The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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SOLID sadly no obvious rerate driver
As you say solid and pretty much as I thought, not sure how the market will react as I probably have lower expectations than many. Real need to show how they can get to £20-25m to stop swallowing cash.
Main takeaway is what isn't there, virtually silent on covid detectors so clearly no pipeline near to contract.
Covid testing is mention further down.
Trails etc successful , looking for manufacturing partner. But no mention of deals
Covid Testing in UK . It states we have a manufacturer! Validation results very good. Just a matter of more time imo.
"Under its programme funded by Innovate UK to develop a solution for airborne COVID-19 detection, the Group successfully completed piloting of the system at a number of schools, airports and other locations. The solution is now in the productisation phase, with a manufacturing partner having been identified and a number of pre-production models also having been produced. Further, the Group also engaged in validation of the technology in third party laboratories with very positive results on both the detection levels, sensitivity and false alarm rates."
There is a lot of good news to come this year ..
65 to 75p valuation read
across from Equity Development
Basu said; "As a result, the Board continues to look to the future with great confidence." LOL, yeah, same statement every semester.
Yet, always has failed to deliverd. The impairment of that contract from a few years ago never reversed. So, with this very bad commercial acumen, Basu will be asking for more money soon from the shareholders ...
Looks well on track for EBITDA profit this year and strongest position they have ever been in. Excellent cash management. Imho DYOR
Strat, I think I must be looking at different base data than you for my research
On cash / working capital
- 7.3m of inventory vs 2.5m cost of sale, so on current run rate about 18 months of inventory.
- 7.2m debtors vs 4.7m revenue, so debts of about 9 months
- 0.1m provision release vs 13.1 total provision
Ebitda is just one metric and in some cases a flawed one, need to take into account 42m of intangibles.
The covid detector news is poor and I'm not shocked the market has reacted with a drop, how many locations are they installed in? Why not just give an exact figure, they mention "very positive" results in a lab environment but don't mention what over 6 months of field data has yielded, "identified" an industrial partner means zilch, and they've made a few early stage units and then talk about productisation cycle, so something is not right/doesn't work, the pie in the sky 60-80p figure based on redlen takeover...how many businesses the size of canon are there that would be interested in paying way over the odds for Kromek to add such a specialist product in their portfolio? Olympus? They have a medical division, very unlikely though, can't see any positive catalysts for this in the short term at all, very disappointed
I get the feeling Greta Thunberg will be drawing her pension before we have any tangible returns from Arnab. Anyway I have been here for quite a while having bought in at a low price, so I will just wait and hope.
One bright spot, the way this is going the 2m share options given to the complete failure Bulmer may be worth very little.
I find comments of vascular and Aqc888 both interesting and informative. however it seems shareholders mostly neither trust nor believe statements from the company. why would long term shareholders be bailing out now,mostly taking a loss ! i have held shares for several years, my worst investment, almost, hear nothing but bold predictions and watch the sp crash when the giddy heights of 16p are reached.
Just tipped again by Simon Thompson!!! Boom time tomorrow. Whilst this is good news, (probably 5-10% tomorrow) it makes me worry Kromek won’t be re-tipped in a few weeks for his bargain shares edition where the huge gains come from 15% plus. But who knows. Whilst I was hugely disappointed this morning looking through the results I think there is huge potential here still as vascular points out on multiple fronts (nuclear,biological pathogen detector). At the current value 15p, there is huge potential here with limited risk. The question is how long will it take.
Yes patience is required here and many running out. Am happy for it to play out and am confident of material gains from here. Interesting move to split business and realise value this way. Yea probably 2-3p rise on IC analysis and tip…
The fact that there is such a reliance on an ST write up rather than real business performance sums up kmk. Hopefully we won't continue the downward shark tooth 5 year share price following and ST write up followed by failure to deliver.
Still don't know whether 15p represents the bargain of the year, or just followed by more cash raises and downward shareprice.
