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All great questions, especially 8 till 12.
Concerning question 3, most of the high France tax rate is being refunded because of a different tax rate of subsidiaries in other jurisdictions. I would therefor remove this part of the question.
When will investors ever be satisfied with what the company does? Great RNS with lots of detail, exactly what we have been asking for for months. Worst case DHSC scenario likely to be far better than feared, and yet very lukewarm investor reaction. I wonder what the company has to do to satisfy investors. Must be a slap in the face of all those working day in day out, trying to build the company.
@Soder,
I have been looking at the board from the sidelines for quite a while. I hope I am still welcome :):):)
Nice to see some numbers for a change. Soder, I think you are confusing cash with revenue concerning your DHSC numbers in the last paragraphs. I think you are subtracting revenue in stead of cash in your calculations. Please check this out.
Here are my numbers. They can be wrong, off course.
2020: revenue 277m£ (reported) minus 90m£ est (under dispute) = 187m£ revenue
>> net profit (cash) 93m£ est (at 50% profit margin). So this number EXcludes the estimated 45m£ cash under dispute for 2020!
2021: revenue 136m£ (very (?) conservative estimate) minus 36m£ est (under dispute) = 100m£ revenue
>> net profit (cash) 36m£ (at 36% profit margin to account for the recent hiring spree which may have brought the profit margin down). Again this number excludes the estimated 13m£ cash under dispute for Q1 2021.
Total net cash estimate at year end 2021: 129m£. Let's play it safe and assume only 100m£ cash!
So our current EV (= Mcap minus 2021 Cash) = 237m£ minus 100m£ = 137m£
(if you add the cash under dispute back in you get an EV of just 79m£!!!)
Our revenue pre-Covid was 11.82m£ (13.7mEuro) plus 3.9m£ (IT-IS) = 15.72m£. I would assume our revenue post-Covid (if ever there will be a post-Covid) would at least be double that (with the enlarged installed base), say 35 to 40m£.
In this scenario and assuming all our DHSC revenue and cash is lost (!), our stock (EV) is currently trading at just 4 to 3.5 times sales and just 12 to 10 times post-Covid earnings (so with the cash under dispute added back in, those numbers are even lower!).
I think we all agree Covid is far from over, unfortunately, so there is plenty more cash to be earned before our revenue stream settles down to a 'normal' level.
Possible upsides to this scenario:
1. dispute with DHSC gets settled in our favour (if not, I don't consider this a downside risk since it seems to have been factored into the share price already).
2. LFT antigen and/or antibody tests turn out to be a big revenue driver in the future
3. a rerate of current (low) multiples when the future growth path becomes clear
Possible downsides risks:
1. DHSC dispute continues to linger on (investors don't like uncertainty)
2. the cash is (even) lower than my already low estimate
3. 2021 revenue is (even) lower than my already low estimate
4. next years' profit margin is lower than my estimate
5. the post-Covid revenue stream turns out to be lower than expected.
On a side note:
I don't expect there to be any take-overs as long as the DHSC dispute is not settled.
Conclusion:
All things considered, I too believe the stock is materially undervalued, but we all thought that a couple of months ago too, didn't we? :):):)
All IMO
Porky,
Nova have been hiring quite a number of people lately. Would they really be hiring so many people if the contract hadn't already been signed, or at least some sort of letter of intent?
I would think the agreement is already in place. When it will be announced, though, is anybody's guess. Could be tomorrow, next week, next month.
Porky, your part post:
What excites me is that the vast bulk of these roles when you dig into them are NHS related across the 7 main territories. I mean this just has Phase 2 written all over it??
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For me this is the single most important piece of information at out disposal at the moment.
I always felt a large part of the SP drop after the trading update was due to the lack of information concerning the phase 2 extension. Once the news of phase 2 or a contract replacing it lands, the SP will explode.
The analogy with a coiled spring about to be released (which I read in an earlier post) was spot on.
crl,
thanks for the explanation. Never too old to learn.
Still, if a trade is being done between a seller and the MM, then at some point those shares will go to a buyer (or the other way around). So in the end, it does not make a difference, I would think. Not trying to be clever either ;)
I agree with Wilson, what counts in the end is the direction of the SP.
Hi Kearen,
When there is a seller there always is a buyer. I cannot imagine MMs having 1m+ shares lying around at any given time.
It is just the price at which the transaction has gone through (bid or ask) that qualifies it at a buy or a sell. The question always is, who is the smarter person, the buyer or the seller?
At least that is how I understand it.
I could be wrong, but I personally think AZN already know everything there is to know about Nova (given their close working relationship), and that a take over could happen sooner than we think. The longer they wait the more they will have to pay. However I also think it would be in the best interest of us shareholders that they wait a little longer until a big contract has landed and even until the 2021 full year results are out.
Geordie,
Very good question. Are you talking revenue or earnings?
I made the following quick calculation with regard to post-covid revenues, in an earlier post:
Just add up base business pre-Covid revenue (13mE), IT-IS revenue (5mE) and revenue from future acquisitions with our likely war chest of 150 to 200mE (by end 2021). At the same P/S of 2.2 at which Nova bought IT-IS, this would bring an additional 68 to 90mE of revenue or 86 to 108mE in total. SP Angel has a revenue estimate for 2022 of 127mE and Numis has 152mE.
So worst case scenario you should get 86mE in revenues or 29mE in profits (at a 33% profit margin; profit margin is now above 50% but will not remain there, I suspect). But this bear case 86mE does not factor in the fact that our base business should grow significantly because of the much larger installed base of Q's and the much larger distribution network compared to pre-covid. These are of course very rough numbers. I am sure others will have done the math in much more detail. Also take a look at Shaun's numbers. Hope this helps.
@Harchris,
In reply to your earlier post addressed to me:
Nobody can look into the future, but unless something really unexpected happens, Porky is right imo: Downside minimal, upside significant.
I am used to looking at tech companies. In that space a P/S of 30, 40 and even 50 is not unusual these days. Investors assume that for these companies double digit growth will continue unabated for the next 10 years or more. The graveyard is littered with companies of whom investors thought the same during the dot com bubble. And yet investors don't seem too bothered by that and have no problem whatsoever paying those high multiples (again). By contrast, over here we are fretting over the fact whether or not we aren't paying too much at a P/S of 2.
I am aware the Nova multiples will likely go up as covid winds down, but even then they will most likely still be low. The safety margin currently built into the stock price seems more than sufficient.
I would rather be invested in a company like Nova with these multiples and this potential for positive surprises and future growth than following the herd in those other companies.
In reply to some of the more pessimistic views, I feel this stock has the potential to at least double before the year is over.
Maddog,
Of course I am aware this now falls under the umbrella of Blackrock.
The point I was trying to make, while having a bit of fun, is that Oddo are fairly alone in their assessment of the value of the company. What's more, I haven't looked into this in any detail for some of the other funds, but for example Argenta, and Nova staff members Mr. Mullis, Mr. Crinelli, Mr. McCarthy (whom I forgot to add to the list) have all been buying at higher prices than the Oddo target. I believe Blackrock too, have been adding to their position at higher prices. If they all have been buying at higher prices, they must all have considered the stock to be fairly valued or possibly undervalued at those higher levels. It would be interesting for someone to look into this in more detail.