Bioventix PLC

Bioventix PLC (LON: BVXP) is an FTSE AIM All-Share listed entity that develops and commercializes high-affinity monoclonal antibodies for its application in clinical diagnostics.

Rationale for Valuation – SPECULATIVE BUY at GBX 3,302.60

• Promising Outlook: BVXP has a resilient business model, and thus, it continued to follow its established dividend policy. The continued success of the core antibody business and vitamin D antibody brought further progress in FY21. Adjacently, the Company is optimistic about the troponin revenues.
• Robust Cash to Support Investments: BVXP continued to report strong cash balance despite investing in research projects and developing pipeline for creating incremental value for its shareholders.
• Stronger Profitability: Since FY17, BVXP has maintained excellent profitability margins as gross margin, operating margin and the net margin remained above 92%, 74%, and 62%, respectively. All the margins are significantly higher than the industry median.
• Technical Indicator: From a technical standpoint, the momentum oscillator 14-day RSI (~38.20) confirms the oversold position, while the price is hovering close to the lower Bollinger Band.

Key Risks

• Pandemic Impact: The resurgence in Covid-19 cases in the UK can be concerning since the diagnostic pathways in hospitals and clinics have been impacted with the Covid-19 pandemic.
• Macroeconomic Risk: The unfavorable exchange rates, with rising macroeconomic uncertainties pertinent to rising US Treasury Yield and likelihood of increase in interest rates can impact the financial performance.

Financial Highlights (for the year ended 30 June 2021, as on 18 October 2021)

 (Source: Company Website)

• Top-line Growth: During FY21, revenue surged 6% year-on-year to £10.93 million (FY20: £10.31 million).
• Profit Declined Moderately: The profit before tax slightly fell by 1% to £8.12 million (FY20: £8.23 million).
• Special Dividend: The Group also announced a special dividend of 38 pence per share in FY21.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY22) (Illustrative) 

Conclusion 

The sales related to troponin antibodies grew significantly in FY21, and thus, BVXP reported an increase in revenue despite the challenging operating environment. The Group also maintained a lucrative dividend policy, which reflects the management’s confidence in the business outlook. The stock made a 52-week High and Low of GBX 4,549.24 and GBX 3,190.00, respectively.

Based on the resilient financial performance, robust profitability margins, dividend increase, we have given a “SPECULATIVE BUY” stance on Bioventix PLC at current market price of GBX 3,302.60 (as on 5 January 2022, at 8:33 AM GMT), with lower-double digit upside potential based on 30.34x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Eleco PLC

Eleco PLC (LON: ELCO) is a FTSE AIM All-Share listed construction software specialist that provides technical solutions.

Rationale for Valuation – SPECULATIVE BUY at GBX 92.25

• Favorable Macro Dynamics: British manufacturing grew slightly in December 2021, and therefore, the IHS Markit/CIPS UK Manufacturing PMI for December stood at 57.9.
• Attractive Fundamentals: ELCO delivered robust financial growth in H1 FY21 and strengthened its cash position to pursue the upcoming market opportunities. It is set to increase the market penetration by leveraging strong customer relationships, introduction of cloud and vision solutions, and implementation of Powerproject Vision.
• Positive Technical Stance: From a technical standpoint, the momentum oscillator 14-day RSI (~29.28) confirms the oversold position, while the price is hovering close to the lower Bollinger Band.
• Undervalued Multiples: On a forward 12-month basis – EV/Sales, and Price/Book valuation multiples are undervalued than the average of the Technology sector.

Key Risks

• Subdued Consumer Sentiments: As the Bank of England decided to hike interest rate to combat inflation, it has tightened the monetary policy and can impact the consumer’s disposable income.
• Delta Variant of Coronavirus: Due to the resurgence of the Covid-19 cases in Europe, travel restrictions can have an impact on new business and pipeline opportunities.
  

Financial Highlights (for the six months ended 30 June 2021, as on 15 September 2021)

(Source: Company Website)

• Revenue Increase: During H1 FY21, revenue jumped 13% year-on-year, while the recurring revenue also increased by 8% versus H1 FY20.
• Operational Growth: In H1 FY21, the operating profit and adjusted EBITDA soared 14% and 11% year-on-year, respectively.
• Liquidity: At the end of H1 FY21, net cash increased to £8,478,000 from £8,478,000 in H1 FY20.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis done by Kalkine Group)

Valuation Methodology: Price/Earnings Approach (FY21) (Illustrative)

Conclusion 

ELCO has strong customer relationships to gain further market penetration, strengthened financial position, and substantial digital capabilities to deliver growth. Moreover, it is on track to meet full-year market expectations, following the significant top-line and bottom-line growth. The stock made a 52-week High and Low of GBX 147.00 and GBX 77.00, respectively.

Nevertheless, the investors are also recommended to gauge their respective risk-return profile before punting on this penny stock since its small market capitalization is exposed to market volatilities.

Based on the strong financial growth, dividend recommendation, operational achievements, and favourable valuation conducted above, we have given a “SPECULATIVE BUY” stance on Eleco PLC at the current price of GBX 92.25 (as on 5 January 2022, at 8:01 AM GMT), with lower double-digit upside potential based on 25.23x Price/NTM Earnings (approx.) on FY21E Earnings Per Share (approx.).

*Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level (indicative stop-loss price).

*All forecasted figures and Industry Information have been taken from REFINITIV.

*The reference data in this report has been partly sourced from REFINITIV.

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

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