Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
I believe nav is about 30p but should shoot up with Guident and MicroSalt developments. As Simon Thompson appeared to clarify recently, Guident's increased activity and likely valuation could add an extra 16p on nav.
I'd assume TEK wouldn't rule out a trade sale for MicroSalt to the likes of Unilever or P&G if the right offer came in. An IPO does mean relinquishing a fair bit of the substantive existing % holding. No doubt it depends on the listing valuation compared to what would be achieved via a trade sale as an IPO has the advantage that the price could ride up significantly as deals come in and revenues increase.
Exclusivity for a multinational via a trade sale could achieve an 'interesting' figure. There doesn't appear to be a genuine competitor to MicroSalt as the other low sodium alternatives appear to have taste issues judging by the reviews or undesirable substitute additives.
Potassium Chloride seems to be the main option as an alternative to sodium but that can cause complications in some instances (diabetes, kidney issues). So it looks like MicroSalt is a marketing gift in promoting the option of 50% less sodium but exactly the same taste and natural product.
TEK having disruptive patented product/technology for one multi-billion market (food/salt) is appealing but disruptive technology within Guident for another massive market EV and other vehicles is almost greedy. More so given they own substantive amounts in the various companies/subsidiaries.
At some stage, the market will catch on and the shares will take off - probably after a significant commercial deal or two in the two holdings.
For now, a lack of understanding by the general market means the stock is incorrectly primarily associated with BELL and can tend to reflect Belluscura movements. With AIM and tech stocks depressed it's been good to pick up at these levels. Simon Thompson has tipped it in his Bargain Shares portfolio at 20p and higher and it's easy to understand why.
Yes, thanks for the link Tivman. My notes and posted elsewhere.
hTTps://ukinvestormagazine.co.uk/electric-vehicles-next-frontier-with-guidents-harald-braun/
A must listen for anyone invested. The energy regenerative shock absorber tested with positive results with a tier 1 OEM. Extended the mileage range by 9 to 12 miles in actual vehicle testing not a simulator.
Could be applied to all electrical and even non-electrical vehicles to enhance performance and that includes e-bikes etc.
Only one serious competitor out there.
Additional patent in application to add to existing grant.
The intention is to license out on a non-exclusive basis within 12 months after further optimisation in the next 3 to 6 months and further extend extra mileage gained in collaboration with the 'multi-billion' tier 1 company.
Market is tens of billions or even 100's of billions. They haven't got an exact handle yet on how big the market is.
Highly impressive CEO who spent 20 years in high roles with Siemens.
Simon Thompson has gone the extra mile in his research and this bit of the article suggests that Guident is going to contribute to a significant uplift in the nav.
He states Guident’s sales pipeline has “experienced remarkable growth over the past year”.
Book value ofor Guident is £18.1mn (8p) but "Valued on a discount cash flow basis, a 50 per cent increase in the compound annual growth rate of sales projections would increase the Guident valuation by $34.5mn."
I assume he really does mean increase because that would make Guidant worth £52.6m and add an extra 15p on to the nav. That's staggering and I don't think the market has picked up on it.
On top of that he also rightly says an IPO of MicroSalt would increase the current book value significantly. It's important to stay grounded as things can take time when dealing with multinationals, but MicroSalt listing on the back of a deal with the top ten multinational they are currently talking to would be transformational.
Belluscura looks set for high growth and probably catches the most attention within TEK's portfolio, but with a 11% holding (circa £5m book value) it isn't as material or potentially transformational as Guident or MicroSalt.
I wonder if that is what they are waiting for before going ahead with listing. Inevitably some of the holding would have to be relinquished for the IPO in exchange for cash but it really could be huge so it's best to retain the full holding until some significant eye-catching deals with a major or two are in the bag.
Agreed CM, doesn't seem likely to be a random action.
I wonder who the Company referenced in the Investor Magazine Is? The CEO from MicroSalt said:-
“Our ability to not only reduce sodium but to enable a more efficient production process could be a watershed moment in the fight against excess sodium consumption, and we have already seen a high level of interest from one of the world’s largest food companies.”
If I were to make a guess I would say a likely candidate would be Unilever. Some in the list from the link below are soft drink companies so can be dismissed.
Seems to be a patented no-brainer unless I am missing something - lower sodium, same taste, less production time and cost savings as well.
https://www.foodindustry.com/articles/the-10-largest-food-manufacturers-in-the-world-by-revenue/
Perhaps an overhang has gone as PHLC has moved from offer to bid after staying there for quite a duration.
