RE: Poor15 Nov 2019 12:03
In my view the best value assessment you can make for companies like TEK is to look at the balance sheet.
- It is reasonably light on liabilities.
- Its cash exceeds its liabilities.
- Its assets are almost entirely equity investments. The valuation might be variable but IMO higher than the current market cap.
From a NAV perspective the question I ask is whether the assets are trading at a discount or premium to the shares. IMO, right now despite the valuations they certainly are.
As to the current investments
- Three are commercially operational. AFAIK Guident is on course to commence commercial operations.
- Bellascura's value if (big if) it receives FDA approval, IMO, will surge.
- The teams running Salarius and Guident have impressive resumes.
- TEK does not (and will not) divulge any commercial info but will update immediately on commercially significant activity.
So to me the investments seem largely sound. I am personally lukewarm on Lucyd.
And then there is the services side of the business which appears to be growing and perhaps on the way to supporting the group's operating costs. This is Cliff's personal baby, his chance to show himself as a capable manager, more than just an equity investor.
My only gripe with the company is their accounting policies w.r.t. recognising fair value as revenue on the income statement (IAS39, FRS9). These policies are used by banks and other financial trading entities who actively trade instruments during the year. To me, it feels wrong when used on assets you expect to hold for more than 12 months. Also I think many investors (at least PIs) find it confusing seeing unrealised P&L on the income statement which cannot be reflected on the cash flow statement.
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