RMS Fundamentals11 Dec 2020 18:04
The RNS today has solidified expectation in P2F by providing firm figures on mask production capacity and potential revenue. That is what has driven the share price down as the market adjusted - NEWS and FACTS - and to a firmer Market Cap based on revenues of an expected 2 million masks per month as we now know it . The potential for masks revenue is now up to £24m per annum based on £1 per mask.
The SP for the last few weeks has been drifting down slowly but steadily as sentiment diminished on no news and delays but what is heartening is that the company's 'sentiment' Market Cap valuation - a 'best guess' - wasn't too far off what we're seeing at the close; a M-Cap of £30m. Today could have seen a much larger drop if the sentiment had been holding the SP higher. How would that have felt?
What we have now though is an equation without unknowns and a truer valuation. This equation is now one from which we can actually make more accurate predictions on future SP rises as production builds, profits are turned into investment in capacity and the company grows. Ignore all the "10-20p by Xmas" rubbish as that would require mask revenue to be far in excess of what we know is currently physically possible to produce.
With the potential for £24m in annual revenue for masks, the remainder of RMS' businesses are valued at £6m giving a £30m Market Cap. That £24m now equates to a SP on the masks business alone of 1.5p. So, with around 1.59 billion shares in issue, for every 1m masks per month increase in production will have the potential to move the SP up by about 0.75p. So, producing the maximum 5m masks per month on one machine is £60m annual revenue which gives a RMS SP valuation of about 4.1p. when adding in the remaining RMS businesses. For masks to realistically move this above 5p per share in the near-term requires additional business in the form of licensing deals and sub-contracted manufacturing announcements which may yet come.
P2F is certainly growing, that's for sure, but it will take time. Today's announcement has been good for investors as it has at last solidified somewhat the company's fundamentals with real facts and figures ahead of the company's accounts being published. What it will also do is stabilise the SP. Once accounts are published, if revenue is better than expected then the SP will rise and if it's less, the market will devalue the SP accordingly. Wild intraday movements are only sentiment driven by the day traders setting the supply/demand signal and aren't indicative of the true value of the company. That's what we've recently seen and the SP may finally now have a chance to settle.
Therefore, sit tight, don't panic and please have PATIENCE. Especially those 'investors' who buy but don't do the research and those who follow the hype for a quick profit and then PANIC. Sells like that are not good for the wallet.
All IMHO and GLA
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