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As my 2 other Covid plays soared yesterday the SP reaction seemed slightly muted here. And yet it was the Ncyt RNS that gave me the most pleasure.

Think about it , a month ago they were excited to announce single orders of £1.4m and yet here we have a single order in the region of £80m announced. And further more it blows out the water the derampers who suggest it will be all over in 2/3 months.

My previous estimates at revenue have felt slightly rampy, but I would not have posted them did I not feel they were feasible.
That RNS somehow makes it more real that once up to 8m a month production we will be bringing in £100m plus per month. And then you can add the OEM royalties on top of that.
Make no mistake, at current market cap, and despite the expontial rise, this remains ridiculously cheap.

Everybody will need to be tested, one way or another. And if positive you will need to be tested again and possibly again.
Ventilators are only needed for the critically ill.
Hopefully with all the testing being done, this has prevented more people getting critically ill, and therefore the additional ventilators shan’t be required.

Nothing better than a minister saying “not sure”.

It means He can’t deny it because he categorically knows that it is true. But...
He can’t confirm it cos he’s been briefed not to as the PM wants to make that announcement.

Nailed on.

It’s blatently obvious that someone from government have tipped the Mail off about this story. It makes them look proactive.
As is normal any govt reps will play dumb and deny any knowledge until official announcement made. I imagine Boris wants the credit for this.

It’s reassuring to see the deramper out in force as it confirms their paymasters want in.

No sales update since 27th March. It would make more sense if they now gave us monthly sales updates in which case I’d expect an RNS in next 2 weeks.

I see CODX with recent analyst forecast annual sales of $37m now has mkt cap of $375m or £300m.
Ncyt current market cap is £210m.

There is plenty of info out there for people to work out what Ncyt sales will be this yea (hint - a lot more than $37m), but I guess some people will need to wait for next RNS of sales before they realise quite how cheap this is.

The indicative cost of £15 per test here is in line with my thinking. Investors trying to work out potential revenues for Ncyt should be taking note of this figure.

Pumpky,

See last sentence of this from Novacyt last FY results to Dec18 :-

Primerdesign sales growth was driven by
a strong core business delivering over 11% or €0.5m of growth, o set by reduced B2B revenues as a result of a large one-o sale in late 2017 for over $1m. Removing this one-o sale in 2017 would have resulted
in a year-on-year growth of over 20% for the Primerdesign business. During 2018 Primerdesign signed a multi-year exclusive B2B supply agreement worth a minimum
in excess of $3m over ve years with a
US customer with material revenue streams expected to commence in 2019. As
sales have increased, the impact of high margin genesig® testing reagent kits have ensured the divisional gross margin remains above 80% and have increased by three percentage points to 84%.”

Shoestring,
Firstly don’t beat yourself up about it, opportunities always arise. I remember looking at ASOS at 120p, looked a bit toppy and decided to await dip to 100p before buying. It never did dip, I never bought, and I tnink it peaked at about £60-70!
For commercial sensitivity test price unlikely to be known. However, this week SCWorx announced deal to supply 2m tests for $35m . So $17.50 per test or £14.
Historically Ncyt have achieved a gross margin of 84% on tests.

Oops! Geography never a strong point of mine. I shall now write a 100 lines on blackboard
Just cos they have a Sultan doesn’t mean they’re in the Middle East
Just cos..........

I was looking at worldometers site and at the countries who are testing most per head of population.
Ignoring tiny countries such as Faroe Islands,Isle of Man etc, the top countries include UAE,Bahrain,Brunei,Qatar.
These Middle East countries are clearly happy to pay to make sure they are getting the best tests available.
I wonder who has been selling to them???

hTTps://www.worldometers.info/coronavirus/

Actually I think you’ll find most market caps will increase in line with annual sales and profits increase. The problem here is that Ncyt are producing week on week increases that most companies would be happy to do year on year. I fully accept that long term revenue uncertainty makes valuation difficult.

