Member Info for StarBright

This repeated assertion that Avacta will retain AVA6K to commercialisation is just cynical ramping. Nothing more, nothing less.

Posters on this board have devoted significant time end energy to establishing the seductive idea that the market misprices ALL of the following:

1. The probability that the next RNS will provide unequivocal confirmation of clinical success (“…it works” etc)
2. The probability that this clinical success will be translated directly into commercial success
3. The probability that the fruits of this commercial success will accrue immediately to existing loyal holders (“…wouldn’t want to be out of this over the weekend” etc)

The theory is that the next RNS will be “the one” that lights the blue touchpaper and remedies these market mis-pricings with only the shortest of fuses from flash to bang.

It’s not going to be that simple I’m afraid. Getting to £10, £11, £144 (any of the targets so frequently advanced in discussion here) may require more than is popularly supposed.

I am happy to be invested at this level - my view is that the balance of risk and reward is positive - but I’m not expecting this to make my year in portfolio terms. I’ll be happy to be proved wrong, of course!

Perhaps too great an emphasis here on the idea that one RNS will change everything overnight. It can happen - of course - but it is vanishingly rare.

New York slapping the belly of the bid, obvs.

This is a good debate - a constructive use of a bulletin board, whatever next!?

@RAH0084, I appreciate the way in which you've chosen to respond. And I acknowledge that you have set out your workings / thought process here from the start. Most don't!

Perhaps the market isn't missing as much as you think. You've worked backwards from £1.5bn x 8.9 to get to 4400pps for a 100% chance of success. The current SP therefore implies that the market is allowing a 2.5% chance of success, against which you set the hypothesis "...but we know it works..."

I see it differently. I am sceptical that revenues for AVCT of £1.5bn pa are achievable. The company's presentation says "...estimated market size (peak sales) of a safer/more efficacious form of doxorubicin...", so incorporates both the doxorubicin AND its anticipated new/better delivery platform. I don't think that it is prudent to assume that the £/$1.5bn represents incremental revenues that will all be captured by the [inventor of the] delivery platform. I don't know how to estimate the % of the £/$1.5bn that might be retained by Avacta, but it won't be 100%. That the company suggests a royalty of 10% is perhaps the only indicator we have.

And I am sceptical that the market will attribute an 8.9x revenue multiple here. I take the point that this is 18x EBIT, but I think that is still a very punchy number, perhaps supportable only if there is 100% translation of revenue to EBIT (surely unlikely!) and a long, uncontested run at market share (this feels more possible given the apparent scientific breakthrough)

So if I were putting forward a valuation on the basis you have used, my inclination would be to aim off on the two key variables. Perhaps assume that AVCT can retain 50% of the "estimated market size" of £/$1.5bn, and that a multiple of 6x revenue might apply. On 300m shares that would give £750m x 6 / 300m, or 1500pps for a hypothetical 100% chance of success. Applying your prudent (I agree with this one) 25% gives a target SP of 375p. A huge uplift from where are today, and a good incentive for investors at this level.

@RAH0084 - I’ve looked back over your interesting posts regarding valuation, whilst wondering why your conclusions are so different to those of the wider market. Your base case appears to be an SP of 1100pps allowing for a 20-25% chance of success, roughly 10x the current SP. Please correct me if I’ve interpreted this incorrectly.

A couple of questions if I may:

1. Why should an 8.9x EV/Revenue Multiple be applied prospectively to Avacta revenues? What is the source* of the 8.9x? Is it derived from companies where production and sales are being achieved? Or is care required because it relates to companies where there’s little if any revenue yet (AVCT’s current EV/Revenue Multiple is nearly 100x for example).

2. Why are you applying this 8.9x multiple to the estimated USD1.5bn market size when AVCT itself** has suggested that it might retain just 10% of that in the form of a royalty. Are all of your subsequent calculations out by a factor of 10 as a result? [An even greater amount should the 8.9x EV/Revenue multiplier be overly optimistic?]

* “After a peak in Q4 2020, in Q4 2021 the median EV/Revenue Multiple for BioTech & Genomics companies was 8.9x, at its lowest level in 2 years.”

** “AVA6000: The estimated market size (peak sales) of a safer/more efficacious form of doxorubicin just three indications (ASTS, breast and ovarian cancer), in the US/EU alone, is $1.5bn* pa.

A licensing agreement with a large pharma partner should deliver 10% royalties on sales to Avacta.”

@RAH0084 - why 8.9x ?

Interesting link. Thank you.

At the time of posting:

To buy a 5kg Silver Bar, £4177 https://www.bullionbypost.co.uk/silver-bars/5kg-silver-bar/

To sell a 5kg Silver Bar £3040 https://www.bullionbypost.co.uk/sell-to-us/sell-silver-bars/sell-5-kilo-silver-bars/

If you avoid the VAT by not taking delivery (which seems to bypass the whole point of holding physical metals) then the buy price is £3481

So you need a spot-price move of +37% to cover the spread or break-even. VAT free you need a spot price move of +15%

I don’t understand why anyone thinks that physical is a sensible way of gaining exposure to the silver spot price. The “premium” just looks like a direct tax on the hard-of-thinking that will be captured by the “dealer”. What have I missed?