Personally, I have positioned myself primarily for the likely MicroSalt IPO and a few other compelling reasons:-
1) MicroSalt IPO and potentially one or two deals before listing. I think the market and investors are trying to assess how big this can be as it has the possibility at least of being huge. You can learn new things in this game and I had no idea that the bread market amounted to 0.5 trillion (dollars I assume) until I read the announcement that Microsalt can be used for bread production. I think that's the first time I have seen the trillion word in a nanocap rns! More realistically, the snack market is probably going to bring the initial deals.
2) Guident and potential spin-off of the energy-capturing shock absorber side of the business with the new subsidiary. Has this been created for another IPO?
3) Further news on the high demand for the Bellascura portable oxygen project and details on how BELL are doing in terms of manufacture and supply for the mass of orders.
4) Some recovery of Innovative Eyeware (LUCY) on Nasdaq. The patent of the hinge was interesting but it's hard to get a handle (no pun intended!) on how significant that can get.
5) Not only an increasing NAV but the prospect of the share price narrowing the gap for the discount given.
Interesting times and plenty of newsflow to come for what looks like should be a decent re-rating for the rest of Q3 an Q4.
I agree on the undervalue and prospect of a re-rating. Podcaster Alan Green values the assets at around 40p to 45p. I'll have to listen again but I think he references other research analysts in arriving at that figure.
https://ukinvestormagazine.co.uk/uk-house-prices-cadence-minerals-and-tekcapital-with-alan-green/
The catalysyt for a re-rating / fair value could well be MicroSalt set to IPO this year. A deal or two with a snack provider or bread producer would set things up more than nicely. I don't see why, ultimatelely, there won't be mass market uptake as it looks a proverbial no-brainer to do so. If so, the book value for MicroSalt looks like something that will be substantially corrected on IPO.
Guident with the new subsidiary for electromagnetic regenerative shock absorbers also looks like it is being set up to release value perhaps via an IPO.
Then of course TEK gives exposure to Belluscura which looks set to deliver high volume sales and just has to deliver on the high demand in China and elsewhere.
They may have some minimal data on efficacy as 47 participants in the psoriasis consumer trial had conditions such as acne. The rest (180 or so) specifically had psoriasis. The data from these 47 participants weren't included in the psoriasis results for obvious reasons. Clearly, the acne formulation has been adjusted and as they announced "the Group has been developing a new bacterial blend. Management is pleased to report that the pilot formulation is stable."
SA mentioned the possibility of a multinational deal before year-end with the added comment "what a Christmas present that would be." I don't think he would say that if it weren't a reasonable possibility although it isn't wise to raise expectations too much and of course he wasn't saying by any means it is nailed on.
SA referenced that he had narrowed negotiations down to two companies from four and no doubt discussions have already taken place about numbers. Perhaps one or both parties have expressed interest in doing a deal subject to a positive acne consumer trial. They may wish to wait for the oral/toothpaste results which should follow shortly after acne results but that shouldn't preclude a pre-Christmas deal.
SBTX will be in a strong position if they have results in the acne and toothpaste consumer trials that are similarly strong to the psoriasis consumer study. That said, I think he will do a deal separately with a different party for toothpaste as it is a more defined market with just four or five major players.
Multinationals are notoriously slow when dealing with smaller companies but given he is pretty much playing off one interested party against the other (he said as such in the TW interview) then that is a strategy that may well bring an early deal.
I don't know why investors go for risky pharmas as a preference to the likes of SBTX given the former take years and require massive funding to complete trials. 70% of phase 2 trials fail and 50% plus of phase 3 trials fail. The appeal for me is that SBTX is addressing similarly sized blockbuster markets at a fraction of the cost, time and risks that pharma companies of all sizes take.
Thanks for those corrections, Toyin. I think the 375m to 400m figure was based on increased revenues resulting from the markup for the enhanced product. If I recollect SA's reply correctly when answering Tom's point about the prospect of £25m royalties from Croda, SA mentioned a potential doubling of product price but with the caveat that not all consumers will transfer immediately or even over time.
Interview (3)
TW target
150p but could go much higher if deals are signed. Listed all the positives v the one negative that a bit of funding (he suggested £1m) might be needed and Dec would be prudent.
INCENTIVES
SA has bought three times when allowed to.
