Route to a £10 share price22 Sep 2020 16:21
I posted this a couple of weeks ago but it seems even more pertinent now given the slightly panicky sell off over the last couple of days. I really believe there is a very clear and credible route to a £10 share price in the not too distant future (potentially much higher). Even if you choose to be much more conservative than the assumptions below (and believe me it’s easy to be much more bullish than them) this still looks like an astounding investment opportunity at these prices.
I’ve tried to be realistic in these assumptions, many will say I’ve undercalled them but if you assume:
- We scale up and sell 30m LFD tests a month (obviously could easily be way more than this)
- We keep that rate for 2 years (or average that rate over 24 months, whichever way you prefer to look at it)
- We make £2.50 profit per test (production price is <$2 remember)
That’s £1.8bn in profit from the lateral flow test alone, in just two years. Even if you attach no other value to the company at all that alone is a SP of around £6.00 that should be realised on announcement at an absolute minimum.
Now assume we continue to sell but at maybe a quarter of that rate for another 2 years. Add another £1.50 on to the SP Assumptions so £7.50.
Now assume BAMs delivers £400m or so of profit (conservative but realistic). Another £1 so £8.50
Add another £1 for the sewage test and you’ve got £9.50.
So close to £10 on relatively conservative assumptions just on the COVID tests and note this is just profit realised in the next few years, no long term assumptions around longer term PE, etc. All this could be announced and factored in in just the next few weeks.
Then on top of that you have:
LG Chem partnership, worth £500m+
preCISION, potentially worth billions
TMAC, potentially worth billions
A number of other partnerships already announced worth £hundreds of millions
(And note we already have £50m in cash to fund and accelerate the development and clinical trials of these)
It’s not hard at all to see the inflection points here that could add another £10 easily to the SP on top of the above and in relatively short order, potentially much more.
And all that is without any irrational exuberance, SP being pumped up, FOMO and greed driving higher, any longer term diagnostics value, etc, etc.
We’re sitting on something incredibly valuable here and not long to wait now.
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