However I still have zero trust in the board and the ceo.
If anyone has the ST wording please send across, could do with a laugh.
Investors are materially underestimating trading prospects of Kromek (KMK:14.5p) in what could be a pivotal year for the Sedgefield-based radiation detection technology company that is focused on the medical, security screening and nuclear markets.
Firstly, during our results call, chief executive Arnab Basu revealed that he expects first commercial sales by April for Kromek’s bio-security pathogen detectors which sample air and identify the presence of any biological pathogen including Covid-19. The company is working with the NHS and a major transportation group, both sectors being obvious candidates for deployment on a commercial basis.
Secondly, Canon’s recent US$270m (£199m) acquisition of Redlen Technologies, the only independent commercial producer of Cadmium Zinc Telluride (CZT) detectors globally other than Kromek, is material. House broker Cenkos Securities’ read across implies a valuation of £196m (45p a share) on Kromek’s medical imaging business, or more than three times Kromek’s current market capitalisation.
Moreover, by removing one rival from the market, it means that medical imaging OEMs – Phillips and United Imaging, for instance – that are looking to adopt CZT technology but lack in-house production capacity are now far more reliant on Kromek than previously. Basu notes that three new strategic original equipment manufacturers (OEMs) have placed initial orders with Kromek and “we expect a number of contracts to be signed in 2022 as they look for surety of supply”, adding that “more conversations are ongoing”. They could be very large contracts given that one seven-year medical imaging contract signed with an OEM in 2019 is delivering US$58m of revenue to Kromek over a seven-year contract term.
Basu also revealed the potential to split out the group’s two distinct business units – chemical, biohazard security, radiation and nuclear (CBRN) activities comprise the other one. The fact that the directors have segmented the two operations in the results presentation is telling. The point is that a medical imaging OEM looking for security of CZT supply could be tempted to make a bid for that part of Kromek’s business, which analyst Mike Jeremy at Equity Development values at £225m. He also highlights the undervaluation of the CBRN business, which could generate half of group revenue of £18m in the 2022/23 financial year, and could be worth £54m.
Importantly, with 96 per cent of budgeted annual revenue of £15m covered by orders as well as 60 per cent of the £18m revenue estimate for 2022/23, then the long-awaited move into cash profitability is on the cards. Jeremy predicts £0.6m cash profit in the second half to 30 April 2022 to wipe out the £0.6m first-half loss, and is pencilling in cash profit of £0.75m in 2022/23.
Kromek’s shares have been volatile since my last buy call at 15.75p (‘Backing a tech winner in the fight against Covid-19’, 14 July 2021), but with game-changing orders from medical imaging OEMs likely and
"and the commercial launch of the Covid-19 airborne detector imminent, then I maintain the view the share price could double. Buy."
Would be interested to hear your thought skid35. I do feel a bit more optimistic after reading. There will be major pressure on Basu if he doesn't deliver something regarding Covid detector in first 6 months after he specifically mentioned April.
Skid, I think fact that there is such a reliance on an ST write up rather than real business performance sums up the market more than kmk. Basu obviously irritated institutional investors into all leaving and for now kmk relies on a band of investors on the main lead by ST.
I’m not sure if it was a slip of the tongue or if Basu is incapable of not embellishing facts. But in the RNS about the £17m contract it was described as ‘upto £17m’ but in the proactive podcast he casually referred to it as ‘£17m minimum’. This unnerved me as I’m wondering what the reality is. This is his biggest contract of the year. What’s happening here?
What I want to see is Basu steeping aside or putting a serious investment in Kromek with his own cash. I’m not happy at all by the founder and ceo owning less than 1%. This needs to be rectified to gain credibility and the confidence of investors.
The future year looks promising and it’s unusual to have such a huge upside with limited risks. But that’s the situation due to past failures. Bargains are bargains because of defects that put off other buyers. Buffet famously bought a car damaged by a hailstorm with little dents all over it but otherwise sound. Are Kromeks many faults outweighed by the potential gains on offer. I think so and I’m hanging around.
