By Tom Winnifrith & Steve Moore | Sunday 7 August 2016
Disclosure: Financial Investigative Media Limited, which is not owned by Tom Winnifrith but by a trust for his dependants, owns shares in companies mentioned in this article. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.
Investment Case: The AIM admission of Concepta (CPT) a couple of weeks ago was through a reverse takeover of shellmeister (Adam Reynolds)-saved Frontier Resources International (FRI). We backed Reynolds when he became involved in Frontier, but despite his track-record, then was clearly somewhat speculative as we awaited a deal to be delivered. Now it has and it looks like Reynolds has delivered another promising one…
Operations: Concepta has developed a pioneering product, 'MyLotus', for home self-testing for women with unexplained infertility. The company notes this “is the only consumer product which allows both quantitative and qualitative measurements of measurement of a woman's personal hCG and LH hormone levels in an easy to use home test to facilitate higher conception rates and early diagnosis of any fertility problems. Competitor products currently only allow qualitative measurement and are based on the 'average woman'”. Additionally, it adds that “our proprietary platform lends itself to wider family home-health monitoring, and we believe there are exciting growth opportunities for Concepta in the future within the growing global connected healthcare sector”.
Management Incentive: CEO Erik Henau has more than 35 years of experience in life sciences companies (Amersham International, Oxoid) and consumer diagnostics (Unipath/Alere) and finished his career at Alere as International OTC Director. His annual salary is £105,000 and he has 213,333 shares (0.20%). Adam Reynolds is Non-Executive Chairman on £50,000 per annum and has 1,155,555 shares (1.06%). An Advisory Board includes Dr Ian Gilham and David Evans of Axis-Shield fame.
Financials: Results for its year-ended 31st January 2016 showed Concepta essentially remained a pre-revenue company and generating a loss of £1.1 million. However, a pro-forma balance sheet shows cash of more than £4 million and regulatory approvals for the 'My Lotus' product are now in place for launch in China, with roll out set to commence in the current quarter.
Risks: Having only been founded in 2013 and now just commencing revenue-generating operations, there is clear rate-of-adoption risk here. However, the company does look to have a superior product offering and a “first order from distributor with payment in advance expected after AIM admission”. There is also obvious risk in terms of operating in China, obtaining CE-Marking for UK and Europe in the anticipated approximately 9 months and the company’s anticipated further new product development. These are somewhat mitigated by an experienced management with a proven track record in the industry.
Valuation: The China roll out is expected to be followed by the UK and Europe in 2017 and the company notes “revenue potential of the Chinese and EU infertility market is worth c.£600m per annum for the company”. At a current 12p offer price, the market cap here is £13 million. There clearly remains a speculative element, but near-term revenues, the market potential and the team here combine to see us tip the shares at a 12p offer with a limit buy price of 17.5p and initially targeting 28p to sell.
This article first appeared on the Nifty Fifty website which Lucian Miers runs with Tom Winnifrith & Steve Moore. To access the website ahead of the next share tip from Tom & Steve and ahead of a new shorting idea from Lucian GO HERE
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