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Optibiotix Interims: Very pleasing but not orgasmic

By HotStockRockets | Friday 26 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.

Results from the half calendar year from Optibiotix (OPTI) were very pleasing indeed but not orgasmic and that is why the shares are a tad weaker at 69p-72p. They are cheap but punters need to see more. They will not have to wait too long.

On the ground the company has made rapid progress. By the end of the half year it had 44 patents across 14 families, 8 strain registrations, and 7 trademarks And in the first half it signed commercial agreements with Slimfast and with DSM while Slimbiome started being sold in shops post period end. We are told that sale are very strong indeed.

We are also told that the company now its affairs organised in four separate divisions each of which could be spun off as a separate entity meaning that if you owned 1% of Optibiotix post spin off you'd have 1% of "spinoffco" and 1 % of Optibiotix.

We can see that cash was £3.55 million at the period end and that the half year loss was £550,000. cash will be boosted in H2 by a) more sales and b) the exercise of the last warrants from before the RTO that created Optibitix which must all be exercised by January 17 2017. But there is clearly no funding concern at all.

So all in all it is very good but not absolutely brilliant, not enough to drive an immediate one day re-rate. What is needed for that:

1. A demerger. We were hoping for hard news on that today. We now expect it in either September or early October. That could drive a major re-rate.

2. A big deal to commercialise a product with a big name. Perhaps P&G will be more forthcoming on its work with the company?

3. Institutional buying. We gather that Steve O'Hara and chairman Adam Reynolds have been asked to present today to a number of funds not currently on the list. Let's see how that goes.

In short we think the shares are cheap and that there will be a re-rate within weeks. So the stance remains buy at up to 80p with a target to sell of 100p plus this autumn.

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