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Advanced Oncotherapy - even house broker Beaufort now getting cold feet

By Tom Winnifrith, The Sheriff of AIM | Friday 16 December 2016


Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.


As joint house broker to the exponent of Securities fraud that is Advanced Oncotherapy (AVO), Beaufort has to sound bullish and has thus reiterated its speculative buy stance today. But read the note carefully. Beaufort is frit. I have highlighted key phrases that have not appeared before for you. Key phrases which show goalposts being moved and a broker that is sick of being made to look foolish.

Advanced Oncotherapy (AVO.L, 50.00p) – Speculative Buy

Advanced Oncotherapy, the developer of next-generation proton therapy systems for cancer treatment, yesterday released a new video on the Company's website to provide investors with an inside look at the groundbreaking technical development of the LIGHT system at its testing facility in Geneva. The video can be viewed here: www.avoplc.com.

Our view: Clearly LIGHT's scientific development work continues to progress well. This is demonstrated by the integration of its proton source and Radio Frequency Quadruple (RFQ) and the high-power testing of proprietary modular accelerating units, the Side Coupled Drift Tube Linacs (SCDTL) and Coupled Cavity Linacs (CCL). Yesterday's video may go some way toward repairing the damage inflicted by the disclosure that two highly prestigious orders sourced through their agent, Sinophi Healthcare, would no longer be installed at the China hospitals originally announced due, amongst other things, to concerns regarding AVO's inability to provide a fixed delivery schedule.

But at the very least, it provides shareholders with a peek inside the laboratories in which this 'rocket science' is coming together. There remains, however, many uncertainties. It remains a gamble whether or not a working model of LIGHT can be demonstrated without having to tap shareholders on the shoulder, one more time, for yet more funding (current cash-burn is thought to be around £1.2m/month+).

Also, will the relationship with Sinophi, who formally placed the two orders with a total estimated value for AVO of around US$80m, turn ugly and end up in court? [TW note it was $120m] Will the advantages that LIGHT apparently offers, in reality, be truly capable of making an establish, cyclotron-based, first-generation proton beam therapy system effectively obsolete, thereby creating giant demand for this smaller, safer and much cheaper Linac-based product? This questions still need to be either proven or answered. So what are we left to conclude?

AVO's reputation has taken a blow that will take some time to repair; investors are getting fed up with perpetual slippage on the route to first commercialisation, even though this might be due more to planning, rather than scientific risk; maybe also the Group deserves criticism for being less diligent in selecting partners than might have been expected, although with a high reputation operator like Sinophi this would not normally raise an eyebrow.

For Beaufort, all this means that AVO's risk profile has moved up one or two notches, even if the management pointedly insist that its technology now comes with no scientific risk and offers huge commercial potential. As Beaufort has detailed in numerous research notes, it believes LIGHT offers the opportunity to power dramatic expansion of the global radiation market, becoming the natural replacement not only for existing proton systems, but also as the natural replacement in current, rather technologically antiquated and more dangerous, X-ray radiation products as well.

Many investors will not actually believe LIGHT can do 'what it says on the tin' until they see it for themselves (in Harley Street or Pebble Mill), so they will probably have to wait until summer 2018. In the meantime, a possible broker/media visit to Geneva or CERN (hopefully Q1'2017) for a presentation of their part-assembled demo model might just be enough to persuade some of the non-believers. Despite the higher risk profile that AVO now presents, Beaufort has decided to retain its Speculative Buy recommendation on the shares in the hope of realising bonanza returns.

Ends.

Quite how the company can say that its technology has no scientific risk when it does not even have a working prototype is amazing. How does Beaufort swallow that shit after what has gone on? The statement is patently untrue and as such any company that can make such a statement is clearly not one you could trust an inch. It is the sort of claim that only a "drowning man" would make.

I note there are now no forecasts for external delivery given the damning Sinophi emails. I note that we now have clear evidence of securities fraud via those emails which neither the company or its paid lacky broker are prepared to address. Implying the Chinese are at fault in someway for recent disasters is bizarre - Advanced just failed to deliver as promised.

Saying that it will take some time to recover the reputational damage is just crackers. Unless Advanced explains why it has not committed fraud in a convincing manner it will NEVER recover.

The key thing here is the cashburn and even the house broker saying another equity call may be needed. This, remember, is the broker that after chatting to the fraudsters said that Advanced would have non dilutive funding in place by December 31. Why no mention of that now? Why? Because Advanced has not got that funding in place and with cash (minus trade payables etc) likely to be sdown to zero by February 28 Advanced is in deep merde. The loan it has is to build out Harley Street but it simply wont have any cash to pay bills like the gym membership of its grossly overpaid 75 year old chairman Mike Sinclair. There will be more on him this weekend.

This note is bracing you for bad news on financing. Where Beaufort not house broker it would be saying sell. That is what you should do because who is going to back the next looming placing when the shares have halved in just 8 weeks since the last one?

Sell. Sell and sell again. Fair value 0p.


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