Incentivised with options at 80p and a second tranche at 120p
CASH BURN
About 250k a month but costs will reduce as a couple of internal studies will complete. So probably about 200k per month. TW suggested it might be prudent to raise 1m in Dec but if Croda launches early next year and if there is a multinational deal this year then there would be no necessity to do this. SA ‘fine for cash but never say never.’
Interview (2)
ACNE STUDY RESULTS
Multinational deal for this and other products. Would like to get a deal before end of this year. Is it possible? Yes although dependent on results from the study being very positive.
TOOTHPASTE
Phase 1 done and very positive
Phase 2 – end of this summer.
Results should be in the next two months.
Probably an easier multinational deal to do as only 4 or 5 major players in the market.
PSORIASIS
Point made that the share price was 80p on the basis that the product performed pretty well. It actually far exceeds expectations so SA cannot fathom why the share price is 25% of when positive results were less clear.
MULTINATIONAL DEAL
SA said it would make a nice Christmas present to get a deal before year end and added no reason why they shouldn’t achieve one. Presumably could be different companies for each if acne, psoriasis and toothpaste but, equally, one Company could do a mega deal for all three and other products.
WOUND CARE
SBTX have to access the bulk lysate from Croda
SA emphasised that it was quite cutting edge and complex as in effect you are putting someone else's bacteria into another individual’s wound.
It would mean full clinical trials but the intention would be to get a major player to fund trials and give SBTX a large downpayment. I think TW speculated 10m plus.
The market is massive and current treatment for the likes of diabetes-associated wounds is unsatisfactory.
Personally, I wouldn’t expect anything from this for this year.
Elric did a good summary of the points from the recent interview. Here are my notes - no direct quotes as I don't want to infringe on Tom Winnifrith's work. I would thoroughly recommend anyone with a holding listens to the interview but the filters won't let me put a link here. I think it is only £1.39. It's worth it as Tom asks the right questions rather than some of the fed lines that the likes of Proactive tend to do. Also, they were just notes for my own purposes so no guarantees I have got everything correct.
No more OPTI sales of SBTX shares this year and potentially going forward as OPTI may be profitable in 2024
CRODA
Invested heavily in SBTX partnership with £5m spent on a machine alone. TW speculated they may have spent up to £10m. The study alone will cost circa 700k. I am not sure if this just relates to the new study on the enhanced findings. Such an investment means they must deem the partnership with SBTX as very material. The amount of investment bodes well for product launches.
Bacteria scaled to 1,000 litres
The delay is due to enhanced claims that will enable a higher price to be charged due to the enhanced findings and associated claims being scientifically validated from the study .
The development deal with Croda expires in November but SBTX agreed a six month extension.
SA was simultaneously disappointed but excited by the delay – the latter being due to the extra enhancements that should be validated by the study. Talking to Croda about other products. For further deals SA is minded to have strict time controls with penalties if the dates are exceeded.
When will it be marketed? Testing should be until calendar year end. Launch should be Jan next year with commercial revenues coming in back end Q1 / start of Q 2
POTENTIAL REVENUES
Zero cost so passive income of 10% plus royalties. In other words 100% margin
Metryxal range circa 275m per annum but will be significantly more due to enhanced claims. Could increase to 375m to 400m
TW speculated £25m income for SBTX. Deemed by SA not to be unreasonable based on revenues but by no means first-year figures which could be circa £2m , £3m or so. My note that would equate to breakeven and even profitability from this revenue source alone.
OTHER AREAS – SHAMPOOS
Intention is to create formulas without the toxicity that is in existing products such as Zinc Oxides. I assume, although it wasn’t specified, that this relates to dandruff treatments.
Regarding the potential acquisition, I queried whether it would be better to grow organically but balanced my view with the observation that an acquisition would presumably make SBTX more attractive to a multinational.
Stuart reiterated he wouldn't over-pay and confirmed that an acquisition enhances the prospects of an optimum deal with a multinational. The associated revenue streams and a reversal of the SBTX science into acquired products would help demonstrate the versatility of the sector and IP.
The bottom line is that SA has a big company background and experience in acquisitions to ensure any purchase is good for shareholders. He appears to have a commendably cautious approach to this.
My main point to him was that there appears to be a lot of good share price-enhancing news to come and, if equity is going to be used in any purchase, wouldn't it be better to secure an acquisition with a stronger share price?
Perhaps the SBTX's relatively low share price is part of the reason for the fairly lengthy due diligence in addition to the answer given to TW that a) they won't overpay and b) the due diligence has flagged up one or two contractual areas of concern (presumably with the target's customers).