Cheers Ark.
ST has written this or something similar about 10 times now, as the interview with basu was. If I remember ST recommended this at around 30p so he's not exactly mystic meg seeing this back to where it might be.he
Amazed the relationship between the two, doesn't ST ask why the hell basu makes him look stupid and hasn't done the things he said he would do last time?
Still holding but haven't and won't pretend I've a clue where this is going, the best route would be a takeover with a target looking at the value they could extract with even a mediocre team.
Aqc.
Noticed your second point as well, this is very important from an accounting perspective.
An MOU with no minimum value and call off orders does not allow you to contract account on the total forecast deal value. A contracted value does.
With the company history on "dodgy" contract accounting Basu really does need to get his ducks in a row and his CFO / chair needs to give him a kick up the backside on this.
Really, really disappointed to see he continues to provide 10x more information to ST on private calls than shareholders on rnss, seems a strange symbiotic relationship.
Despite everything I still think / hope you're right on risk / reward.
The Simon Thompson tip will give the share price a good boost tomorrow 5-10% I presume, the print edition will be published on Friday, hopefully cementing tomorrow’s boost.
I really wouldn’t rule Kromek out of featuring in the early feb bargain shares edition - which would see further and much bigger gains. 2022 is looking like the year it could all come together. Very limited downside especially at 15p and huge potential gains on x3 fronts in 2022, any one of which could multiply Kromeks share price - nuclear detector sales, biological pathogen detector governmental sales and sale of part of business.
Comprehensive review after yesterday's presentation..... apologies if posted before..
I watched the results yesterday and took some notes, most of what was said has been reported here but, there was a few things said esp the last questions that were interesting, I'll post them latter
https://www.***************************/kromek-group-on-track-to-deliver-significant-revenue-growth-for-full-year/4121044609
Directors talk interviews...it was before law blocked it .
My notes on yesterdays Zoom call -
"There were only 17 on the zoom results presentation supprisingly, Paul delivered the financials for the first 30 mins and mentioned a £1 mil product shipment was defeated due to components supply iussues, and was expecting this to be due now March I believe.
He also said after investment in equipment Kromek were now in a position of having 'excess' CZT production capacity.
Arnab followed on with an explanation of how the buss. was now going to be thought of in 2 sectectors.....CZT based imaging etc and CBRN detection...this is very relevant as others have said. For me this also was very telling, 2 OEMs have launched new CZT based SPEC &CT 'starGuide and Naeom..?
after much development (58 mil contract being GE) as now Kromek are the only independent CZT global manuf. (others have in house supply-?) there are 12 manuf at various stages in developing products that need CZT, Arnab said ' it would be fair to say some are a bit nervous re supply.
Then the hand held D3/D5 market was talked thro' and with the many tenders coming in it sounds promising...best in class etc. Then the Bio detection was addressed - it's been very busy, IP Patents submitted (2 I've found today) Portion Down mentioned, the full KAPSCAN AT has to be valadated, and PD are the only options, my thinking, the trails which have been light on news was mentioned, with (new to me) Dental Hospital and Rail carriages along with air travel .. so make of that what you will, Arnab went on to say an Advisor had been appointed/engaged to explore all options 'joint ventures' to bring the Bio product to market asp. He noted that the potential market was huge, with Viruses, food security, crop protection, new building regs and waste water spec coming in.
Also said they were very interested in the US Bio watch replacement situation.
I'm sure I missed a few things, a lot to take in, but there's very likely to be some positive news in the coming months."
the 2 recent Bio related patent/IPO application's i came across today -
https://www.ipo.gov.uk/patent/p-journal/p-pj?startYear=2021&startMonth=January&startDay=27th+-+6871&endYear=2022&endMonth=January&endDay=19th+-+6922&filter=kromek&perPage=10&sort=Publication+Date