RE: Trx24 Apr 2020 16:38
from the Hardman report feb 2020
Valuation
Valuing a company like TRX is extremely difficult. Whereas potential products being
developed by biopharmaceutical companies have a finite life through to their patent
expiration, on which DCF valuations can be performed, the situation with medical
device products is more complex. First, there is often no precedent for the sales and
profit potential of the devices to generate a sensible forecast period. Secondly, as
would be the case with TRX, there are supply implications (sourcing of human
material) and manufacturing “know-how” issues, meaning that there is a terminal
value. Therefore, we have to look at alternative measures to derive a valuation.
Based on the following facts, it is clear that TRX, with a market capitalisation of
£14.1m, is currently being undervalued by the market:
? To get TRX to where it is today, £95.8m – equivalent to 8.2p per share – has
been invested into the company, including the £38.0m of shares issued to
acquire CellRight Technologies in 2017.
? The R&D investment by TRX to get FDA approval and CE marking for a number
of products, excluding all the investment made by CellRight, has been £21.8m.
? The marketing and administrative overheads to establish its products in the
market (mostly in the US) and to sign up the network of GPOs and distribution
partners have been £62.4m.
? The administrative achievement of obtaining the relevant accreditations and
licences for the harvesting and processing of human tissue is considerable.
Even though the company is still unprofitable, there is a positive trend toit becoming
EBITDA-positive by the end of fiscal 2021.
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