Novacyt SA

Novacyt SA (LON: NCYT) is an FTSE AIM 100 index listed France-based Clinical Diagnostics Company. The Company deals in diversified diagnostic products used in oncology, haematology, microbiology, LBC, and serology testing.

Investment Rationale – WATCH at GBX 365.80

• Weak Profitability: NCYT’s profitability margins were in negative territory during H1 FY21, while the respective industry medians remained positive. Moreover, the Company had reported a loss after tax of negative £12.7 million during H1 FY21 as compared to a profit of £35.1 million in H1 FY20.
• Top-Line Business: The Company had shown a significant reduction of 14.70% in the total revenue from £3 million during H1 FY20 to £54.0 million for H1 FY21.
• Omicron Variant: The Government-led restrictions under Plan B because of an increasing number of Covid-19 cases in the UK may adversely impact the UK Equities. Meanwhile, the UK had reported fresh 90,418 cases on 18 December 2021.
• Recent Approval: The genesig® COVID-19 test recently became the seventh product to be approved and added to the CTDA register.
• Unfavourable Technical Indicators: From a technical standpoint, the stock price is hovering between the upper Bollinger band and the middle Bollinger band, indicating an overbought scenario.

One Year Share Price Chart

 (Data Source: Refinitiv, Analysis by Kalkine Group)

Conclusion

Based on the decline in total revenue during H1 FY21, weak profitability, and unfavourable technical indicators, we have given a “WATCH” recommendation on Novacyt SA at the current market price of GBX 365.80 (as of 20 December 2021 at 08:06 AM GMT). However, for any profit booking scenario, buy and holding levels should be looked at as per the risk appetite of investors.

Audioboom Group PLC

Audioboom Group PLC is an FTSE AIM All-Share listed global leader of podcasting having international operations and global partnerships across North America, Europe, Asia, and Australia.

On 19 January 2022, the Company will release a detailed trading update for FY21.

Investment Rationale for Valuation – Sell at GBX 1,260.00

• Loss-Making Entity: The Company has been consistently reported a net loss for the last five years. Moreover, the Company’s profitability margins remained in the negative territory during H1 FY21, while the respective industry medians were positive.
• Target Price Breached: The stock price has breached the target levels provided in the last coverage, giving a decent profit-booking opportunity.
• 52 Weeks High: The Company’s stock is trading very close to the 52-week high. Thus, it may face some retracement from the overstretched level.
• Technical Indicators: From a technical standpoint, BOOM is hovering around the upper Bollinger band, indicating a bearish price pattern. Furthermore, the 14-days RSI of ~73.99 approaches overbought territory and indicates a correction in the stock price.

Key Risks

• Covid-19 Pandemic: The daily COVID cases in the UK surged to a record 90,418 (18 December 2021), which may result in increased restrictions over the period.
• Interest Rate Hike: The recent interest rate hike of 0.15% to curb inflation may keep investors’ away from UK Equities.
• UK Services PMI: The UK Services PMI fell sharply to 53.2 in December 2021 from 58.5 in November 2021..

FY21 Trading Update (as of 16 December 2021)

• FY21 Outlook: BOOM expects FY21 adjusted EBITDA and revenue to remain ahead of the current market expectations.
• Divisional Developments: The Audioboom technology platform and continued focus on content expansion plan would drive the business further in FY22.
• SHOWCASE Performance: The Company’s recently launched “SHOWCASE” has already created a positive impact in the last six weeks.

One Year Share Price Chart

 (Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

The Company’s top-line business witnessed a remarkable improvement, but the bottom-line business remained dull. Moreover, the stock price almost reached 52 weeks high and comfortably breached the target price given in the last coverage. Since it is a penny stock, BOOM may show sizeable corrections because of several factors such as an interest rate hike announced by the Bank of England, disappointing UK GDP numbers for October 2021, and the record number of Covid-19 cases in the UK. Thus, it would be prudent for the clients to book profit at the current levels on this Company. The stock made a 52-week low and high of GBX 190.00 and GBX 1,265.00, respectively.

Based on the weak bottom-line profitability, increase in interest rates, and unfavourable valuation as done using the above method, we have given a “SELL” recommendation on Audioboom Group PLC at the current market price of GBX 1,260.00 (as on 20 December 2021 at 08:05 AM GMT).

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

*All forecasted figures and Peer information have been taken from REFINITIV.

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