Are those “premiums” still there when you’re looking to sell physical silver..?

My recollection is that additions happen only through the semi-annuals.

It's a shame that the more persistent contributors to this board only buy on blue days when the sp is +XX%. Or so they tell us, persistently. Colour me sceptical...

For anyone interested in a deeper dive, I’ll try to explain some of what happened today

On Nov 10th, MSCI (the provider of the MSCI Global Small Cap Index series) announced changes in index constituents, to be effected “…as of the close of November 30…”. See here https://tinyurl.com/3rkezcyd

The MSCI Global Small Cap Indexes (there are many of them, too much detail to explain) are used by ETFs offering exposure to small cap equities. It is essentially a list of 4000+ small cap stocks from markets around the world. There isn’t an “MSCI Fund” as such, but the many individual ETFs replicate index portfolios in order to deliver index-like returns. Periodically (I think in May and November) the composition of the indexes are reviewed, adding securities that have (simplistically) gained market cap and deleting securities that have lost market cap.

ETFs operate through “Authorised Participants”https://tinyurl.com/yhvru9d7 These are primary market participants that trade in the underlying securities of the ETFs. Some are desks within wholesale investment banks, some are dedicated practitioners and others still are firms like Susquehanna who I mention only because they are a local topic of interest. The APs have agreements with the ETFs to buy and sell baskets of securities reflecting the index/ETF composition. Their trading activities can at times impact/disrupt regular trading by regular investors. But this - participants with different motivations/timescales/strategies etc - is what makes a market so shouldn’t be seen or characterised as manipulation; it is part of the price discovery process which operates most effectively when liquidity is plentiful. We all benefit from the liquidity the APs provide, in theory at least!

Ahead of changes in index composition, the APs might look to build positions that mirror changes in the indexes/ETFs for which they are active. The APs have known since Nov 10th that Avacta would be deleted from the MSCI Global Indexes and that relevant ETFs would divest their Avacta positions at close today. As the ETFs exist only to replicate index returns, they are price insensitive buyers and sellers at times. So the AP firms may have built short positions ahead of today, knowing they could close them out by buying the $Xm of Avacta stock that would be dumped into the auction by various ETFs. Obviously the APs would be looking to acquire these shares as cheaply as possible. Note that APs can benefit from an exemption in (publicly) declaring such short positions. Of course the APs would be competing with other buyers, including fundamental investors like Jupiter/Bronte looking to close longer-term short positions, so the price action isn’t always one-way.

All of this is irrelevant to true investors. In many ways it’s a silly game played out by a limited number of market participants on a limited number of days. Long term investors can (and should) look through the volatility it causes on those days.

@Wyndrum 14:34 is spot on. The endless posts on LSE about MM manipulation reflect nothing more than their authors lack of understanding. Harsh but true! MM's don't need to manipulate prices to make money, they need only to lower their nets where the flow is strongest and they can maximise their opportunity to capture two-way trade. They are price followers not price setters, despite the daily nonsense spouted here. They care about flows not price levels.

The real risks of investing in AIM companies are around corporate activity: capital raises, related party transactions, M&A and disclosure etc. Rarely any discussion of those amid the endless tick-by-tick commentary though..!

@Hurst10: “Size buyer from New York…” nearly cost me another keyboard. Thanks for the laugh - hilarious!

It really isn’t “vote of confidence finance”! They have simply pre-sold some production at an undisclosed discount to a shark who will likely have bent them over on terms. It’s the corporate equivalent of a payday loan…

It is possible that the funds secured will keep them alive and in the game long enough to get close(r) to some of the many promises they have made. This would be a good outcome for shareholders, who would be rewarded by a higher MCap.

But this is a company that omitted to disclose on a timely basis that it had entered into a CLN, continues to delay/obfuscate regarding production progress and has now engaged in a deliberate mis-characterisation of a transaction perhaps intended to give Goldplat a helping-hand in completing their exit.

Even with the elevated risk appetite and patience required for micro-goldies, this is three clear strikes against the management team. So I have used the rally to sell (at a modest loss) the starter-position I’d bought earlier in the year. For me this remains an interesting story with an outside chance of success, but not properly investable. I wish all of you LTH’s the best with your investment.

Hmmm…..

They’ve sold an undisclosed quantity of gold for USD10.5m with USD7m receivable now and USD3.5m to follow.

The key question is just how low a price per oz have they had to take for the deal to be done. The gap between this and the market price represents the cost of the “non-dilutive financing”…

I'll be watching from the sidelines having decided to sell into the rally of the last few days, escaping with a small loss overall. I don't see ZIOC as investable without some detail on the economics of the marketing agreement - is it "a low single digit %" to GLEN a suggested by one poster, or could it be far more than that?

And the fundamental question for ZIOC holders has never been "How much might the mine be worth?", rather "How much of any such value can be captured by us [existing ZIOC shareholders]?".

Good luck to all of you LTH's who decide to stay in and see what happens, and to those of you who've bought my shares over the last few days! I hope it works out well for you.

£13m MCap...?

£24k and £26k trades aren’t noteworthy.