OptiBiotix Health PLC   

OptiBiotix Health PLC (LON: OPTI) is an FTSE AIM All-Share listed Life Science Company. It is involved in the development and research of microbiome modulators.

Investment Rationale – Speculative Buy at GBX 41.09

• Financial Growth: OPTI remained financially robust to meet or exceed the full-year sales forecast boosted by the rising brand awareness and increased sales of the first-generation products.
• Growth Catalysts: Recently, OptiBiotix has completed the publication of a third human volunteer study on its cholesterol-reducing probiotic (through a wholly-owned subsidiary, ProBiotix Health Ltd), achieved British Retail Consortium ('BRC') accreditation, and signed sales and distribution agreement with Nahdi Medical Co.
• New Launch: On 1 December 2021, OPTI launched a new sports nutrition product range branded LeanBiomeTM. Moreover, it also received a supply & licensing agreement with a leading global player in beauty & nutrition.
• Health Canada Approval: The Company had achieved approval for the SlimBiome® by Health Canada, which is considered as the toughest regulatory body in the world.
• Technical Indicator: From a technical standpoint, 14-day RSI (~40.88) is in the oversold territory, while the stock price is hovering close to the lower standard deviation of the Bollinger Bands.
• Better Profitability: In H1 FY21, OPTI reported a significantly higher net margin and return on equity than the industry median.

Risk Assessments

• Potential delay in drug launches: Any delay in rolling out treatments could lead to a loss in revenue and market share to competitors.
• Financial Risk: The Company requires funding for product development programs and commercialization efforts, and any delay or failure to attain the funds could lead to delay in operations and plans.
  

H1 FY21 Financial & Operational Highlights (for the six months ended 30 June 2021, as of 30 September 2021)

 (Source: Company Results)

• Robust Revenue Growth: The sales of LPLDL® and SlimBiome® had resulted in strong revenue growth of around 44.5% to £1.076 million for H1 FY21. 
• Strong Divisional Performance: The revenue for the ProBiotix division went up by around 5% to £536,225, and the PreBiotics division’s sales grew by approximately 35.6% to £539,819.
• Decent Profitability: On the profitability front, the Company had achieved approximately 59.6% increase in gross profit and a 4.8% increase in gross margins during H1 FY21.

Share Price Chart

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

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

Conclusion 

Recently, OPTI announced a plan to set up a subsidiary in India, which holds high growth potential and access to Asian markets. It also has commercialized next-generation products, including microbiome modulators (MM's) biotherapeutics, and a growing family of SweetBiotix® products. Moreover, it would continue to develop the scientific and clinical evidence base required to de-risk the innovative second-generation products. The stock made a 52-week High and Low of GBX 69.00 and GBX 39.14, respectively.

Considering the healthy development pipeline, strong revenue growth, robust profitability, strong liquidity profile, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on OptiBiotix Health PLC at the current price of GBX 41.09 (as on 21 January 2022, at 11:17 AM GMT), with lower-double digit upside potential based on 2.98x Price/NTM Earnings (approx.) on FY21E earnings per share (approx.).

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

Note 2: Investment decision 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.

Note 4: Target Price refers to a price level which the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios. 

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.

Disclaimer

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. Kalkine Limited is authorised and regulated by the Financial Conduct Authority under reference number 579414.

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. 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 does not intend to exclude any liability which it is not permitted to exclude under applicable law or regulation.

Kalkine does 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 intend to exclude any liability which it is not permitted to exclude under applicable law or regulation. Kalkine’s non-personalised advice does not in any way endorse or recommend individuals, investment products or services for your personal financial situation. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional authorised financial planner and adviser. You should be aware that the value of any investment and the income from it can go down as well as up and you may not get back the amount invested.

Kalkine Media Limited, an affiliate of Kalkine Limited, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.