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I looked on the Ondo website to see if I could get one for my apartment and you can't. Not sure why other than there perhaps being "interference" from other other flats such that you may not be able to match a leak with a specific flat. It's less obvious to me why it wouldn't work with semi-detached houses though. Definitely worth asking them. Maybe it's something they'll be able to do overtime, like (hopefully) an external option for Australia etc. There's clearly more than enough value to be had just from detached homes though, so not a massive concern for me if they can't create a solution for flats etc
It's worth noting on the cash balance that they vast majority of it could be deferred income (ie customer deposits), which isn't really ours yet - it's only ours once we've hit the relevant milestones (which will require costs to be incurred too).
If you look at the FY22 accounts, we had £28m of cash and £21m of deferred income, so only £7m of cash is really ours / "free".
So we probably don't have anywhere near as much cash available for dividends or M&A etc as people might be thinking
THanks @slicevolley
Found the tweet, which is quite clear, and on a second look at the Prospectus it's clear that Craig had no shares immediately before re-admission, but 2.61% immediately afterwards (plus options). So the purchase was presumably part of the £3.2m fundraise on admission, but it's strange that it didn't specifically refer to directors partaking in that (that I can see) as it's definitely a big positive.
@Kabaa - I can't see any evidence of Craig Foster buying any shares (in the prospectus, RNSs or on Stockopedia), he just has a lot of options with an exercise price of 12p. I'd be very happy to be wrong though so would appreciate it if you could send a link to your source for that comment.
Essential viewing for any serious / long-term investor here I'd have thought. I don't think there was anything new, but it was good to hear from the wider team and especially a client.
The most important thing for me was Mo saying that the "you guys" (ie the City) have told me that previous overpromising / underdelivering has hit the share price, so he reiterated (again) that he plans to flip that round. Might take a while but I think a rerate could be swift once he's proven that to be the case.
Seconded GeordieChris, as a CFO too!
I think the out of favour comment refers to investors / the stock market Si. Nothing to do with the market for our services I don’t think.
CONTINUED...
- taking the bottom end of those valuation ranges, 12 x £8m EBITDA = £96m, and 3x £50m revenue = £150m, so one way or another, given that there's no value in there for DIM and the non-core assets, the market is arguably assuming that we don't deliver this year's expected performance (I say arguably mainly because who knows whether or not the comparable valuations are still appropriate...)
- I don't think that's an unreasonable position for the market to take to be honest, given the mixed messaging / delivery over the last year or two, but it provides an opportunity if you think the valuation metrics are still appropriate and believe we will hit this year's numbers - sounds like the £50m revenue is basically in the bag, but we'll have to wait and see about £8m or thereabouts of EBITDA
- one potential fly in the EBITDA ointment is the cost of developing new models, which I think Mo told me cost up to £5m each. Ideally the customer pays for this, but it may not happen. I suspect a lot of the "cost" is the time of the staff we already employ, and it may be that there's an element of this in the 2021 numbers, which would depress margins as there's no evidence of the work being capitalised rather than written off. This is one area where I think there could be more clarity in the numbers - if we hit £50m revenue this year but EBITDA is only say £3m again, because we've developed an extra new model vs 2021, I'd personally be OK with that (there should be a good ROI on it), providing it was made clear in the numbers and we're not all guessing about it
- cash position - most of this (and most of the "trade and other payables") is deferred income, or the deposits we've received, so it's not really "free" cash (we haven't earnt it yet), but nor will it all be paid out to settle creditors. So either way I wouldn't be knocking it off the market cap to get a lower EV
- if we did get to say £100m revenue and £30m EBITDA, 12x EBITDA would be £360m and 3x revenue £300m, or c45p (ignoring the benefit of any free cash generated in the meantime)
With that in mind, I don't think the core business alone will develop quickly enough to justify 45p within a year or two, unless there's a significant change of sentiment, but I'm confident that it's possible within three and am very happy holding on that basis. We should start start moving towards it as more / larger contracts are hopefully landed and visibility on continued revenue growth (and margins!) improves, and DIM / non-core spin offs could obviously trigger a re-rating at any time.
And finishing on the potential spin-offs, I thought Mo said on the IMC presentation that he's "not sure they'll happen this year", rather than categorically saying that they wouldn't? I'm not banking on anything, but it would be a good opportunity for him to under promise and over deliver, even though the spin-offs aren't his remit.
