My 2 cents29 Jan 2021 13:07
I was a new comer to the trade late last year and had an average entry in the high 7s. Sold some last week at 10.64 and this morn pre mkt just above and below 10. I am still long and this is the biggest position I own. I have only just had chance to go over the rns and some views presented below. I am not a regular poster but have always posted caution to some of the more fantastical posters on here and gave my views some time ago that I believed earnings would match consensus. In actual fact, they had to match consensus as listing rules would have dictated that any out or under performance that would have moved the share price meaningfully would need to be reported pre year end.
I am still very positive on ncyt but experience over the years on AIM has taught me to appreciate the technical as much as the fundamental. AIM is full of dream chasers and fast money retail tradesrs. The recent run up was the tourists positioning long into the RNS. Most of those guys will sell out now and move onto the next fantasy ‘bagger’. Most of those guys will have no clue about fundamentals, valuation or even what the detail of this rns means. Sorry if that sounds like intellectual arrogance but it’s true. You just have to read LSE boards (including this one) to confirm it’s full of financially illiterate ‘traders’ who are chasing short term dreams with no clue what they are doing or saying. Anyway, from the RNS...
Cash position at year end will not show the full picture. This business will have a ton of cash tied up in working capital. We dont have the balance sheet so I can’t tell you how much but as co if sales start to fall in late 2021 all that cash will be released from working capital and into the bank. It will be a BIG number! We will find out when earnings are released and we get the balance sheet. As they have said conversion is 80% we can probably assume that there is at least another 50m of cash tied up in stock, receivables etc. On an ongoing basis this is expected to be 80% - truly phenomenal. I can’t think of many companies that can convert 80% of ebitda to hard cash!!
We can safely assume that revs in H1 21 will follow H2 20. In actual fact I think H1 21 will be bigger as there was a huge summer covid lull between July-October when cases here really fell. Let’s assume they are broadly the same and h1 21 matches h2 20. That gives you 160m ebitda and another 130m of cold hard cash if 80 percent is converted.
Add these up and you are talking the possibility of 300m of cash at year end 21. That is without any contribution from H2 21 and assuming no new products and no new sales. This thing really is a cash machine.
The current mkt cap is 650m with no debt. If they have 300m of cash that’s an EV of 350m for a business doing min 250-300m run rate ebitda. I have never seen a cash flow positive co, with 80 % cash conversion, that is a leader in its field valued so low. As an investment it’s a a no brainier.
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