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Kaeren,
if you think the number is neither crazy nor misleading, then please explain this (I sure would like to know the answer):
My earlier post:
... the U.K. contract that AZN has for running the Cambridge Lighthouse (dated April 27, 2020; duration 12 months) amounts to "only" 152m£. Considering phase 1 of the Nova September contract already amounted to 150m£ for only 14 weeks, I find it hard to understand how the Lighthouse contract can be sufficient to cover all testing expenses for a whole year. What am I missing here?"
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ShaunP's answer:
You are right to question & compare the values of both contracts
We know Cambridge Lighthouse processed 2 million tests up to 31st Dec 2020
that equals around €16m to Novacyt
Add say another 4 months = €28m (as per research finances) = total €44m Euros = £40m UKP
Therefore the total contract of £152m to AZ looks reasonable
I think you are right that it is hard to see how £150m could be spent within a 14 week period on "low volume" testing, in fact I think it is impossible.
It is the £406m contract which raises the questions, the AZ contract looks okay.
@ Try2buylow, Porky, Shaunp, Poidster,
It is still a mystery to me how the Nova HT tests for the Cambridge Lighthouse are being invoiced. If I remember correctly, according to Shaun, they were being invoiced to AZN directly. However the U.K. contract that AZN has for running the Cambridge Lighthouse (dated April 27, 2020; duration 12 months) amounts to "only" 152m£. Considering phase 1 of the Nova September contract already amounted to 150m£ for only 14 weeks, I find it hard to understand how the Lighthouse contract can be sufficient to cover all testing expenses for a whole year. What am I missing here?
@ Try2buylow, Porky, Shaunp, Poidster,
Excellent posts.
In reply to Shaun's question, for what it's worth, according to Novacyt Insider the Q16 maximum throughput is 14 tests per hour, the Q32's is 30 tests per hour. So assuming a 50/50 mix, maximum throughput for 200 machines per month would roughly be 1, 2 or 3 million tests per month for 1, 2 or 3 eight hour shifts respectively. A lot will depend on the mix of Q's installed and the question whether the hospital labs indeed run 1 (not likely), 2 or 3 shifts per day. Because of these unknowns, it is impossible to make a precise estimate, but depending on the price per test, I would estimate between 15 and 25 million £ of revenue per month is currently being invoiced under the September NHS contract (or 30 to 50m£ so far this year from this contract alone).
If we add all the other sales (Cambridge Lighthouse, ROW, private, WHO, etc.) it is very likely we passed the second half of last year's 2 month average already (70m£). Six more months like this to go and we reach SP Angel's revenue target for the year. All imo.
@Bluelight,
Interesting question. It has puzzled me somewhat too. The extension of phase 1 of the contract has never been confirmed (as far as I know). So the contract should have ended mid January (14 weeks = 3.5 months = mid January). However it is clear Nova are still supporting the NHS (as mentioned in the TU). So some sort of contract must be in place at the moment. Is it the phase 1 extension (which runs to the end of March = 10 more weeks from mid January)? Or is it another agreement that is in place? I don't know, but I would sure like to see the question answered by one of the more knowledgeable persons on this BB. If it is the extension of phase 1, then we are talking about 100m£ in revenue.
Concerning a possible take-over bid, it was argued on this board last night that rarely a company is taken over at a 200% premium above the share price at that particular moment. It just so happens I was invested last year in a biotech company that was taken over at a 250% premium!
https://www.beursduivel.be/Aandeel-Koers/612902/Kiadis-Pharma.aspx
These big premiums often happen with stocks that are not listed on the main stock exchanges and that are left at the mercy of private investors (with all their fears and anxieties) who are simply incapable of figuring out the true value of a certain business. Both the buyer and the seller of the company concerned, however, DO know what the business is really worth, and that is why you sometimes get such large premiums to the SP when a business is taken over.
Might I further add that until just before the take over, the BB of the aforementioned company sounded just like this BB has been sounding lately: the CEO is worth sh*t and should resign, the communication is poor, why all the radio silence, etc., etc.
Keep the faith!
@t2bl
I think this possibility to issue more shares can be there for multiple reasons.
For example, say Nova want to take over company XYZ and want to pay part in cash and part in shares.
For example, say AZN wants to take a stake in Nova as part of a distribution agreement (AZN to distribute Nova products).
For example new shares need to be issued to finance a joint venture.
Just speculating.
I am sure there may be many other reasons, but again this is imo a testimony to Nova management's foresight and ability to cover all eventualities.
up one day, down the next & we don't have production metrics or any measure of demand to work scenarios of a model out
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@try2buylow
The broker estimates for 2021 and beyond were defined after consultation with Nova management (see text of the SP angel note) and therefore logically seem to have been endorsed by them. I base my financial model on those numbers. Using the discounted cash flow method, we are currently 50% undervalued. This undervaluation is the market's way of expressing its uncertainty about the estimates and its annoyance with the radio silence.
Once both uncertainties are cleared up, we should be able to go to fair value fairly quickly imo. This gives this stock a very decent amount of upside (around 100%) in a short period of time.
At the moment the market is pricing in a worst case scenario. This means that if this worst case scenario were to happen (say revenues come in 40 to 50% below broker estimates), that at the current share price the stock is still fairly valued. So, the rewards for investing in Nova far outweigh the risks imo. IIs are very aware of this situation and are taking full advantage.
&Jgcw
The current volatility is the price you pay for being invested in the Secret Service :). However I foresee a serious step change in the share price once the September contract is extended. Negotiating with the government takes time, so we have to be patient.
