#NCYT – guest post from fellow investor Nov 2021

GMF78 – I’ve kept fairly quiet on Novacyt last few months, not because I don’t believe in the company (still invested) but because I am utterly convinced the DHSC dispute resolution is undermining the share price and investor sentiment. When that gets resolved it makes sense to see more activity from the company. That said, the following article was sent to me for review and I asked permission to publish, so a wider audience can see it too. There are a few ideas within this piece that the company would do well to consider.

Novacyt Critical Assessment of Investor Relations

I’m taking the time to write this as although I am a continued supportive long-term holder of Novacyt, and intend to keep it that way, I feel a critical assessment of the current scenario is due in order for constructive feedback to (hopefully) make it’s way to the management.

There’s no sugar coating that the company has faced a fair few issues this year:

  • Dispute with the DHSC
  • Delays to LFT approvals
  • Write down of inventory
  • CDTA delays (industry wide issue)

Although these issues obviously have a justified negative influence on the share price, the hit to the company valuation in my opinion has been disproportionate to the news, especially when weighed against the positives that are known from e.g. the interims:

  • £77m cash position, negatives factored in
  • £100m FY revenue guidance for 2021 excluding DHSC
  • New £4.7m contract for Promate with DHSC
  • Expansion in US underway
  • Including Tax rebates + H2 revenue, potentially over £100m cash by year end (less any investments made before then)
  • Genesig is the second most used manual PCR test used by UNICEF

Also, although unfortunately not a positive for global healthcare, the fact that the pandemic is still very much in full swing and testing is still a very large part of every day life also means the company is still able to take advantage with it’s portfolio of Covid testing products which has yielded the revenue to date.

To paint a picture of how badly the company valuation has been hit, if you bought Novacyt just 1 week into the first UK lockdown (30th March 2020) as a long-term investors (buy and hold, no trading) you would only be up 13.3%.

At that date though, the financial position as per the 2019 results:

  • Company had €1.8m cash
  • EBITDA €0.2m
  • Revenue €13m
  • Borrowings of €11m

Kind of feels like the developments over the 18 months since then are perhaps worth a little for than a mere 13%? That is just £19m added to the MCap.

In relative terms, going off expected FY21 results:

  • Cash position increased by 6500%
  • EBITDA increased by 21000%
  • Revenue increased by 900%
  • Borrowings erased fully

And this is ignoring DHSC revenue for the year, and that cash position will get a significant boost on positive outcome of the dispute.

So what is the issue that is amplifying the poor sentiment in the company? My verdict is the way the company deals with Investor relations and communications.

I was at first critical of those that said the communication was poor. I used to argue for the side of “They have told us how great the financials are, what more should the market need?”

Well, more.

What initially led me to change my viewpoint was playing around with some graphs and made the following. It is neither volume or price, but rather the product of the two – the monetary value of Novacyt shares traded daily (combined NCYT and ALNOV). I have however applied a 10D moving average to smooth it out a little.

As you can see, the interest in Novacyt is at all-time lows throughout the pandemic. A couple of bumps on the way down but the cash flow around Novacyt is just not there.

There is an argument that “the share price is lower so of course total value is lower, duh”, and although I feel that is applicable to certain cases – to Novacyt I believe it isn’t. In shares forming part of an index, weighting plays a heavy part in the trades IIs make and as such I expect the total value traded to be influenced by the share price heavily. But we know the overwhelming majority of Novacyt holders are PIs, who generally have a set sum of cash to invest rather than a set weighting to hit. If the share price halves? That just means they get more shares for their money.

Also when we were last at an equivalent share price, the traded volume was 5 times higher than it is today.

So to me, the above graph kind of tells me Novacyt isn’t so much the beaten up share – it’s either the forgotten share, or the share people simply don’t want to touch.

“But surely this can also mean that it’s just because everyone is holding and not selling, waiting for dispute outcome” I hear you say. And you’d be right, but it also shows there are no buyers. If there were lots of buyers and no one was willing to sell, the natural unfolding of events would be the price keeps rising to a point where the two are matched. Also, it’s not hard to see why no one is selling as no one that bought and held since April 2020 is in profit, and no one that bought even as a trade since the end of January 2021 is in profit.

