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Concepta - Upgrade to STRONG BUY but I am annoyed

By Tom Winnifrith | Tuesday 14 November 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.


I have also covered my extreme annoyance with Concepta (CPT) in Bearcast HERE. Last week it had a profit warning thanks to a new order for £600,000 having been received but not being able to be booked until Q1 2018. Hence there was a 2017 miss. That saw the shares go down. There is now a placing and at the same time we were told that this order would now be booked in Q4 2017. Surely that unwinds the profits warning.

Why not announce that pre-placing so that it could have been done at a higher price rather than allowing City boys to get in on the cheap. That is wrong and I can't see how it is allowable.

But we are where we are. Concepta's market cap, at 8.125p, is now £11.2 million so there is an EV of circa £9 million. The company is now signing up distributors and winning orders in China at a rate of knots. Next stop Europe, starting in Germany and then the UK. We are told:

The primary use of the net proceeds will be to expedite the geographical expansion of its myLotus fertility product in China where the Company currently has three distribution agreements in place targeting an estimated market of 2.3 million women per year across Hebei, Shanghai, Beijing and Liaoning. The Company plans to further expand this and has identified a total of 25,000 target hospitals with approximately 20 distributors.

Additionally, the funds will be used to advance the Company's launch of myLotus in the European marketplace where it has commenced its application for CE Marking with approval expected by H1 2018. Funds will be deployed to market myLotus to be sold through online channels direct to consumers, initially in the UK and Germany.

Ends

I would expect that profit next year will be in the region of £1-2 million, with in 2019 potentially £3-5 million. A company in this sector is normally valued on a mid teens multiple and that implies - on mid range forecasts - a doubling of the share price in 2018 and potentially another doubling or more the following year.

It would have been nice for Concepta to allow we ordinary investors in via an open offer but I suppose we are just peasants not fit to lick the boots of City wide boys who must be given first dibs. Why treat we grunts with even a modicum of respect? Despite my anger, the shares are cheap and the stance is thus upgraded to strong buy.

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


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