Simon Thompson tipped again24 Apr 2020 17:09
romek starts making medical ventilators Sedgefield-based Kromek (KMK:20p), a radiation detection technology company focused on the medical, security screening and nuclear markets, has signed a licensing deal with Metran, a leading medical ventilator manufacturer in Japan, to support the fight against Covid-19. Kromek will commence production of medical ventilators before the end of April, producing 2,000 units within 12 weeks, for sale both in the UK and globally.
Given that the NHS alone needs another 8,000 ventila- tors to add to its current stock of 10,120, and there is an acute global shortage, then there is scope for the licensing deal to be expanded in due course. The global threat
of Covid-19 will not pass until a vaccine is developed,
and until then countries across the world are having
to materially increase intensive care bed capacity and acquire medical ventilators. The deal is likely to prove a decent earner for Kromek – medical ventilators normally sell for around $20,000 (£16,000) per unit – although the financial terms are confidential.
There is no issue with funding Kromek’s bumper order; the company had closing net cash of £7.7m at
31 October 2019, and was well on course to report second-half cash profit of £3.3m on revenue of £13.3m as it delivered on an estimated order book worth $90m.
Kromek’s share price is unchanged since I covered the first-half results (11 December 2019), during which time the FTSE Aim All-Share index has fallen by 18 per cent. There is considerable upside to my target price of 35p. Buy.