RE: NYCT or AVCT10 Apr 2020 16:21
AVCT may well catch up with NCYT's present market capitalisation - but within a few weeks we will have moved much higher.
All companies are jumping on the COVID19 test bandwagon - similar a couple of years ago to blockchain.
The difference with NCYT is that it was first and all it does is the tests kits - and it has years of experience doing this including during previous crises such as Ebola.
In addition people, and the press, make much of the share price being only 6p at the end of last year but omit to mention that the company was floated at 60p in 2017.
So 60p to 377p over 3 years suddenly doesn't seem so remarkable.
In addition they fail to explain how it got from 60p to 6p.
Financial difficulties are one avenue (all disappeared now) but the issue of convertible bonds (death spiral) was another.
Once the bonds were all refinanced in November 2019 the shares started rising and had already risen from 6p to 20p by the beginning of this year. By the time all warrants had been exercised the shares were around 100p, albeit volatile.
Those financial difficulties are all in the past now, so as regards what is possible, I prefer to use a valuation of around 60p as the starting point, rather than the somewhat artificially depressed 6p.
Given the circumstances 60p to £5/£6/£7+ over 3 years doesn't seem such a big ask, given present circumstances.
As regards the future I don't see NCYT's future value as necessarily just how many test kits they can produce over X months but more the deep knowledge and patents they have as to how the whole testing system works. That is the real value to GSK and AZN. Their knowledge is in how to scale it, with almost limitless financial resources - and the government will make sure these resources are indeed limitless.
It isn't easily copied or developed evidenced by such as only NCYT and Roche being on the WHO approved list.
And also by the number of defective test kits out there, of which there appear to be many.
Moreover the government wants to set up a domestic testing base, where the UK is weak. NCYT are uniquely positioned to take advantage of this and in fact the whole things probably cannot come to fruition unless it is brought in house by one of the majors.
Which then develops into other longer term themes - Brexit and the end of globalisation. Manufacturing was already beginning to relocate from China. The COVID crisis will accelerate this, China will no longer be the main source of rare earths, of prescription drugs or vital electronic equipment. Trump may be anti China, but the Democrats are also. Let's see how long Huawei lasts in the UK - not much longer, I bet.
So as part of these themes the UK will be looking to onshore vital strategic industries one of which is domestic virus testing - which is where NCYT is uniquely placed. And that can only happen with strategic backing - or ownership.
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