Another YGEN Buy Note16 Jan 2023 13:51
BUY
TARGET PRICE CHANGE Overly discounted
Price (13 January 2023) 0.4p
Changes
Rating
Target Price
Previous
-
9.0p
Current
BUY
1.2p
Key data
Bloomberg/Reuters codes: YGEN LN / YGEN.L
Market cap (£m) £12.4
AIM 865
1mth perf (%) (79.5)
3mth perf (%) (91.8)
12mth perf (%) (96.8)
12mth high-low (p) 13 - 0
Free float (%) 76
Key financials
Year to Mar 2022A 2023E 2024E
Sales (£m) 37.6 18.4 20.0
Sales growth (%) 105.4 (51.1) 8.9
EBIT adj (1.5) (8.9) (5.6)
EBIT margin (%) (6.8) (58.4) (30.5)
EPS adj (p) 0.15 (0.64) (0.15)
DPS (p) 0.0 0.0 0.0
EV/EBITDA (x) 2.7 (2.6) (14.4)
PE adj (x) 2.6 NA NA
Number of shares (m) 724.2 1,323.0 3,227.9
Price as of close on 13 January 2023
All sources unless otherwise stated: Company
data, FactSet, Stifel estimates
Share price performance (indexed)
120
100
80
60
40
20
0 Mar-22 May-22 Jul-22 Sep-22 Nov-22 Jan-23
Absolute Rel.AIM (AXX)
Summary
Following Yourgene's heavily discounted 0.3p per share fundraise (-84% to prior close)
for gross proceeds of £7.3m (£6.8m net), we reduce our target price to 1.2p from 9p, but
with the stock trading around 0.4p, we maintain a Buy rating. The fresh funds will be used
to support working capital needs, SVB debt repayments and cost base restructuring to
remove £2.0m of annual opex. Yourgene is also pursuing further funding options such
as divesting its Taiwanese subsidiary and a potential strategic investment from a major
diagnostics company. The company also recently announced 1H FY23 results which were
broadly in-line with expectations, but FY23 guidance was lowered, with full year revenues
now estimated at £18-20m (vs £22m previously) and an EBITDA loss of £3.5-4.5m
(vs £1.5m loss previously). We have updated our forecasts accordingly, with changes
summarised overleaf. Our new target price puts the business on 2x EV/sales, a discount
to diagnostic peers at 2.6x, in recognition of ongoing near-term funding concerns. The
current share price implies just 0.5x EV/sales, which we believe is too conservative.
Key Points
Encouraging core growth in 1H results. Core revenues (ex. Covid sales) increased
14% in 1H FY23 to £7.9m, with NIPT revenues up 15% to £4.0m, as post-Covid demand
for NIPT services in its UK and Taiwan labs returned to deliver 44% revenue growth
to £1.25m. NIPT product revenues increased 6% to £2.7m. Adoption of the Ranger
Technology (the 'Ranger inside' concept for NIPT) is also increasing with a $2.0m annual
run-rate achieved in 1H. Yourgene now expects to pay the $2m cash consideration to
Coastal Genomics for achieving $4m cumulative sales at Yourgene Health Canada by 1
March 2023, with $0.7m payable in April 2023 and $1.3m in April 2024. Inclusive of Covid
sales, group revenues in 1H FY23 declined 45% to £9.6m, with just £1.6m Covid revenues
vs £10.5m in 1H FY22. For FY23 we have lowered our NIPT sales forecast by 9% to
£8.3m, but this still represents 23% YoY growth in 2H. We reduce other products/serv
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