888,
Thanks for your recommendation of 0.02% savings acc, but if you don’t mind I’ll politely refuse as I’m aware of a share that should do slightly better!
I am well aware this has multibagged (I’m a holder from 51p), but that is my point. Too many people look at chart and think that’s had a good run it can’t go much higher.
But in actual fact at 38p no one thought it a bit steep with monthly sales of £1.1m hoped for.
Yet now with monthly sales of £100m plus hoped for people seem to have “I’ll sell at 500p cos it can’t go much higher” mentality without realising that Ncyt could have cash/debtors of twice that market cap by year end.

Hi DGR,
Did you actually read my post or did you just completely miss my point?

I have offered up valuations previously and this is just a simple alternative to suggest that although, on the face of it, SP has had a good run it has in fact not kept up with the news flow.

When Ncyt announced launch of test on 31st Jan, they anticipated production of 200,000 tests per month. The SP finished the day at 38p.
Since then we have increased production capacity 3 times , so that it is now up to 8 million per month. A 40 fold increase. And yet the SP has only increased 12 fold. Had SP matched production forecast we should now be £15.20.

After yesterday’s RNS I’ve now pencilled in 60m tests this year giving revenue of £840m and gross profit of £630m. Not including AZN/GSK consortium or any US OEM revenue.

Jonesrichard,

I’m genuinely concerned at your naivety. Any percentage gains are based on the price of your original investment. You do not go resetting the benchmark every time it doubles. So for you every £2.55 increase is a 100% gain.
So at £2.55 = level
£5.10 = +100%
£7.65 = +200%
£10.20 = +400%

You will not become a millionaire with your holding. The SP would need to reach circa £300, or a market cap of about £20 billion. That ain’t gonna happen.
Please remember shares can go down as well as up.
Also consider the merits of derisking, should you get the chance. By that I mean, for example,if share doubles, you sell half. Money back and remaining shares are a ‘free ride’.
No advice intended.

Good luck.

VanV,
It sounds like it could be, tho CODX jumped from $3 on 21/2 to $16 6 days later. Btw may thanks for your research and contributions to this B.B. which I’ve appreciated as a lurker.

Wolfbag,
That is it tho the full note is/was available via CODX website. This is a snippet:-

“FDA policy change permits use of Logix Smart COVID-19 test in U.S. CLIA labs. On February 29, 2020, the FDA issued new policy guidelines to help expedite the availability of COVID-19 coronavirus diagnostics, which allows laboratories certified under the Clinical Laboratory Improvement Amendments (CLIA) framework to validate an in vitro diagnostics (IVD) test for COVID-19 in-house, submit an Emergency Use Authorization (EUA) form, and start using the test before the FDA completes review of the submission. This new policy allows Co-Diagnostics to ship its Logix SmartTM COVID-19 screening test to U.S. customers in addition to distributors in international markets. The domestic and international demand for COVID-19 tests has been surging in the past weeks; Co-Diagnostics is now shipping its proprietary COVID-19 test to 50 countries across four continents, including America, Europe, Asia and Australia. As a reminder, the Logix Smart COVID-19 screening test received CE IVD clearance from the FDA on February 24, 2020. Co-Diagnostics was the first U.S. company to receive CE Mark designation for a COVID-19 test. Naturally, the company’s commercial activities have been focused on international markets that accept the CE Mark as a valid regulatory approval. We believe the FDA policy change could be a significant boost to the company’s potential sales of its COVID-19 test as community spread has already begun in multiple U.S. states and the test can be shipped to those labs capable of in-house validation immediately. In view of the continuing—and rapidly accelerating—COVID-19 infection spread worldwide and initialization of shipments to U.S. labs, we have increased the enterprise value-to-sales (EV/Sales) multiple to 12x from 10x and projected 2020 total sales to $1.66 from $0.40 per share, which leads to a value of $20 per share. Therefore, we reiterate our Buy rating while raising the 12-month target to $20 from $4 per share.”

Intrepid,
I would agree with your valuation. I was applying a brokers valuation method to Ncyt, which in truth I find err a bit rich.

donnertrader,
Bottom line. If they can deliver on sales these are still very cheap.

RichKen,
Cheers, appreciate the feedback.

