Ryan Mee, CEO of Fulcrum Metals, reviews FY23 and progress on the Gold Tailings Hub in Canada. Watch the video here.
HarChris
I agree that Novacyt has been highly successful in capitalising on a black swan event. However, for investors we cannot go off hope alone. There are far too many variables and extrapolations to just simply put our faith in the changing board.
I agree that hot air is not what this company requires, however a deliberate strategy is key. Troublesome requouted 'Novacyt has a clear strategy focused on organic growth of existing products, R&D and acquisitions with the target of achieving a global leadership within certain sections of the oncology and infectious disease clinical diagnostic markets'. That is a very thin statement of intent which has not truly been fleshed out yet.
If we are honest with ourselves, there is an element of hope going into the company's future. That is why a clear strategy with actual detail (yes clearly not enough to erode competitive edge) is what's needed. Just think about the strategies outlined by small to midcaps that have been successful. Those that I have analysed have provided enough detail for institutions to get on board. This is as HarChris states is partly a reflection of an unprecedented time and volatile marketplace (for testing and others). That said there is a requirement for that longer-term plan soon.
The buffer is cash and strong performance over a 2 year period. However, that will need to transition quickly as we enter the next stages of the pandemic (post-winter).
I'm an infrequent poster.
Companies are rarely predictable in performance and news releases in a 2-year horizon, which makes investing challenging. The difficulty of COVID is that expectations (either positive or negative) have been thrown in the air. The developments regarding DHSC dispute, international market expansion, approvals and R&D have been difficult to predict. The marketplace for testing has moved in certain respects and static in others (as larger players have dominated their respective markets). Within this Novacyt has carved a space, that other equally sized companies have been unable to do. I'm a much stronger believer in intrinsic valuation, so this is of less consequence to me.
From a valuation perspective, as many correctly identify, this year's revenue/profit is less relevant than future cash flows and what the business can transform into. One of the most frustrating elements has been the lack of clarity in that direction. We have a new CEO and board members who will help to define and shape that vision. I am confident that the new CEO will outline this in the short term and provide a more practical strategy for achieving the goals that were previously laid out by Graham.
There are a number of shorter-term potential catalysts, that many here are aware of which may have a corrective impact on the share price. For me, three stand out year-end results with forward-looking statements, dispute resolution (many potential outcomes) and a more detailed strategy outlined (hopefully a departure from the low information approach).
Like many longer-term holders, I have had to consistently reevaluate this company as new developments were released. I still value this share materially higher than the current share price, but my understanding of their future has unfortunately only become muddier with time. I look forward to clarity over the next quarter into the FY result publication.
As an infrequent poster, I am looking for clarity tomorrow and potentially some visibility on future operations. The markets tend to assume the worst when it comes to profit warnings and contract disputes. That in itself should provide opportunity if the results are vaguely in the direction of what was stated but not audited. I look forward to tomorrow and wish all shareholders the best with their investments.
As you may know, I rarely post. I thought now is as good a time as any to dip back in. Firstly I remain fully invested. The contract update as many have concluded is not ideal. It is worth considering the specific language used, which when legal counsel is referenced is important. My take on it is that this is part of a negotiation strategy with the government and we are seeing the flare-up in the public eye. It's hard to know how this will be resolved. I would be surprised if the increase in staff selling and interacting with the NHS was done without cause. I do not believe that the CEO would make speculative hires, so whether the envision a new contract/s or a successful resolution, it's clear this business has focus on the NHS. We are clearly established within the infrastructure of hospitals and it will be interesting seeing how we leverage that position. I don't think we've heard the last from this contract. The legal counsel statement appears a direct shot to the government and feels very much part of a difficult negotiation strategy.
Regardless of the success of that contract there are still more up for grabs and if innova and randox can continuously acquire contracts with suspect tests, I am sure that the quality of ours is sufficient to gain further contracts. Our international business can be expanded in the meantime, which works with other countries health systems and private. Clarity over the future is low, but the valuation is even lower. This is an investment that unfortunately offers little visibility and as such has been valued at low levels and may continue to be until greater detail is divulged to the market. The advantage and disadvantage is volatility and the potential for rerates. I for one am interested to see what the medium and long-term growth plans of this company are. If they are strong and the market believes in them, the multiples will be readjusted. Do you believe in the diagnostics industry and Novacyts position within? These are questions that will hopefully become clearer later in the month.
A little late on the reply, but when I was walking people through P/E I intentionally used an FY23 projection as a 70% drop off, as I believe demand for COVID products will exist in FY22 and the tail off will be less severe next year. If contracts do extend into FY22, there may be very little tail off. It's just too hard to say right now.
Some of these PE calculations are a little suspect.
P/E formula: Share price/EPS
EPS formula: Net income- Prefered dividends/ average shares outstanding
Forward P/E: Current share price/ expected EPS
With that in mind current P/E= 6.72/ (~180m/ 70.626248m)
=2.63
NB net income derived from half-year results and for full using margins and EBITDA: Net income conversion ratio.
Forward PE FY21 assuming an increase of 20% (imo fairly conservative): 6.26/(216m/70.626248m)
FY21 P/E =2.04
Forward PE FY23 assuming 70% decline: 6.26/(64.8m/70.626..m)
=6.82
As stated by other posters there are real issues with using P/E and other multiples to value the share. However, it is a potential snapshot and is used by some people. I much prefer using a DCF alongside, but that comes with its own issues. Assumptions are everything.
A little light-hearted relief- what happened to the sea doc? Obviously, I'm not a big poster but, have followed the board since my 2020 spring entry. Back then the sea doc plagued this board with drivel and his CFD short position. I hope he got burnt badly.
First off happy to hold based on fundamentals etc... My concern around IG is that tomorrow could be a blood bath? I don't know the volume of long-margin investments, I imagine they far outweigh shorts. I also don't know how much of NCYT is traded on IG. I've read from the IG community mods that margins will closed first then if you do buy 100% you have 30 days to close. So I guess we have to hope that not many people bought on IG...