September 29th VOX Podcast
Twee weken geleden. Ik post het hier nog maar eens voor wie het toen gemist heeft.
Justin: Now today we’re going to talk about Novacyt. Last year: 7.2 million euros. This year: 72 million euros, 40 million profit for the first six months. These guys have the crown as far as covid testing stocks are concerned, because they are doing it. Others are.. developing tests. And today they’ve announced two pieces of news, and the significant one is a contract with the Department of Health and Social Care. That is phenomenal… and the share price is only up 20%. I don’t understand it. Take us through this, I think people are missing something here! Do you hold any stock?
Vadim: No, I don’t hold any stock. We [SP Angel] do act for them, we are their nominated advisor and broker.
Justin: I wish I held stock, look at the chart there, it’s done phenomenally well hasn’t it?
Vadim: Me too, I wish I held stock, I couldn’t agree with you more. Today is a very good announcement, it’s unique this Department of Health contract, I haven’t seen very many contracts of this size for AIM companies. It’s 150 million pounds to be deployed within the next ten to fourteen weeks. It’s effectively a purchase order for that amount. It’s for a testing order, to get these testing products to the point of need. To deploy testing in hospitals, rather than what they’ve been doing today, which they’ve been doing very well as you’ve said, a run rate in the first half of about 75 million. Probably going to see a higher run rate in the second half. We will have a full six months of centralised testing in the second half. This contract is incremental to that. This is about delivering these PCR machines near the patient. Therefore the turnaround time for this test is just 60 minutes. It’s really fast.
Justin: So the tests now, you go to a centre, they put the swabs in you, it gets send to a lab and if positive they tell you. These are in clinics, in hospitals?
Vadim: Exactly, these are going out to hospitals primarily I think first because there’s only 300 units in that first batch. It gives you an idea of the scale of this. 300 units to generate 150 million in revenue. It’s not just the machines, it’s the test supply for the machines. The machines will be running full tilt in hospitals. Then there’s.. the astonishing thing is, look at the second part of the contract, another 700 units. We’re looking at potentially a half a billion pound contract.
Justin: They’re [Novacyt] are valued at 400 million [market capitalisation]. I don’t understand it, why isn’t it rerating further up by multiples of its current valuation? Is it to do with Head of Operation Warpseed announcing that the vaccine by Pfizer will be released by end of October,[a nice coincidence for Trump, and vulnerable people will be vaccinated by end of the year and the rest of the population by Q1. Is that the reason for this? Testing will still be done of course, but are people expecting volume to decrease over 6 to 12 months, or what is it?
Vadim: Okay I think that is what the most important detail is. Do we think that’s the window of opportunity. Even on Trump’s forecasts [laughs] or whoever it was who said “we’ll get this all done by Q1 next year” [laughs].. even on that basis the contract announced today would still be deployed. 150 million is going to be deployed in the next ten to fourteen weeks. Even faster. And maybe the second contract will be triggered before then. 300 machines is not very many. Even a 1,000 machines is not very many [for the NHS]. So it’s possible you know that such a contract will be fully deployed before that very ambitious timeline of testing ‘stopping’. I really don’t think that’s going to be the case. Testing is going to go on to 2022 and even further.
Justin: Not only that though, look at the margins. Of the revenue of 72 million, they made 40 million after tax. Gross margins are 83% there!
Vadim: Yep [laughs]
Justin: There are companies out there, they’re not earning anything and they are close to Novacyt’s valuation. I don’t understand it.
Vadim: This is cash in bank for real now. We all know the situation and this is a solution. I would expect more of this, not less. I cannot see anything stopping the need for testing, not even vaccines. It’s all incremental too to Novacyt, I guess investors should just do the math. Just say this.. what contracts that are going to be deployed at the end of the 14 weeks? I mean even 1,000 machines aren’t very much. What happens after the 14 weeks, you know what I’m saying?
Justin: Phenomenal comparison between this year’s figures and last years.
Vadim: I guess the reason Novacyt is doing so well is because they’re part of the solution now. They’re delivering technologies today that are part of the immediate need and solution. There’s an absolute overwhelming need that they have a solution for.
Justin: Thanks, it’s phenomenal news, they’ve done so well.