&ShaunP
According to try2buylow and several websites, L&G are still on board. I think try2buylow is right.
According to try2buylow
Institutions and insiders already hold approximately 24% of all shares outstanding at the moment. I don't know about other companies, but it sure seems a lot to me. Must be they all expect the company to produce stellar results this year, or they expect a take-over to be in the cards.
I always considered Astra Zeneca the take-over candidate of choice, since they already have a close working relationship with Nova (Pillar 1), and they expressed the desire to have their own diagnostics division.
On a side note, I wonder when we will hear about the outcome of the active discussions with the DHSC to extend the September contract (as mentioned in the trading update, already over a month ago). Surely cannot be long now?
@Shaun, welcome back old boy.
I will say one more thing on this. The fact that the market currently is only willing to pay half of fair value in my opinion means that worst case scenario is already baked into the stock price. With the possibility of a large contract landing on our doorstep any day, who would want to be out of this stock at these prices?
@HarChris
You are right and you are wrong.
It is indeed impossible to predict what sort of revenue ncyt will be making in 2023 (although we can get a very good idea already). However is equally impossible to predict what revenue a "growth" company will be making in 3, 5 or especially 10 years time. And yet analysts calculate fair value based on estimates of the next 5 years, in the States even the next 10 years! Who can predict what will happen in 10 years time? And yet, for those same growth companies investors are prepared to pay up to 2, 3, 4 or even 5 times fair value. For Nova they are currently prepared to pay half (!) of fair value. This is absolutely ridiculous. In my opinion, both cases are equally hard to predict, but I know one thing: the Nova share price presents infinitely more value than those supposedly eternally growing growth companies. For this reason I consider Nova an absolute no brainer.
Deas,
I agree, and due to the urgency of the pandemic, the sale of a covid related test on the U.S. market can start as soon as the application for EUA has been received by the FDA. No need to wait for the approval.
Just put a comment re downside valuation on another thread but genuinely interested to hear the case for this company being valued lower....
Mkt cap 475
Cash 100
Gives EV of 375
Will be making at least 100m more cash in h1 21. At least. That cash will not disappear.
So ev in reality here is 275
Give me a worst cases no covid everyone back to normal ebitda projection for 2022 and beyond. 50m?
So ev ebitda then is 5.5x
Tell me please another company with min 200m cash who is a leader in their field valued at that? Help me understand. Cash can’t just disappear and we know the company has recruited on 6 month contracts so fixed costs will disappear if covid does.
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@Soder,
you are too conservative in your calculations. The company also has an exceptionally high amount of roughly 50 million in inventories, mostly raw materials I would suspect; This is cash temporarily stored in inventory and should be added to the cash of 2020.
There is so much more I could share about the true value of this stock I could probably fill a dozen more posts. Unfortunately posts get snowed under so quickly on this board that there is absolutely no point in doing this. When you explain something, you notice that a few pages later the same questions are being asked again. Must sound very familiar to most regular posters on this BB. I applaud them for their persistence.
This stock is so difficult to understand in so many ways, that it does not surprise me one bit that there are so many misconceptions about its true value. I noticed there were a few inexperienced investors on the BB yesterday. Some were asking about the P/E of Nova.
Before I answer that question, it is important to know that Nova has an exceptional amount of cash in the bank and that it currently holds an exceptionally high inventory (inventory being cash temporarily stored in product and raw materials). The unusually high stock of raw materials was a precautionary measure against a possible shortage in the market.
Given this unusual situation, both cash and inventory at the end of the previous year should be deducted from the market cap before calculating the P/E (and P/S).
If we do this calculation based on the SP Angel forecasts for 2021 and 2022, this puts the real Mcap (at last night's share price of 8.68 Euro) for 2020 at 608m Euro, for 2021 at 453m Euro and for 2022 at 311m Euro.
We then get the following P/E's:
P/E 2020 = 3.62
P/E 2021 = 3.27
P/E 2022 = 6.77
Everybody can draw their own conclusions.
GLA
@RBMinvest
I’m not a professional investor, but I do indeed use my own methods. I’m cautious (and selfish!) and don’t publish them though. Fair play to you that you do so, but, as soon as you do, someone’s always going to take a pot shot at you...
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The thing is that the Fair Value of a stock is easy enough to calculate when you have revenue and margin estimates. As I have said this morning, the current share price reflects revenues that are less than half of what the brokers are expecting. So if we all could only agree on what we think revenue over the next five years will be, then we could calculate what this stock is really worth and put all fear and anxiety on this board behind us.
Concerning the revenue post-Covid, we already know base business pre-Covid was 13million Euro. With the considerably enlarged customer base, pre-Covid base business will probably be worth 16 to 19million in 2022. The purchase of IT-IS brought another 5million Euro of revenue. IT-IS was bought at a P/S of 2.2. So with our 100 million Euro in the bank we could immediately buy a comparable business which would bring an additional 45 million (100/2.2) of revenue, just for the cash earned last year. Add all of this up and we are already at 66 to 69 million Euro of revenue for 2022. Every month that goes by and every month the pandemic continues, should bring another 39 million of revenues (average of the last 6 months of 2020). With this money we can buy yet another business that adds revenue to our future revenue stream. And who says Covid testing is going to end this year? And who says we are not going to win another big contract in the not too distant future, either in the U.K., the U.S. or somewhere else? So much upside potential so little risk. And yet the market fails to see all of this for god knows whatever reason. If I hadn't lost all of my hair already, I would certainly be loosing it right now out of utter frustration over so much short-sightedness.