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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 declare an interest first. FIML, a company owned via a Trust by dependents of Tom Winnifrith, took part in the placing at 4.5p but was scaled back so topped up with market purchases at 6.9p.
FIML already had a material position. The TW view is that the shares, now 7p-7.3p, will be 25p+ by Christmas. Let's start with trading. In the year to March 31 2018 we are told that sales doubled to £6.2 million. Clearly Premaitha (NIPT) will report a big loss thanks in good part to the Illumina patent challenge but all costs have now been settled pending an appeal and we reckon that there may well be a settlement. The good news is that as of today, just 5% of sales are in the UK. And the launch of two new testing centres in India and Kenya - also just announced - will probably see sales greater than those that would be lost if Premaitha exited the UK market.
The company now operates in 20 countries and we are told that at an operating level it is now at breakeven with annualised revenues now running at £7.7 million. But those revenues will increase materially this year, house broker Finncap notes that the £7.7 million number:
Excludes growth from existing customers yet to come on stream, the benefit of national reimbursement coverage to NIPT volumes in France (expected H2 2018) and new customer wins in high-volume markets that will be accessible due to new technology that affords a lower-priced NIPT (eg. India).
This all means that even if UK sales are discontinued the placing will see Premaitha through to profitability and thereafter massive operational gearing will see a big ramp up in profits. Why you ask not go to PrimaryBid and allow all shareholders to take part? Well a) they would not and b) many PB guys would flip. This placing - at the 30 day MA - was done with board members and 9 HNWIs and ourselves (a very small amount). We will not flip so that should help all shareholders by seeing the shares move sharply higher on good news.
We expect further sales agreements from outside the UK to be announced in the coming weeks and months and that this will drive upgrades to forecasts and a material re-rate of the shares. The FinnCap target is 12p - as you can see HERE. We reckon that if Illumina is settled the shares should be double that by Christmas. The stance is STRONG BUY.
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