Sareum Holdings Plc

Sareum Holdings Plc (LON: SAR) is a Pharmaceuticals & Biotechnology Company engaged in the discovery and development of therapeutic drugs by a combination of skills in medicinal chemistry, computational chemistry and biology.

Investment Highlights - Sareum Holdings Plc – Expensive at GBX 2.50

• Despite the good progress made with TYK2/JAK1 programmes, the Company might face liquidity risk if fail to obtain government funding for covid-19 treatment.
• As per valuation metrics, Price/Cash Flow and Price/Earnings multiples of the Sareum Holdings Plc are currently higher as compared to the corresponding multiples of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• The Company’s Profitability margins in FY2020 stood in negative zone. The ROE (Return on Equity) stood at -68.00% for FY2020, which is significantly lower than the industry median of 9.6%.
• From the technical standpoint, 14-day RSI is in overbought zone and is currently supporting downward movement (around 83 level), which means the stock price could decline in the short term.

Key Risks

• Significant competition in the industry could affect the revenue and profitability of the Company.
• Any change in regulations and government policies could affect the overall business of the Company.

Recent News

On 3 December 2020, Sareum holdings announced the award of Grant Offer Letter from UKRI (UK Research & Innovation) to explore the potential of SDC-1801 to treat Covid-19 in severe-phase.

Financial Highlights – FY2020 (30 June 2020) (released on 13 October 2020)

(Source: Annual Report, Company Website) 

• For the financial year 2020, the Company reported revenue of £47,204, reflecting commercialisation of products.
• The profitability for the period improved, reflecting careful management of cash. .
• The cash balance as on 30 June 2020 increased, with well-positioned balance sheet.
• In June 2020, the Company raised £1.02 million through share placing by Hybridan LLP along with an offer via PrimaryBid.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the financial year 2020. Both the top-line and the bottom-line performance improved, while profitability margins remained in the negative zone. The Company progressed well with new working conditions and made decent progress in obtaining government funding to identify potential treatment for Covid-19. SAR is actively monitoring the working capital position and has taken steps to maximise the cash runway. The Company’s board is confident to make good progress with proprietary TYK2/JAK1 programmes, despite the market uncertainty related to covid-19 pandemic. The stock made a 52-week low and high of GBX 0.22 and GBX 3.09, respectively.

Based on the factors as highlighted above, we believe the stock of Sareum Holdings Plc is “Expensive” at the current price of GBX 2.50 (as on 22 December 2020, before the market close at 8:00 AM GMT), with support from progress in proprietary programmes needs to be evaluated at a later stage.

Panthera Resources Plc

Panthera Resource Plc (LON: PAT) is a UK based mining Company engaged in the business of exploration and development of gold. The Company have focus on projects in West Africa and India.

Investment Highlights - Panthera Resources Plc – Avoid at GBX 25.98

• The Company no revenue and profitability margins remained in negative zone in the first half of the financial year 2021.
• The Company’s ROE (Return on Equity) stood at -64.10% for FY2020, which is significantly lower than the industry median of 6.00%. The ROE remained in negative zone from past 4 years.
• As per valuation metrics, Price/Cash Flow and Price/Book Value multiples of the Panthera Resource Plc are currently higher as compared to the corresponding multiples of the Mining industry, reflecting overstretched valuations.
• From the technical standpoint, 14-day RSI is currently supporting downward movement (around 63 level), which means the stock price could decline in the short term.

Key Risks

• The demand and supply disruption during Covid-19 can pose a risk to commodity prices.
• Moreover, the increasing political uncertainties and uncertain regulatory environment can impact the ability to execute commercial transactions.

Financial Highlights – H1 FY2021 (30 September 2020) (released on 17 December 2020)

(Source: Interim Report, Company Website)

• For the financial year 2020, the Company remained in the development stage and did not generate any revenue.
• Reflecting lower expenses for the period, the profitability margins improved but remained in the negative zone.
• The cash balance as on 30 September 2020 declined to $115,978, while the balance sheet remained well-positioned.
• The Company entered into an agreement with Moydow and acquired interest in Nigeria based Dagma and Paimasa projects.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Conclusion

The Company has shown an improvement in financial performance in the first half of the financial year 2021. The Company is in the development stage and hence rely on grants and cash balances to carry on all the business activities. The operations are financed by the sale of equity securities by private placements. The Bottom-line performance has improved, while the profitability remained in the negative zone. The Company’s cash balance declined, while balance sheet remained well-positioned. PAT managed to retain interest in  Bido PRM with the help of joint venture partner and Ministry of Mines of Burkina Faso, and received cash  proceeds of USD 190,000 as Moydow agreement’s consideration pursuant. The stock made a 52-week low and high of GBX 4.00 and GBX 30.00, respectively.

Based on the headwinds faced by the Company, we have given an “Avoid” recommendation on Panthera Resources Plc at the current price of GBX 25.98 (as on 22 December 2020, before the market close at 11:45 AM GMT), and we will watch out at the benefit of recently received cash proceeds.

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