Bottomline - We are (significantly) undervalued23 Oct 2022 14:23
Whatever the feelings or perception of management, the bottomline is that we are, at present, significantly undervalued at £30m market capitalisation. This is 1.5x FY23 projected sales, and under 3x GP. As I intimated before, we are now most likely a (hostile) takeover target.
The business pre-Covid (Y/E 2020) grew by 87% of which 36% was organic. We are now back to 20% growth on non-Covid income, as reported in the Q1 update. This is only just the beginning of post-Covid growth, with Ranger, EKF + Ambry, a larger NIPT lab installation base coming to the fore. So, as we progress into H2 and beyond, I would expect growth to exceed 20%, perhaps even getting close to 40%.
With sales growth of 20-40%, and a gross profit margin of 60%, you can calculate we will comfortably be EBITDA positive and possibly report our first OPAT in FY24. The term loan over 3 years will cover us until then in the absence of any M&A activities, which I really hope will be avoided until share price improves.
The pandemic delivered us record revenues and EBITDA. It also diverted us from the plotted course, although in a positive manner, in my view. It proved to me the ability of management / company to adapt, scale and deliver, and it helped build the foundations for growth today. Oncology (with Ambry) is a big space to enter for YGS and with Covid variants still popping up, our sequencing capability may be called upon again.
All this doesn't, however, excuse the severe underperformance in share price management by the Board. Time to fix that Board of Directors.
- Better representation of our progress: starting with the interim update;
- More regular progress RNSs across strategic pillars;
- More commercial deals;
- Confident statements/endorsements from our existing large shareholders which still include BGF, Amati, Myers and Thermofisher;
- Delivery of growth in numbers + cost discipline focused on ROI instilling confidence.
We have a wonderful business with a solid base of customers and a growing portfolio of products & services. Let's make that count for investors, old and new.
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