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Poidster, i think the important thing here is we all see the diagnostics sector as a huge opportunity, but not all opportunities work out.
Novacyt probably would have concluded an acquisition or 2 by now, but the company is constrained by the DHSC dispute. It's not clear what the outcome will be on that, and it could consume a large part of the cash balance, so hands are tied for acquisitions, in my opinion.
We were clear in moving to PCR travel testing, which has diminished significantly in the final month or so of the year.
We were given £100m revenue and EBITDA guidance of £40m for the full year 2021. I expect a trading update in the next couple of days meeting that or potentially falling slightly short. They had £77m of cash at HY so i expect cash of circa £100m for the full year. Market cap £210m. Potential upside from DHSC could be significant, but i expect we will just to say cover our costs with this, which would be fair for both sides. It's clear the volume of tests ordered by DHSC would not be required now as we are in a different stage of the pandemic.
There will however be testing for years to come in hospital settings and probably for travel upon any new variance. But let's hope they get milder and milder and immunity builds in the population!
Definitely value here and I agree that communication could be better, but if they have nothing material to communicate and significant uncertainty with the DHSC, but it's important to keep your portfolio DIVERSIFIED, and not be angry or upset at any one investment.
You can't give a figure publicly like that because it gives the other side a huge advantage
We have to wait and see. Yes uncertainty but I have confidence.
They should try to do a deal for variant testing in exchange for settling the dispute. Win win for everyone.
Hi All,
My take is this. The order from DHSC was placed 30th September to meet the 100k tests a day by end of October. Some of the machines have been used in some hospitals, we know that, but i saw a pathologist comment on twitter saying that it's been left in a box. I think when we get to this stage of the pandemic and it's under control and lots of new LFTs available they've looked at the tech and it's either been too complicated (initially, hence PROmate) or it's needed a trained pathologist, all of which have been utilising machines with mass throughput.
I suspect that the issues that were reported in December in the papers i.e. 200 machines delivered but " too difficult " to operate and lacking the required staff is the major issue. DHSC ordered the machines and they have been delivered. The revenue and margin was in the support and value of tests required, not the hardware.
So if 200 delivered, rollout paused and no further deliveries, then potentially this could be a £50m hit on revenue, but i see that as worst case (we have lost £206m of market cap btw). Best case I would say is 100 machines x£14k sell price = £1.4m credit plus ancillary services. Or do a deal for Variplex tests.
This issue has obviously been that DHSC (gov) ordered and NHS have struggled to make it work as a solution.
The faster it's resolved the better because at the moment, there is a huge uncertainty hanging over them that will delay the approval of the accounts and also stagnate their appetite for the acquisition they have lined up. They can't use the cash in the bank in case it's recalled by DHCS and they can't raise shares because their share price is in the toilet.
I'm watching and waiting at the moment and will accumulate on the dips. I see £3.80 to £4.50 being the range now until we have some clarity.
Best regards,
Craig
Wonder if NCYT can pull the LAMP test out the bag in January, previously scheduled for q1 2021. Ideal low cost but a relatively accurate and fast solution for schools
I disagree about the working capital being way lower, if you remember the margins are 80%+, so when you talk working capital, you are talking raw materials which are pittance, finished goods (valued at cost), trade debtors - would imagine you can name your payment terms as payment on delivery. The NHS contract is invoices every 2 weeks and paid after 7 days (if i remember rightly)
They will have invested in capital equipment of course, which will be the mean deviation from EBITDA to operating cashflow for this year, and agree cash will lag, but not to the extend you are suggesting, in my opinion of course!
The valuation of this share currently is crazy. I'm estimating that by April 2021 assuming current expected run rate of sales and profit continue, the company will have cash on hand equivalent to the market cap, which massively underpins the share price at this level. The upside is ANY trading from May onwards, 4 and a half months away.
I can understand the sentiment of getting out of COVID stocks due to vaccines, but the upside potential here from future contract wins is huge, with the bottom valuation underpinned by the cash generated. You never see a company on AIM with a PE multiple of LESS THAN 1 !! Appreciate a somewhat limited lifespan for this volume of testing, but I can't see the PCR testing volume being any less than current rates for at least 12 months from now.
LAMP and Antibody testing to follow in January too......
Acquisition in the near term?!
I think the point is we continue to ramp up PCR testing, and the rapid LFT's are cheap and easy enough to pick up Asymptomatic infections that would otherwise not be caught.
Regarding care homes, i think people need to take some personal responsibility and self isolate/reduce risk to a minimum where possible prior to visits, but agree and LFT should not be used as an "all clear" device.
I've got access, it's not much of an update, it just summarises the RNS issued yesterday about strains and bird flu tests. no update on price target or anything
When you say GM likes to under promise and over deliver, I suspect it also helps in negotiation of contracts to not shout from the roof tops about the margins being made. You also don't want bad press "Profiteering from a Pandemic".
All this is great for investors who know and see the value. So many AIM companies are "Jam Tomorrow".
ODX revenue split 4 ways in the consortium and only manufacture 25% of main test
GDR test being developed and ready for sale from January - too slow!
Novacyt ahead of the competition with innovation and when they announce products they're almost ready to go!
Lucky enough to buy in at 45p in Feb. STRONG HOLD!
Big fan of your work in the forecast Shaun. Sensible and conservative with what we know. I've clicked on it at least 10 times to go back and refer to stuff so that might account for some of the views haha!
I'd prepared similar calculations myself and came back with very similar figures which is a good sense check!
If you were to update further you should consider a 10% patent box tax rate - has been discussed in the interim results.
Thanks again
It's pretty standard to just list the resolution numbers that have been passed/refused, no idea why they don't list what has actually been agreed it's silly.
Is any one else uneasy about Russel Swarts not standing for re-appointment when he is their finance guy at the precise time when they are about to potentially put RHA in administration and buy it back out as (which is their fallback plan if 90% deal not signed off)
How do you get in?