Member Info for StarBright

@iceman888: “ Is this not a cleaver way to get instructional investors to invest in the company? ”

I’m sure that is the intent, although it’s worth acknowledging that the register could stay unchanged (ie no impact from Cenkos) and - if the SP is materially higher on the back of company results in one year - Cenkos will get their payday anyway. Smart chaps Cenkos..!

Overall I think that it is good that VAL are working with Cenkos, who wouldn’t commit time and energy without being optimistic about the potential outcome.

Thanks for sharing these. I’m broadly comfortable with what you set out, although I suspect that 40% of £33 for antibody tests might be optimistic when our part of the value chain is manufacturing only. We might capture a 40% margin, but not on the ultimate selling price if that makes sense.

AVCT link-up offers some big numbers v quickly as you point out. I agree that this is the core investment case.

Swiper no swiping…

HarChris - I think you are right in that the appearance of shorts often serves as a flag that an SP has run ahead of its underlying value. When short positions are reported it is a good time to stop and have a closer look at why. The actual impact of short(ers) though is systemically overstated on these ‘boards. Prices are set at the margin, and it really doesn’t make any difference whether or not a seller has an existing position or not. If sellers (including both short sellers and those exiting positions) are more motivated than buyers to initiate trades, then the SP will fall. The hundreds posts here regarding WQ are disproportionate to their market impact, which is no more or less than other sellers at any point in time. These dynamics can change when a material proportion of a company’s shares are sold short, but that’s clearly not the position here.

HarChris - why do shorts have more “power” than similarly sized longs?

Doesn’t one 500k (or whatever) sell have the same market impact as another 500k sell? Why does the opening position of the seller make a difference?

HL neither want to buy or sell or your shares…

Bid, even….

100% correct Bluelight. The discussion here around Worldquant is naive at best, excruciating at times. PI’s have control, and are responsible for the price action we’ve seen. The share price fell as it did because it became overheated and many sold, despite (probably whilst…) protesting to the contrary here. It’s a reasonable buy where it is today, with good scope for upward revisions.

Buying these in the 13s looks like a good opportunity to me. I’m happy to be adding at this level.

From note 13 to the accounts…

“Matters affecting the tax charge
During 2020, Novacyt applied for a number of patents for technology it developed during the period. Patents can take several years to be granted, if at all, and at the year end, all the patents were still going through the process for approval. If one or more of the patents ultimately are granted then the Group hopes to be able to benefit from the UK Patent Box regime, which is a special low corporate tax rate used by several countries to incentivise research and development by taxing revenues from patented products differently from other revenues. Subject to a number of adjustments, the effective rate of tax on profits derived from the sale of products subject to patents is close to 10% rather than the current UK corporation tax rate of 19% (due to rise to 25% in 2023). The Patent Box rate can only be claimed once a patent has been granted, although the benefit can be backdated to the time at which the patent was applied for, and so this is not reflected in the 2020 accounts.“

Insto investors are generally deterred by cash piles that are material to EV. Other than where management teams have a proven track record of value creation through acquisition, insto investors aren’t keen on allowing those managers to run both their existing business and (effectively) an unconstrained investment fund on the side. In practice then they don’t want pay for the earnings AND the existing cash (see Soder’s illustrative valuation). They’d sooner buy the earnings ex the cash pile and choose themselves where to allocate the cash. They have (by definition) a wider opportunity set than the management of NCYT.

Management teams don’t like dividends, as they impose a discipline - because reducing them in future is always badly received by shareholders. Insto investors of course have the opposite view. For them dividends provide greater certainty over their access to future profit and thus make companies more investable. In this circumstance, where as Soder points out the markets perhaps find NCYT difficult to value, a strong statement of commitment to ongoing cash returns for shareholders might help drive the share price further and faster in the direction we’d all like to see.

As I said carefully in my post, I am examining the case for a modest recurring dividend. I agree 100% that a special divi or buyback would be a bad idea. The merit of a modest recurring dividend is that it would signify managements confidence in NCYT’s ability to sustain profitable cash generation. The level I have suggested wouldn’t materially impair their ability to go shopping should an opportunity present itself.

Seeing as we have an outbreak of reason and sanity, can we talk about cash and dividends? At present, the cash pile is likely a disincentive for insto investors because of the (very real..!) risk that management use it to fund a crazy deal etc.

If management are confident that earnings are durable, they could signal this by declaring a (say) 20p dividend. Not a special, just a normal divi. 70m shares, so £20m pa ie well covered in terms of cash and profit generation. This might help attract some proper insto investors by providing a peg to hang valuations on.

Just a thought.

Agreed, and I’ve looked at (most of) those too. The distinguishing point is that their businesses are more mature - ie they have to some extent proven that their ability to generate sustainable cash flows. NCYT hasn’t had the opportunity to do this yet so my view is that a material discount (applied via the EBITDA multiple) to that peer group seems appropriate.

FWIW my view is that Covid testing revenues will be durable in terms of longevity (we’re stuck with this…) but I think we should not view the indicated margins as similarly sustainable. This is especially true if testing continues to be mandatory for certain activities. Expect huge pressure over testing costs from governments and “consumers”….

@Soder - thank you for putting your foot on the ball here. Can we discuss EBITDA multiples? You’ve used 10x - 15x for your illustration. I wonder whether those are too high, in that they embed an implicit assumption that Covid testing revenues will be durable in terms of both (1) longevity, ie testing will always be needed and (2) margin, ie testing will always be a very high margin business.

I’m not convinced on either front and would have suggested a range centred upon 10x not staring from 10x. In which case your fair value of 740p would be my “central assumption”, with perhaps +/-33% each side so a range of £5 - £10.

With the cushion provided by the net cash I am a happy buyer at the current £4 level.

I’d be interested to read your thoughts on the appropriate EBITDA range.

Yes (all other things being equal).

You’d have made £105 before costs.

Whether or not that represents a good risk adjusted return on the initial £17k capital committed is the question. Some platforms won’t let you deal twice in the same name within a (typically) 5 minute window. You might have committed the £17k then discovered you couldn’t sell for 5 minutes…

I guess if you already owned 150k shares then you could have sold them at 15.92p and bought them back at 15.85p. Same timing risk, although no new capital required so theoretically a more efficient route.

This happens sometimes if the quotes are for tiny size and the RSP’s polled by your platform are slightly out sync. Unless it persists at higher size, you can’t draw any real conclusion from it.

I wouldn’t include 5 as a legitimate / generally accepted option.

Any hint of it, and I’d be long gone - as would many insto shareholders.

100% agreed...

It's anything but "free"! It is only "free" in the way that commission-free FX at the airport is "free" - that is to say that there is no EXPLICIT charge. Check the prices your "free" trades are filled at compared to other trades going through at the same time....

The "limit sell stops them lending your shares" idea is a piece of repeated LSE nonsense that you can safely disregard. If you are concerned about your shares being lent out, then buy and hold them on one of the mainstream retail platforms - HL, Barclays, Lloyds etc. None of these engage in securities lending with client assets. They all have more transparent cost structures too...