Shareprophets14 Jun 2014 12:53
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Saturday 14 June 2014 | The one stop source for free breaking news, expert analysis, and videos on AIM and LSE listed shares
Vialogy: Reverse takeover, placing, shares unsuspended – strong buy
BY TOM WINNIFRITH | FRIDAY 13 JUNE 2014
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Disclosure: The Real Man Pizza Company Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
AIM listed Vialogy (VIY) shares came back from suspension on Friday, closing the session at 0.16p after a £6.5 million placing at 0.11p. We took part in that placing and will be taking up our full entitlements in the open offer at 0.11p – we were already shareholders. I suggest that existing shareholders do the same (given how in the money they are already) and also buy a lot more in the market on Monday.
Vialogy has bought molecular diagnostic company Premaitha by issuing 95 million shares at 0.11p (that is a £10.5 million price tag). It has raised another £6.5 million at 0.11p in a placing which was FOUR TIMES oversubscribed with a raft of institutions on board. The open offer will raise up to £700,000 more.
Effectively the free float (since the vendors and institutions and those who backed the last placing cannot or will not flip) is c 10%, if that.
The board now comprises the company rescuer Adam Reynolds, Stephen Little from Premaitha who is a very impressive chap but also David Evans. Do you remember Axis Shield? No wonder the funds were lining up to back this one.
Premaitha is working on the final development and commercialisation of a non-invasive pre-natal screening test for Down's syndrome developed by Premaitha. This is a massive market. Assuming the Open Offer is fully taken up the market cap at 0.11p (there will be a 100 for 1 consolidation) is sub £20 million. At 0.15p it is c£27 million and the company will have cash of c£8 million. An £19 million EV for a company with this board set to tap into a market this big ($4.2 billion) looks far too low.
This is not a classic value investment of the sort Steve Moore and I favour. There are obvious risks. But we chatted to Reynolds who seems confident that his generous 0ption package (priced at 0.1p) will kick in before very long. That would require the shares to trade at above 0.5p for 30 consecutive days. With an undemanding EV, a tight free float and Evans on board, I really would not bet against it. We will only sell 24 hours after giving Nifty Fifty readers advice to bank gains. Our initial target price is a cautious 0.36p to sell.
The stance is strong buy at up to 0.23p.
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