Omega Diagnostics Group Plc

Omega Diagnostics Group Plc (LON: ODX) is an FTSE AIM All-Share Listed medical diagnostics Company. Its major segments are infectious diseases, allergy testing and food intolerance.

The Company will release interim results on 30 November 2020.

Investment Highlights - Omega Diagnostics Group Plc – Speculative Buy at GBX 43.00

• The Company has made decent progress in recent months in positioning the business to improve business performance in H2 FY2020.
• In the one year, the Company delivered a significant return of ~ 339.12% and delivered higher returns compared to the benchmark Index (FTSE-AIM Index).
• As per valuation metrics, EV/Sales and Price/Earnings multiples of the Omega Diagnostics Group Plc are currently lower as compared to the corresponding multiples of the Healthcare Equipment & Supplies industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is in oversold zone and supporting an upside move (around 14 level), which means the stock price could increase in the short term.

Key Risks

• The Company operates in a highly regulated landscape, and failure to comply could lead to a significant financial or reputational loss.
• Also, the overdependence on technology can lead to loss of data and significant service interruptions.

Recent News

On 13 November 2020, Omega Diagnostics Group announced that the allotment of 141,846 new shares of 4 pence/share in the capital after the exercise of share options under the Sharesave scheme. The trading will commence on 19 November 2020.

Trading Update for H1 FY2021 (released on 28 October 2020)

• The Company expect revenue to decline by 29% for the period, due to lower revenue from Food intolerance and Allergy businesses.
• ODX is expecting EBITDA to be a loss of around £1.3 million and stood in line with management’s expectations.
• The cash balance as on 30 September 2020 stood at £6.95 million stood in line with expectation based on capital investment and trading performance.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Company has shown a decline in revenue in the first half of the financial year 2021, with EBITDA loss. Due to covid-19 pandemic, the short-term performance of food intolerance business declined, which is showing signs of recovery in recent months. ODX made progress in VISITECT® CD4 and received the highest level of regulatory approval. The Company noted the recent Media speculation on the performance of AbC-19 Rapid Test and rejected the conclusion drawn. DHSC (Department of Health and Social Care) and UK-RTC (Rapid Test Consortium) are satisfied with the performance of the test, which is positive news for the Omega. The Company made significant progress in developing products to support global response to Covid-19 to improve performance in the second half of the financial year 2021. The stock made a 52-week low and high of GBX 5.93 and GBX 127.00, respectively.

Based on the decent growth prospects and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation for Omega Diagnostics Group Plc at the current price of GBX 43.00 (as on 13 November 2020, before the market close at 11:25 AM GMT), with lower double-digit upside potential based on 8.60x EV/NTM Sales (approx.) on FY21E 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.