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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.
The shares of Premaitha (NIPT) have been all over the shop since what was a cracking year end trading statement on Monday. The reason is the cackhanded disposal of Rupert Lywood's remaining 17.9% stake. We thought he was locked in following his last dump on 9 March and a statement signed off by broker Finncap. Weasel words. His shares were placed by Finncap at just 6.5p with directors taking some and solid institutions Helium, Henderson and Hargreave Hale taking the rest. The overhang is now gone but boy has it crushed the shares. Without Lywood's "assistance" since last summer we think the shares would be 20p today. But he is now out of the picture.
The trading statement was great. Sales in the year to March 31 2015 will be £2.5 million but that is largely down to contracts won in H2. The annualised run rate on the contracts already secured - ie base case revenues for the current year is now c£4.5 million and since Premaitha continues to win a stack of new contracts we feel very relaxed indeed with full year forecasts of £7 million sales.
That would see the company make a loss of £1-2 million but it has the cash and we are steered that by Q4 it will be cash generative and ready for a step change in sales for next year of c£14 million. That would imply profits of £2-3 million. It is our belief that risks to forecasts for this year and next are very much on the downside. Looking forward to the year to march 2019 is more a guesstimate than a forecast but we'd expect sales of £21 million plus and profits of £6 million plus.
The market cap at 9p - the price now - is just £20 million. The company has plenty of cash but clearly the two risks are the speed of roll-out and the Illumina patent challenge. We think Premaitha is delivering on rollout and expect more contract wins very soon to drive a further re-rating. As for Illumina we believe that Premaitha will prevail against a US corporate bully with form in terms of legal bullying but also of losing many of its spurious cases.
Premaitha shares remain a buy.
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