My assessment of the future31 Jul 2022 14:30
I found the presentation on FY22 results reassuring, even if the frustration around share price performance continues to tests one's patience, including the management. Lyn is mostly right - he and the YGEN team can only focus on delivery and implementing our growth plans - the share price should eventually take care of itself. I say mostly, because I think PR / RNSs can be better & more frequent. EG 12 newly installed NIPT labs (30% growth on base over last 6 months alone) why not announced and the other megalab (even if we have to respect client confidentiality). Nonetheless, we do seem to have built a solid post Covid platform to get back on track. We should not understate the SUPERB work done by YGEN over Covid period, generating record revenues and EBITDA, allowing us to build this platform. That alone is validation of the team's ability to deliver / execute, in my view.
As we look to FY23 and beyond, here's my take. I have not read any broker's reports. I expected us to return to FY21 levels for core businesses, enjoy new Ranger and related contracts signed over the last few years and continued growth returning to our core business. Starting from a core (FY21) base of £17.8m (only £1m Covid related revenue assumed), I expect growth in NIPT from 12 newly installed labs (£2m), reproductive health and genomic services (£1m) and Ranger, DPYD and related growth (£2m), resulting in circa £22.8m revenue. On GP of 65% and OPEX base of £12m, and EBITDA of £2.8m. All on commercials deals already announced and back to growth in core.
I also anticipate significant traction in Ranger implementation in FY23 - for EBTA tubes, sample selections, NIPT workflows, with USA being a key adopter. If we installed 12 new NIPT labs in the last 6 months alone, I expect us to add a further 12 in the remaining period of FY23. Add to these further genomic services from Ambry agreement and traction on our 100+ products and services. None of these have been assumed in my forecast above in FY23, but we can expect full year benefit in FY24. I place a £10m growth in FY24, resulting in GP of circa £21m and EBITDA of circa £9m.
On a multiple of 9x GP or 20x on EBITDA FY24 = £180m or 25p/share
Of course, the enlarged presence, installed bases and validation of tech / delivery / execution, means that is a prudent number since we will be expected to grow again in FY25 and beyond, which can easily take us to 40p/share.
We must be an acquisition target today. Loved chart 17!
In summary, I am prepared to see where we are over the next 1-2 years. I invest based on fundamentals and the fundamentals look better today than pre-Covid and during Covid. Unless developments suggest otherwise, I will enjoy the ride to 20p and above before considering selling.
Good luck all.
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