Escape Hunt Plc

Escape Hunt Plc (LON: ESC) is a United Kingdom-based Company, which is a provider of escapes the room experiences. It has a franchised global network of branches in 17 countries. It was formerly known as Dorcaster Plc.

Investment Highlights – Expensive at GBX 45.03

• In FY20, the Operating, EBITDA and net margins were in the negative zone.
• The Company is dependent upon funding through external sources to run its business operations.
• On a trailing 12 months, EV/EBITDA, Price/Earnings, and Price/Cash Flow are in the negative domain. Moreover, EV/Sales multiple is overvalued as compared to the industry median.
• From the technical standpoint, 14-day RSI stood at ~57.93 level, which means the stock price could decline in the short term.

Key Risks

• The prolonged travel restrictions and battered passenger demand can widen the losses and put liquidity at significant risk.
• Moreover, the failure in cybersecurity and a critical data breach could hamper the operations as well as the reputation of the Company.
• Fluctuations in exchange rates and increased volatility in fuel prices could impact the profitability and balance sheet position.

Financial Highlights (for the year ended 31 December 2020 (FY20), as on 18 May 2021)

• Group revenue was 46% lower than FY19, with revenue from digital and other play at home products of £230 thousand.
• Despite the Covid restrictions, the adjusted EBITDA loss decreased to £1.4 million as compared with the previous year.
• Cash at year-end increased to £2.7 million against the previous year (2019: £2.2m), while cash was £3.3 million on 31 March 2021.
• The Company has expanded its owner-operated estate to 14 sites.

One Year Share Price Chart

 (Source: Refinitiv, research done by Kalkine Group)

Conclusion

In January 2021, the Company raised around £1.3 million to fund the French and Belgian acquisition. In the first three months of 2021, the digital and downloadable sales had generated revenue of around £92 thousand. The UK market is expected to a strong recovery in the second half of 2021, which would also be positive for Escape Hunt. From the past acquisition and significant progress made by the digital and other play-at-home products, the Company expects good progress in the future. However, the profitability remained in the negative zone. ESC operations are impacted by the outbreak of the Covid-19 pandemic and have been focusing on strengthening its balance sheet and improving the liquidity position. The Company do not have substantial catalysts to support the growth, and hence, it appears to be a quite risky bet to invest in the stock. Presently, the company is trading near its 52-week high, raising doubts about its upside potential at current prices. The stock made a 52-week low and high of GBX 6.49 and GBX 49.80, respectively.

Based on the headwinds faced by the Group, we have given an "Expensive" recommendation for Escape Hunt at the current price of GBX 45.03 (as on 25 May 2021 at 8:05 AM GMT).

N4 Pharma Plc

N4 Pharma Plc (LON: N4P) is an AIM-listed specialist pharmaceutical company, which is engaged in reformulating existing drugs and vaccines to improve their performance. The Company operates in two segments: generic and vaccines.

Investment Highlights – Avoid at GBX 7.81

• The Company has not reported the revenue in the period, which raises uncertainty regarding its earning potential.
• The Company’s profitability margins and Return on equity remained in the negative zone from the last three years.
• On a trailing 12 months, Price/Earnings and Price/Cash Flow metrics are in the negative zone as compared to the industry multiples.
• From the technical standpoint, shares were trading below the short-term support level of 100-day (GBX 8.56) simple moving average price, which reflects a downtrend in the stock and can decline further.

Key Risks

• The growth trajectory of the business could be impacted due to existing as well as emerging risks and uncertainties. Also, the increased competition can lead to the market share decline and income short fall.
• Moreover, the Brexit implications are causing higher costs, customer delays, longer lead times for customers, and longer product approvals.
• Adjacently, there are some operational risks arising from changing regulatory policies, loss of sensitive data through cyberattacks, and increased supply cost due to the Covid-19 outbreak.

Operations Update (as on 20 May 2021)

• The Company had entered into two MTAs (Material Transfer Agreements), with no guarantee of either agreement resulting in a commercial collaboration.
• In vivo studies, the Company has made good progress in developing and testing, which is for a monodisperse formulation of Nuvec®.
• The Company has contracted through the Medicines Discovery Catapult access to a full-time Postdoctoral Researcher.

One Year Share Price Chart

 (Data Source: REFINITIV; research done by Kalkine Group)

Conclusion

The Company is in the development stage and do not generate any revenue in FY20. The Bottom-line performance remained in the negative zone. Further, the near-term economic outlook stays unclear.  Moreover, the Covid-19 pandemic continued to create operational challenges while the global uncertainty remained over the supply chain distribution. In the future, the Company may face emerging headwinds and cost pressures. Furthermore, the prolonged impact of the COVID-19 outbreak continued to affect its financial results, plans, operations, outlook, goals, reputation, liquidity and stock price. The Company rely on grants and cash balances to carry on all the business activities, and hence, it appears to be a quite risky bet to invest in the stock. The stock made a 52-week low and high of GBX 3.80 and GBX 16.00, respectively.

Based on the headwinds faced by the Company, we have given an “Avoid” recommendation on N4 Pharma at the current price of GBX 7.81 (as on 25 May 2021 at 8:10 AM GMT).

*Dividend Yield may vary as per the stock price movement.

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