Omega Diagnostics Group Plc – Strategic Partnership with Increased Focus on Lab Automation

Omega Diagnostics Group Plc (LON: ODX) is a FTSE AIM All-Share Listed medical diagnostics company, which is focused on infectious diseases, allergy testing and food intolerance.

The Group will announce the full-year results ending 31^st March 2020 in mid-July.

Recent News
On 29^th June 2020, Omega Diagnostics Group notes the Press Release released by UK-RTC (UK Rapid Test Consortium) on development of COVID-19 Rapid Test (COVID-19 lateral flow antibody test) which can be used at homes by people. UK-RTC formed jointly by CIGA Healthcare Limited, BBI Solutions Limited, Abingdon Health Limited, Omega Diagnostics Group Plc along with the University of Oxford.

On 19th June 2020, Omega Diagnostics Group announced that it had raised gross proceeds of GBP 8 million through placing of 20,000,000 ordinary shares of 4 pence/share to both new and existing institutional investors and some wealth managers The proceeds will be used to fund covid-19 testing opportunities and increase manufacturing.

Update on Trading Performance (9^th June 2020)
The Company signed a Supply Agreement with Mologic (Mologic Ltd). As per the agreement, Omega will receive raw materials from Mologic to manufacture CE-Marked ELISA1 antibody test. The Group has also shipped first COVID-19 ELISA test order worth GBP 0.1 million (approximately) to Senegal. ODX also signed MTA (Material Transfer Agreement) with Mologic. The Omega intends to CE-Mark COVID-19 tests under MTA and after which both companies will work collectively to commercialise tests. The Group expects its EBITDA for the FY2020 to be ahead of market expectations and in between GBP 850 thousand to GBP 900 thousand.

Share Price Performance

Daily Chart as of July 1^st, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Omega Diagnostics Group Plc shares were trading at GBX 40.92 at the time of writing before the market close (at 3:14 PM GMT+1) on 1^st July 2020 and down by 1.87% versus the previous day closing price. Stock 52 week High and Low were GBX 90.37and GBX 5.93, respectively.

From the technical standpoint, 14-day RSI is currently in an oversold zone, which means there is a good potential for a short term rebound in the stock price.

Valuation Methodology
 
*Peers: Lidco Group Plc, Inspecs Group Plc, ConvaTec Group Plc, Yourgene Health Plc and Rural Life Sciences Plc.

Key Risks
The development, marketing and use of products are subject to stringent regulatory policies, which are time-consuming; moreover, failure to meet the quality and comply with regulatory laws leads to increased cost and even recall or suspension of products. Furthermore, the Growth of business is dependent on external funding, which is difficult to get amid the weak internal cash generation. 

Conclusion
The economic environment in which the Company operate is full of challenges, while the recent developments have opened new opportunities. The Group has signed a Supply Agreementand Material Transfer Agreementwith Mologic, which will help Omega to effectively use its English and Scottish manufacturing sites and broaden its growing portfolio of coronavirus tests to meet needs of healthcare systems globally. ODX has shipped the first order of COVID-19 ELISA test to Senegal and is engaged in evaluation and registration activities in 15 counties, which can result in increased orders in future. The proceeds raised from recent placing can be used to meet working capital needs and fund covid-19 testing opportunities. The Group is also a part of UK Rapid Test Consortium, which will help them to attain synergies from bigger players in the Healthcare sector.

Based on the decent growth prospects and supported by the valuation as done above, we have given a “Speculative Buy” recommendation at the current price of GBX 40.92 (as on 1^st July 2020, before the market close at 3:14 PM GMT+1) with lower double-digit upside potential based on 7.35x EV/NTM Sales (approx.) on FY20E sales (approx.).

IXICO PLC – Anticipating Better Margins and Double-Digit Revenue Growth in FY20 and Beyond.

Founded in 2004, IXICO PLC (LON: IXI) is a FTSE AIM All-Share listed Data Analytics Company, which provide services to Biopharmaceutical Companies for their clinical development programme.

Recent News
16^th March 2020: The Company announced the expansion of contract with Vaccinex Inc, to provide imaging services. It will support the development of treatment for Alzheimer's disease.

Trading Update (as on 24^th June 2020)
In this update, the Company affirmed that it is anticipating a double-digit revenue growth across the FY21 as the impact of COVID-19 has been modest. Regarding the financial guidance, the Company expects to achieve at least GBP 9.1mn in revenues and GBP 0.9mn in EBITDA with positive cash flow for FY20 (ending on 30^th September 2020). Therefore, the results are likely to ensure the fourth consecutive year of revenue growth of 20% or more, despite COVID-19 disruptions to clinical trial timelines. During the Covid-19 mayhem, the Company is operating the business through the proprietary TrialTracker® platform, while it has centralised artificial intelligence capabilities in place to run the business remotely.

Share Price Performance

1-Year Chart as at 1^st July 2020, before the market close (Source: Refinitiv, Thomson Reuters)

IXICO PLC’s shares were trading at GBX 67.00 on 1^st July 2020 (before the market close at 8.00 AM GMT+1), which was down by 4.96% against the last day closing price. Stock 52 week High and Low were GBX 98.00 and GBX 26.00, respectively.

From the technical standpoint, 14-day RSI is currently close to an oversold zone, which means there is a good potential for a short term rebound in the stock price.
 
Valuation Methodology

*Peer: Clinigen Group PLC, Horizon Discovery Group PLC, Proteome Sciences PLC, and Ergomed PLC.

Risk Assessments
The short-term headwinds arising from the Covid-19 pandemic can delay the clinical trials timelines. Moreover, the Company’s performance is subject to various kinds of risks, such as failure of IT infrastructure, termination of the client’s clinical trial contract, cyber-attacks, and strict regulatory policies.

Conclusion
During the first half of FY20, the Company witnessed a 33.0% growth in revenue against H1 FY19, while EBITDA margin stood at 14.8%. Moreover, the Group has the ability to operate the business through a remote model during the pandemic. Also, it has been witnessing a strong order book to sustain the momentum amid the Covid-19 disruption. Further, the Company is increasing the deployment of artificial intelligence for advanced data analytics to enhance operational leverage. Therefore, strong business fundamentals and opportunities shall continue the robust revenue growth momentum. Overall, the Company is well-positioned to meet the client’s needs of FY20 and beyond to sustain the double-digit revenue growth.

Based on the decent prospects, which are supported by valuation done using the above method, we have given a “Speculative Buy” recommendation at the current price of GBX 67.00 (as on 1^st July 2020, at 8:11 AM GMT+1) with lower double-digit upside potential based 3.30 EV/NTM Sales (approx.) on FY20E Sales (approx.).
 
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.