for the 0800 bell to sound on Tuesday? Cheers,

Kus.

Just back from my 3 weeks holiday and the news re SEO is excellent and much as expected. Thanks to all for excellent postings and analysis - it really is a pleasure to read sensible and well thought out comment on this BB. I am still cautiously optimistic with SEO - it still seems too good to be true and I keep looking for the downside - but I just cannot see one - even the Court case seems to be a relatively minor irritant now.

PS - I can thoroughly recommend GOA for a winter break - the weather was a constant 34/35 degrees C with a gentyle on shore breeze, the sea was not a lot cooler - like a warm bath. The food is fantaaastic - 3 weeks and not a hint of a delhi belly - the peopole are warm, friendly and genuine and its so cheap - we strugggled to dpend more than 5 per head for an evening meal including drinks - lovely fish and lobster (about5), Chateaubriand 3, Gin & Tonic (Double)- 75p. The hotels are good but basic, clean and comfortable - and whats more if you have a Tesco Club card or Tesco Credit card it will cost you next to nothing (We shop at Tesco but use a Tesco Credit card for all our purchases - using their club deals we travelled to Goa with Cosmos, stayed in a 4 star hotel, and it cost us 20 (yes 20) - if anyone wants any details - please email me seperately). Our next trip is to Prague in May and again 5 days is only costing about 140. There are no catches.

Looking forward to Tuesday and getting back up to speed

Bazza

great post eric. i hope you are right when you say your projections are cautious. it will be an interesting week, next week. personally, i am hoping for consolidation at the current price.
glad you had a good time ,bhunt.

girlfriend has a great day planned for me today looking for a new sofa. what fun!!!! dfs here we come.

Excellent post Eric as usual, I will most probably be dipping my toes in tuesday, hope you get the mag soon, posted Sat.

bosely---- Is that a rec for dfs ?????????

Eric, good post, number crunching always puts the meat on the bones.
Tesco and Sainsburys will soon be wishing they had this and will be chomping at the bit in a years time, in the meantime they could squeeze every possible ounce out of their current suppliers whom won't necessarily also supply Asda.
In turn these suppliers will be chomping at the bit to get this technology.
WHY so much interest? because it reduces their costs and has positive impact on their environmental obligations. The growth potential is outstanding, say 250-300 machines this year, royalties from these the following year plus 500 new machines, the year after that royalties from 750-800 plus 1000 more machines and so on and so on. Conservative figures here but just an example of growth.
I like the quote from the Asda chap about other ideas for this technology within packaging, there are now loads of other avenues to be explored and the fact that SEO are being backed by Asda will just drive it on. I bet BPRG wish they had this kind of backing. The other revenue lines like Frogpack, Water-Soluble, Bio-degradable and now Ingel are vitally important as it shows there is more to SEO than RF sealing of meat. SEO really could be the next Tetrapack.

Outside the UK many governments now do or soon will impose penalties for using too much (or any) non-biodegradable plastics. That is an enormous market for SEO too. As usual, for all Tony's talk, UK is ourselves more closely to the US and its gas-guzzling, sod the environment attitude. But even the UK will have to give in one day and embrace the need to stop using oil products to create damaging and/or indestructible waste.

andysmith

I see you have gone for 250-300 machines this year, 500 next year and 1000 the following making 1750-1800 or 3.5% of the machine market. That compares with my 200, 800 and 1750 respectively, a total of 2750 or 5.5% of the market. Both could be very conservative. At some stage you would expect competition to emerge together with patent battles; seeing the problems BPRG have had with SEO then SEO may well have similar problems. However, you would not expect the majors to want to take risks with litigation over their projects and tehy will be likely to stay faithful to SEO. It will be interesting to compare our views with the official analyst projections when they emerge. We may both be in right ballpark on current year and next year bit I suspect hopelessly cautious thereafter. Not just a matter of mid-cap but FT100 - here we come!

Eric

Morning all...hope you all had a good weekend. Here is a post from Bprg ....
'FWIW Evolution have just issued a broker note on SEO complete with financial bells and whistles recommending a target price of 30p.
This shows how it should be done.
Perhaps it will be done for BPRG soon by whoever.'
Di

di: Thanks for that. 30p will be OK for the moment. Buying those shares back?
Eric

Oh I did that a while ago Eric...I was a bit too overweight in SEO for my liking. Now I am happy to hold on waiting for the next ride.

:-)

Good news, Di

SEO is my share for this year - nearly all excess weight is in there. 30p will be a good level of comfort to reach.

SD

morning all. hope you had a good easter. good start to the week. volumes ok and we are nice and steady. also been having a read of evo's (tim freeborns) thoughts on seo. very detailed and interesting analysis.

morning all
Very good posts over the W/End not much I can add except its nice to relax on this stock and do other things.

Hi guys - SEO look good and stable for the moment - I expect them to rise over the next few months - hopefully to 30p. SEO always seem very resilient and hold up well price-wise. I think they also have excellent Market Makers in charge - they don't do silly things with the price or spread.

ULT are off on one again today if you fancy the day trading punt of the week!

bos - is there a link to evo's note?
SD

- Wish I'd kept me trap shut!!

Poverty - at least someone accepts the blame! Looking at the trades, it looks like a bear raid! Any comments?

bos: it would be helpful to have essence of EVO note if the link cannot be posted. Ta muchly!

Eric

A typical shake out then a trade buy come in at 1.1m after the close punters with this stock should just site on there hands.

evening all. link is

http://www.evbgresearch.com/

but you have to register first. if price holds at previous 17p support we will be ok , i think. lots of red today again!