Firstly it's worth saying that:
- I think the Company could provide a lot more clarity on the numbers, especially on cost of sales vs overheads etc, and I made that point to Mo at the investor conference last month, although I appreciate that they may not want to make their margins / pricing too transparent. I think more clarity would help bring investors on board, although the intellectual challenge of trying to work it all out can be enjoyable and arguably provides those willing to invest the time in doing so an opportunity to buy / top-up ahead of the masses
- Cathal has clearly overpromised in the past, and I think failure to deliver on timescales etc has undoubtedly harmed the share price, but I think it's becoming increasingly clear that Mo's absolutely running the show now and that he has a very different approach - he said that to me at the investor conference, has said so in his interviews / presentations etc since, and I think it's reflected in what / how he presents. Only time will really tell of course, but whilst I'm as irritated as anyone else about the overpromising / underdelivering of the past, I think we need to get over it and give Mo the benefit of the doubt that he's different until he's hopefully had chance to really prove it.
Results:
- Looks like the c£3m EBITDA could largely be attributed to the R&D credits rather than underlying trading - not ideal, but on reflection the nature of the business is such that the R&D credits should be recurring
- Either way, as someone else did yesterday comparing H1 to H2, if you look at the movements vs FY20 and the cost analysis in note 6, I think it's pretty clear that we've got a high fixed cost base and a marginal EBITDA margin of at least 50%.
- So, all else being equal, if we do increase revenue by £10m this year, and the R&D credit remains unchanged, we should see at least £8m of EBITDA
- I personally think the market backdrop looks very positive, for the challenge trials in particular, and think it's highly believable that Mo can add other services around the core to increase revenue further
- There are likely to be stepped fixed / overhead cost increases if new capacity is taken on, but this could be offset by extra high margin bolt on services such that the 50% marginal margin remains appropriate going forward, and if it did dip below 50% it should revert back to it as any new capacity becomes increasingly utilised
- So, for example, £60m revenue should deliver £13m EBITDA and £100m c.£33m (the 30% EBITDA margin that Mo referred to as possible in the long-term)
- Given the market backdrop and the scope to branch out into other services, as they've successfully done recently, I think £100m revenue is a very plausible aspiration within five years (I'd like to think three's eminently possible, but let's not get greedy)
Valuation:
- Someone posted some CRO valuation metrics a few weeks ago that had an EV/EBITDA range of c12-16x and EV/revenue of c3-5
NEW POST NO
Remembered overnight that I asked Gerry about the repeat purchase rate for STC, after people have done one initial follow-up - do they buy a third or more tests etc, acknowledging that it's probably too early to have much data on this yet. All he could say was that the results are encouraging, but he stressed the fact that the microbiome changes with the seasons and age etc, so there are definitely reasons for repeat purchase of the tests over time, and the follow-up marketing reflects this.
Might not be new to others, but I hadn't really appreciated this before - I thought the numbers could be attractive even if you just had a reasonable number of new people buying say two tests in one year, and then nothing after that, but if people buy a lot more than two tests over a few years, on average, it should supercharge the financials given that the marketing cost for the additional tests per person should be zero / small.
It sounded like the Silicon Valley set particularly understand the opportunity for repeat purchase, which is something you don't get with DNA tests etc.
I went to the UK Investor Show today, where OO had a booth, and managed to have 5-10 mins chatting to Mo, who I thought came across well. I didn't ask anything I thought he wouldn't be able to provide an answer on (ie price sensitive), with the key points as follows:
- he recognises the need to under promise and over deliver in order to gain the trust of institutional investors in particular, and said that this is very much his default style as a scientist
- I shared a chart Cathal presented back in Sept 2020 showing the revenue and cost dynamics of challenge trials, indicating the potential for high gross margins at high capacity utilisation, and he agreed that's definitely the case (I've seen people on twitter referring to OO as a 20% gross margin business, and whilst that may have been the case in certain years, the high operational gearing of the facility means it should be much higher than that going forward, and Mo said there'd be no point bothering with the business if it was going to stay at 20% GM)
- in the past they've just said yes to whatever date clients wanted to start trials, but they'll now only commit to starting trials in a certain month / quarter, giving them the ability to dovetail with other trials thus increasing the utilisation rate (and thereby the gross margin)
- he confirmed my thought that the incremental overhead requirement of the new services (eg the recent phase II field study) is relatively small, so they're very high incremental margin
- he said they haven't been that proactive on sales in the past, more reactive, and that's changing
- as part of that, they're speaking to clients about their longer-term plans for the first time, to hopefully extend the order book years ahead, which should further improve their ability to maximise capacity utilisation (and could presumably underwrite any further capacity utilisation [my interpretation rather than something Mo said])
- there's still a big education process to do about the merits of challenge studies, but awareness is obviously increasing all the time, and in some cases investors are insisting that the companies they invest in do them, as a quick / relatively cheap way of assessing efficacy etc
- even though they pay travel costs for people travelling to London for screening, having screening facilities in Manchester too makes a big difference because people might previously have had to take a couple of days off to travel down to London
- some interesting anecdotes as to why people choose to do challenge studies - the cash if obviously a big driver, but some people just want a break from partners / kids :)
That's all I asked about - nothing about spin-offs etc, as they're just the icing on the cake from my perspective
Might not be anything new there, but hopefully vaguely useful / interesting to some anyway.