RichKen,

Yi Chen of brokers H C Wainwright put out a note on NASDAQ listed company Co-Diagnostics CODX on 9th March. The pdf is available online but not sure how to link it here sorry. CODX is rival to NCYT.
He believes they will have sales of $37m this year and believes they should be valued on an EV/Sales ratio of 12. His target price of $20 gives them a market cap of $500m roughly.
I have used this method of valuation based on sales for that SP target range of £30-£65.
FWIW I find that valuation method a bit fanciful, but having said that CODX Sp did go above his $20 target intraday and is currently just under $9?

I’ve previously tried to predict figures for this year and now feel that needs amending.

Gross Margin.
...on tests last year were 84%, and Ncyt have stayed that gross margin for GROUP would improve this year. I mistakenly took this to mean test margin could be 90% which is wrong as they are saying it is the overall margin that will increase due to sales of high margin tests. I actually think that after weighing in a number of factors gross margin on tests likely to fall and for now I’ll use figure of 75%.

Sales.
Could be anything but I’m happy to assume that Ncyt would not have committed to buying raw materials for 18m tests if they are not expecting to achieve that. Indeed if they knock these out at 4m a month, and can have access to further raw materials they could be selling 30m plus tests this year.
I view the AZN,GSK deal partnership as separate to this giving Ncyt more of a royalty like revenue. I’m guessing £2 to £4 per test.
I’m unsure of the workings of the Bruker OEM deal. In normal circumstances I would expect Ncyt to produce these tests and attach Bruker labels to them. But with Ncyt working at full capacity I can’t see any point in them doing that. So will Bruker be producing tests under licence from Ncyt and paying sag £1 per test to us? I dunno.

Cost of test.

We know PHE paid £8.97 per test for their earlier 115,000 order. We have seen in the Guardian that NHS wee umming and arghing about buying 400,000 tests at £20 per test. I see that in US the Medicare going rate is $51 per test. If lab mark up is 100% to 200% that would suggest test cost of £14 - £20 each.
So I’m going to use figures of £12 - £15 for eac Ncyt test sold.

Revenue.
AZN GSK consortium. 30,000 tests per day for 8 months, 7.2m tests at £2-£4
= £14m to £28m.

Own sales. 18m at £12-£15 each = £216 - £270m. @ 75% margin
= £154m -£202m profit.
At 30m tests this rises to £270m - £336m.

OEM deal. I’ve no idea but I’ll say 10m tests giving £10m.

I’ve taken no account of LAMP test potential or possible antibody test.

Conclusion.
Potential Gross profit this year of between £178m and £374m. Which imho more than underpins current market cap.

Indeed were I the HC Wainwright analyst I would be suggesting mkt cap of £1.9bn to £4.4bn. Or target price of £30 to £65 per share!!!

This is a bit back of an envelope compared to Quickdraws excellent summary, but concurs that Ncyt is very much undervalued at current SP.

Peer comparison.

Codiagnostics CODX NASDAQ.

Forecast sales 2020. £30m.
Current market cap. £180m
Broker target mc. £400m

Novacyt

Forecast sales. Unknown but 6 weeks sales/orders £17.8m and raw materials secured for nearly 10 times that.
Current market cap £140m.

Despite meteoric SP rise, for me the SP still looks very cheap and looks an obvious T/O target for a big pharma.

Hi codey,

I am the ‘anonymous’ poster whose post you are criticising Routy for sharing here. I can see why you think my figures are wrong so I have signed in here to enlighten you.
The purpose of my post was to provide a figure for the likely gross margin on the tests. Too get this you need to look at sales in PrimerDesign business NOT the group as a whole. These can be found in the last FY results to Dec18 not the guidelines of Jan. Sales for PrimerDesign were £5.5m and here is the paragraph showing 84% margin.

Primerdesign sales growth was driven by
a strong core business delivering over 11% or €0.5m of growth, o set by reduced B2B revenues as a result of a large one-o sale in late 2017 for over $1m. Removing this one-o sale in 2017 would have resulted
in a year-on-year growth of over 20% for the Primerdesign business. During 2018 Primerdesign signed a multi-year exclusive B2B supply agreement worth a minimum
in excess of $3m over ve years with a
US customer with material revenue streams expected to commence in 2019. As
sales have increased, the impact of high margin genesig® testing reagent kits have ensured the divisional gross margin remains above 80% and have increased by three percentage points to 84%.”

Hope that helps.