Novacyt SA

Novacyt SA (LON: NCYT) is listed on FTSE AIM All-Share Index. It is a clinical diagnostics-focused Anglo-French biotechnology company. The firm develops in vitro and molecular diagnostic tests.

Investment Rationale – Watch at GBX 198.02

• Decline in Revenue: In FY21, the company's underlying revenue was £95.8 million, compared to £277.2 million in FY20, subtracting £40.8 million in DHSC revenues under contractual dispute.
• Covid 19 Test Approval: On 17 February 2022, the company announced that their PROmate® COVID-19 2G Real-Time PCR test had been authorised in the United Kingdom under the Medical Devices CTDA (Amendment) Regulations 2021.
• Overdependency of Business on Single Stream: In FY21, 86% of revenue was derived from the Covid-19 products. Such overdependency can hamper the business sustainability.
• Overvalued Multiples: On a forward 12-month basis – EV/EBITDA and Price/Earnings valuation multiples of NCYT are overvalued against the healthcare sector.
• Unfavourable Technical Indicators: From a technical standpoint, the stock is lingering between the upper and middle Bollinger Bands (close to the overbought zone), while the 14-day RSI (44.21) indicating a neutral action.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group) 

Conclusion

Based on the decline in revenue, test approvals, overvalued multiples, and bearish technical indicators, we have given a “WATCH” recommendation on Novacyt SA at the current market price of GBX 198.02 (as of 18 February 2022 at 08:06 AM GMT).

Blue Star Capital PLC

Blue Star Capital PLC (LON: BLU) is listed on the FTSE AIM All-Share Index. It is a UK-based investment firm that invests in assets across a wide range of sectors, including media, gaming, esports, and technology.

Investment Rationale – Watch at GBX 0.45

• Absence of Revenue: In H1 FY21, BLU failed to produce any revenue, while its operating losses were also aggravated due to adverse foreign exchange movements.
• Increase in Net Loss: BLU recorded a net loss of £0.49 million in H1 FY21 from £0.19 million in H1 FY20, due to the significantly higher operating losses.
• Subdued Macroeconomic Conditions: The dented risk appetite of investors amid record inflation rate in the UK, Ukraine war crisis, expectations for further interest rates hikes, and uncertain demand outlook, can further impact the market sentiments.
• Unfavourable Technical Indicators: The stock is hovering between upper and middle Bollinger Bands from a technical viewpoint. Also, 14-day RSI is ~60.18, is hovering near the overbought zone.

One Year Share Price Chart

(Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on the absence of revenue, worsened losses, macroeconomic instabilities, and bearish technical indicators, we have given a “WATCH” recommendation on Blue Star Capital PLC at the current market price of GBX 0.45 (as of 18 February 2022, at 08:03 AM GMT).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors' appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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