Also listened in on a chat Jeremy was having on the Poolbeg stand. Again came across well. Said everything's going to plan, other than the sh
Just realised that I posted this on the wrong board!! Should be on Open Orphan. Long day!!
I did speak to Gerry / Deepverge too though. Nothing new but he's clearly very excited about Skin Trust Club in particular. I'll probably look to add as and when funds allow
I went, and managed to have 5-10 mins chatting to Mo, who I thought came across well. I didn't ask anything I thought he wouldn't be able to provide an answer on (ie price sensitive), with the key points as follows:
- he recognises the need to under promise and over deliver in order to gain the trust of institutional investors in particular, and said that this is very much his default style as a scientist
- I shared a chart Cathal presented back in Sept 2020 showing the revenue and cost dynamics of challenge trials, indicating the potential for high gross margins at high capacity utilisation, and he agreed that's definitely the case (I've seen people on twitter referring to OO as a 20% gross margin business, and whilst that may have been the case in certain years, the high operational gearing of the facility means it should be much higher than that going forward, and Mo said there'd be no point bothering with the business if it was going to stay at 20% GM)
- in the past they've just said yes to whatever date clients wanted to start trials, but they'll now only commit to starting trials in a certain month / quarter, giving them the ability to dovetail with other trials thus increasing the utilisation rate (and thereby the gross margin)
- he confirmed my thought that the incremental overhead requirement of the new services (eg the recent phase II field study) is relatively small, so they're very high incremental margin
- he said they haven't been that proactive on sales in the past, more reactive, and that's changing
- as part of that, they're speaking to clients about their longer-term plans for the first time, to hopefully extend the order book years ahead, which should further improve their ability to maximise capacity utilisation (and could presumably underwrite any further capacity utilisation [my interpretation rather than something Mo said])
- there's still a big education process to do about the merits of challenge studies, but awareness is obviously increasing all the time, and in some cases investors are insisting that the companies they invest in do them, as a quick / relatively cheap way of assessing efficacy etc
- even though they pay travel costs for people travelling to London for screening, having screening facilities in Manchester too makes a big difference because people might previously have had to take a couple of days off to travel down to London
- some interesting anecdotes as to why people choose to do challenge studies - the cash if obviously a big driver, but some people just want a break from partners / kids :)
That's all I asked about - nothing about spin-offs etc, as they're just the icing on the cake from my perspective
Might not be anything new there, but hopefully vaguely useful / interesting to some anyway.
Personally I don't recall seeing any of that info in any CAPD releases.
I'd suggest contacting CAPD directly or submitting questions for their next IMC presentation (there was one last Thursday).
Presumably you could ask Centamin too?
Great to hear that things are going well enough to require further growth capital, and the acquisition of Glanaco makes a lot of sense, but I am left wondering what happened to the £9m of funding we had available at the end of June '21, incl £7.6m of cash, especially as H2 '21 appears to have been profitable at the EBITDA level?
Presumably it's working capital and capex, but it would be great to get more clarity please.
I'm probably being extremely stupid, but I can't find any reference to a CPR being undertaken on the new discovery in any recent RNS or interview so would really appreciate it if someone could point me in the right direction
Personally I'd rather they didn't make a profit for a few years yet. CEO said in the last presentation that they could make a profit now if they wanted to, but the plan is to invest in further growth. Not saying I want them to burn cash, but around breakeven would suit me fine if the top line continues to grow strongly - let's grab as much market share as possible (at the right margin of course)! Might delay returns to shareholders, but if that gives me longer to accumulate at good prices I wouldn't be complaining
originally posted by LTBeliever on the Deepverge and Microsaic pages
https://www.youtube.com/watch?v=9W74aeuqsiU
And Poolbeg will probably be the first customer for DIM (website certainly indicates it will be a customer) - presumably they'll feed the DIM data into Pathomics