Simple15, a sensible approach.
It's a decent salary but he is not a greedy CEO like so many.
I believe SA has options at 80p and 120p and you don't get many stocks where the CEO is incentivised as four times and then six times the current share price.
He also rejected the B2C business model for psoriasis and other pillars at a short-term detriment to his finances.
Lastly, he seems a very switched-on CEO with a background with much bigger companies and he is conscientious in answering shareholder companies. There are a lot of companies I would avoid because of the CEO but SA is quite the reverse.
I think he has been hampered in terms of PR and highlighting the remarkable positives in this Company but to do so would only create liquidity for the sale of OPTI sales of SBTX stock. With OPTi out for this year it's in effect an overhang gone.
I would recommend listening to the paywall interview on the Tom W website. I'd like to see SA do an rnsnon with the same information as provided in the interview. It's not a gripe as such as any investor who wants to have a material investment isn't going to balk at paying £1.49 to access it. Also, nomads can be so and so's in terms of what CEOs can say in formal announcements to the detriment of retail investors and this is a legitimate way of by-passing that. It will give a broad and detailed understanding and TW doesn't shy away from asking searching questions.
Elric, the 80p plus point was Stuart's although I think it is a good and fair point. Obviously, markets were kinder to small caps then as well but that will return at some stage.
I have to admit, I don't fully understand the reference to subscriptions of 25k. If you are saying that was because SBTX were going to sell AxisBiotix PS themselves with a subscription model, I'd contend that the decision to switch to a multinational licensing approach because of direct approaches and interest might be worthy of an even higher share price than was previously achieved. Well, if not now then certainly on conclusion.
That was a good pick-up and subsequent initiative on Optibiotix, so having sorted OPTI out with a 400% plus share price increase, can you please do likewise with SBTX? Any time in August is fine if you're not busy!
I asked a few questions on Stuart and I was impressed again by how conscientious he is in replying with honesty and detail where he can.
I asked about AxisBiotix PS and, whilst it wouldn't be appropriate to copy an email, he made the following point:-
The share price jumped to 80p plus just on the hope that the AxisBiotix PS product might work. The fact is that it works beyond any expectations anyone may have had.
Not only has there been validation from a FTSE 100 multibillion pound plc that the SkinBiotix Technology works but (and I will quote a small extract here) "it will change the face of cosmetics forever (excuse the pun). The science we are progressing is simply game changing, the Microbiome is a very hot space at the moment and we are a pioneering company therein."
Buy and hold seems to have gone out of fashion, but I think his comments highlight why that approach should reap significant rewards here. Elric mentioned he believed that Croda's publicly stated excitement about the additional benefits of Skinbiotix could have been released as an rns by itself and I think that's fair comment. Presentation of factual information and associated PR is important.
The non-material Reach/RNSnon by Optibiotix was one of the best bits of PR I have ever seen, I don't like to see a company over-hype and raise unrealistic expectations but that release was just complete detailed information rather than hype. I hope SBTX will do something similar or engage with whoever constructed the OPTI RNSnon/Reach.
Toyin, I did get a reply and an excellent and helpful one at that. I certainly get the impression that, unlike far too many AIM CEO's, he has shareholder interests as his main priority.
He has a background in M&A and I sense he is aware that acquisitions can make or break a company. I can see he is very aware of doing extremely thorough due diligence on the potential acquisition however long that takes and that is something to be applauded. I'm not a shareholder yet but very likely will be. I'd be very reassured that the Company appears to be in cautious, capable and conscientious hands. Buy and hold seems to have gone out of fashion with so many small-cap investors but getting the entry timing right with a stock like this and holding for a couple of years should reap rewards.
Thanks Clio, I appreciate the helpful and balanced replies and I have put some queries to SA. We'll see if he gets back although I am not confident he will do. I'll also have to listen to Elric's interview again if it is still available because, rightly or wrongly, I came away with the impression that he was confident that a multinational licensing deal would be signed well before now.
In light of what you say about further validation/enhanced range studies being required prior to what would be a company-changing deal, I'd agree Croda looks like the most realistic and medium-term prospect for a re-rating.
There remains the possibility that SOH hasn't yet finished what appears to be almost forced selling to raise funds for OPTI but it's definitely a stock that could significantly reward the patient and it's around or approaching a good risk-reward entry price. At some stage sentiment towards small cap AIM shares will also switch for the better. Good luck to all holders.