IXICO Plc

IXICO Plc (LON: IXI) is an FTSE AIM All-Share listed Data Analytics Company, which provide services to Biopharmaceuticals Companies for their clinical development programme.

In early December 2020, the Company will release the FY2020 Results to 30 September 2020.

Rationale for Valuation – Sell at GBX 106.30

• The Company is trading near a 52-week high, and Price/Earnings and EV/EBITDA multiples are significantly higher as compared to corresponding multiples of the Biotechnology & Medical Research industry, reflecting overstretched valuations.
• The operating landscape remains highly volatile with the continuing uncertainty of the Covid-19 pandemic.
• From the technical standpoint, 14-day RSI stood at ~59.85, which means the stock price could decline in the short term.

Key Risks

• 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.

Recent News

On 22 October 2020, the Company announced that it had secured new contracts in Huntington's disease clinical trials, with the new and existing large pharma clients.

Trading Update (for the year ended 30 September 2020, as on 19 October 2020)

• The Company has a fourth successive year of more than 25% revenue growth, with an increase of 26% year-on-year to £9.5 million in FY20.
• At the year-end, the Company’s order book surged by 36% year-on-year to £21.7 million, with strong revenue visibility for 2021 and beyond.
• The Company saw a decent balance sheet, with an increase of 9% year-on-year in cash and no debt.
• EBITDA stood at £1.1 million (2019: £0.5 million), reflecting a strong growth with the market expectations.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

Despite the COVID-19 pandemic, the Company has achieved a decent growth in FY20, with a reduction of new clinical trials. The Company saw uncertainty in the clinical trials market but shown a decent order book of future revenues and robust balance sheet. IXI works in a challenging environment which requires continuous investment, sometimes at the cost of profitability, to stay ahead of competitors. Overall, the Company is still in the development stage; it is advisable to book profit now and reinvest the amount of principal and gains at the right time and price. The stock made a 52-week low and high of GBX 41.50 and GBX 111.50, respectively.

Based on the risks associated and factors as discussed above, we have given a “Sell” recommendation on IXICO at the current price of GBX 106.30 (as on 28 October 2020, before the market close at 8:37 AM GMT), while we will look forward to reinvesting at the right time when the market dynamics become favourable.

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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