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Concepta - good news and er ...less good news and good news: STRONG BUY

By HotStockRockets | Saturday 17 June 2017

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.

Let's start with the bad news. It really should not be a surprise given the lack of orders announced (until now!) but Concepta (CPT) has confirmed that it will miss full year 2017 sales forecasts. That is the bad news. It has launched a new product and it is a few months behind schedule. These things happen. But...

Prudently, the company has scaled back expenditure so that Full year losses will be broadly in line with forecast at around £2 million. on the back of sales now forecast to be £1.3 million. Since year end cash was £2.7 million "chatter" by Bulletin Board Morons about a placing is just wide of the mark. There is no apparent need for one.

The good news ( other than that at a bottom line level, Concepta is broadly on track) is of a first order and it is a material one worth £225,000 for its myLotus fertility products from its partner in China, HuanZhong Biotech Co.Ltd. And there will be more. From the release:

The Board anticipates that further sales orders will be made by HZ Biotech in line with its partner agreement and will update the market on these developments accordingly. We are now in a position to activate the whole supply chain, leveraging core UK elements configured to provide a scalable international supply chain. This is the result of a significant investment in regulatory processes and physical assets enabling our modular systems to expand capacity in line with demand."

So what now? The shares are trading at 11p-11.25p capitalising the company at just £12.2 million. The house broker - as ever steered by the company - has new numbers for 2018 and 2019 as follows:

"moving its 2017E and 2018E Revenue estimates to £1.3m (from £2.7m previously) and £6.0m (from £8.25m) respectively, with revised earning of 0.71p and 2.10p. "

So in just over six months time these shares will be trading on a 1 year out PE of just over 5. For a fast growing tech play that is far too low. IF it delivers, and we admit there are uncertainties, on those forecasts a PE of 20 ( that is a share price of c48p is not implausible)

Certainly the shares should be on a multiple of a PE of 5 and as such we retain a STRONG BUY stance with a target of 25p+ to sell.

This article first appeared on HotStockRockets - to catch the next red hot share tip from the HotStockRockets team out shortly for just £5 click HERE

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