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.
What with all the trading statements and the placing at around the year end, results from Collagen (COS) were pretty well telegraphed. There were no surprises but the CEO statement is upbeat and that seems to have been overlooked.
For the year to March 31 2017, sales were up 26% to £4.09 million, the adjusted EBITDA was minus £1.26 million (roughly trebling) but year end net cash balances were £8.98 million. But with nine commercial deals signed last year, the launch of new US online sales and a 60% stake taken in Cre8ive Collagen to move into Chinese market this year is going to see real growth.
Jamal Rushdy, Chief Executive Officer says "With this momentum, funding, and team in place we remain positive about our vision to be the industry's first choice in regenerative biomaterials and progress towards our goals to deliver our revenue growth and profitability targets."
It is those last few words that are key. With high margins, once sales go through inflection point operational gearing will see a rapid ramp up in profitability. That is not discounted in a £16 million market cap.
We tipped these shares at 5.75p offer but advised averaging down in the open offer at 5p. The shares are now 5p-5.5p and are a buy at up to 6.25p with a target to sell of at least 8.5p.
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