Cash.

Again, if we are to accept the predictions from the Shaw Stockbroking Cellestis report, then it is hard to miss the progressive cash position of the Company. Because the report assumes a relatively low dividend payout ratio (54% to 61%) the cash holdings of the Company grow quite rapidly. By 2018 the cash pile has built to over $200m. By 2023 it would be approaching $400m. (All done using the Shaw numbers). If, as I believe (and Shaw intimate), the numbers are very conservative then the cash position could be even bigger.

Every well managed Company needs to have sufficient cash on hand to meet operational requirements, protect against untoward events and generally be prepared for whatever the future sends along. However, there is a limit to how much cash is sensible to hold - earning bank interest only. Previously, the Company have alluded to the necessity of holding $20m in cash. I suspect that view may well have changed as the Company has grown and they will want to hold more than $20m. $200m on the other hand is a lot of cash - I think it would be hard to justify so much "lazy money".

So, what might happen with that cash?

• Dividends. The Directors may decide to increase the dividend payout ratio. They have certainly not ruled that out. There may be a small problem in that they have expressed their desire to pay fully franked dividends. Depending upon how the overseas operations are structured, they may or may not earn enough franking credits to increase the amount of fully franked dividends. Of course there is nothing stopping them from paying some unfranked dividends, if they want.
• Capital Return. They could do a capital return to us. However, I think that would be quite limited as we have not actually contributed much capital in the first place.
• Share Buyback. They could start a share buyback program. In effect this is an acquisition - they would be investing (on our behalf) in a great little Company called Cellestis. Probably a lot of people like this option - the share price watchers are happy because it tends to drive the price up and I am happy because it means that I have to share the future profits  (and dividends) with less people.
• Acquisition. The Company have suggested that they would not be averse to making an acquisition if it made sense and would be earnings accretive. As far as we know, to date they have not found such a candidate. The problem for CST is that it is going to be hard to find anything that can match the returns that Cellestis will be making.
• Waste it on Company Ego. They could build themselves a chrome and glass edifice for Company headquarters. Fortunately our Directors have shown no inclination to do such a thing. 
• Sit on It. Bank Interest return? No thanks - I can do that (and better) myself.

The above is all just my musings. Really just stating the obvious. I have no idea whatsoever what the Directors are actually thinking about this issue. 

Finally, can I just point out the huge difference between Cellestis and most other biotechs listed on the ASX. If you are invested in most of those others you will be watching and worrying about their quarterly cash burn and where they are going to raise their next tranche of cash. What a pleasure it is, on the other hand, to have the luxury of wondering what Cellestis is going to do with its ever growing cash pile.

Admin.

As I have previously said, I really appreciate your comments. Some of you may have noticed that I have changed my comment policy slightly so that you need a google account to be able to comment. I have not done that to restrict the ability of people to comment. I have only done it because, despite numerous requests, multiple posters have insisted on posting under the name "Anonymous". It's just tedious trying to hold a conversation with somebody when multiple people are using the same name. The change that I have made means that you can comment while still retaining your anonymity to whatever extent you like. I apologize for the small inconvenience.