In terms of “creating shareholder value”, we are now at the point where absolutely none has been created throughout the entire pandemic as it’s all been reversed. Let me be clear though, the company itself has created an astounding amount of value hence they’ll soon be breaking a £100m cash figure, but this is failing to translate into shareholder value.

Looking at the Investor Relations

Here is a chronological look at how news releases have unfolded YTD:

29th Jan – 2020 trading update, company states they are in active discussions to extend the DHSC contract

2nd Feb – Launch of SNPsig

24th Feb – R&D update, announces Covid HT, and next gen Antibody LFT due to launch in Q2

17th March – Launch of Versalab

24th March – Expansion of SNPsig

9th April – Trading Update, DHSC are disputing H2 revenue but on a positive note lots of new DHSC revenue from Q1 and the company are confident they will win the dispute. But also, the DHSC likely doesn’t need any more PROmate

23rd April – R&D update, Antigen LFT expected end of Q2. Genesig, Promate, SNPsig all levelled up and the company announces it’s inclusion in Microbiology Framework. But also the Next gen Antibody LFT previously announced has been kicked to Q3

4th May – UNICEF 1m test Donation.

17th May – SNPsig included in a framework

21st May – Dispute update. No progress but it now inexplicably includes Q1 revenues

22nd June – 2020 results + update on strategy

29th June – Antigen LFT launched, self test version stated as coming “shortly”

6th July – Guillermo buys shares

29th July – New CEO announced

18th August – Half year update, new £4.7m Promate contract awarded, deal with Excalibur announced, £100m rev guidance, 2 year WHO deal, 1 year UNICEF deal extension

18th August – Investor presentation, reiterates strategy given in June (but no additional action discussed)

16th Sept – DHSC dispute update, will now not recognise revenue and writing down significant amounts inventory

27th Sept – Unaudited HY results, poor EBITDA and Revenue numbers due to 16th September implementations

30th Sept – R&D update, New Winterplex launched and new Co prep machine launching in 1 month. But also, the LFTs are now super late

2nd Nov – Industry wide CDTA issues

Some of the trends I see

  • Overwhelmingly large RNSs sometimes, full of info more suited in lab sales brochures
  • The good news is often paired with bad news which completely distracts from any positives
  • Many of the bad news examples are from the company themselves over promising and under delivering on timelines. First the DHSC extension, then the next gen LFT, then the Antigen LFT for self test, and now Co-Prep. Co-prep is particularly bad as it was claimed it would be launched with a one-month outlook, yet now appears delayed. Surely that close to launch, more precise time scales should be known
  • When negative news is released, there is never an attempt to look for silver linings or spend a few words explaining how the impact in the company isn’t necessarily concerning.

Example 1: Non recognition of H1 DHSC revenue massively hurts the image of the company on investor stock comparison sites such as Morningstar making the company look like it’s fallen off a cliff and is loss making when it’s not. Why not explain the benefits of this to shareholders?

Example 2: When announcing the CDTA issues the company could have mentioned that government contracts are exempt from CDTA and as such £4.7m contract is unaffected. Also if the view is that this will be a very short term issue, why mention the impact for a 2 month outlook?

  • Inconsistency in what is released. Many R&D updates, but then some arguably more important products not even mentioned (e.g. new multigene HT tests)
  • Strategy first laid out nearly 5 months ago, and reiterated word for word in August and then at AGM. How long till strategy is actioned though?
  • David? Sorry never heard of him.

One thing I hope the company realise is the only additional media coverage that the company gets is from publications that just scrape daily released RNS and rewrite for a short story. The latest articles are all headlined “Novacyt issues profit warning and pulls product” as a direct consequence of the choice of wording.

Perhaps better worded RNS would lead to better articles. And then on RNSs where its a mixed bag of good and bad news, it’s of course not the good news that gives any headlines:

“Novacyt announces delays to LFTs”

And when exclusively good news is announced? Nothing. And that’s when the companies in house press team should be getting in touch with publications through issuing of Press releases. And they should also be contacting the publication’s picking up bad news. Just additions along the following could have huge impacts:

“Novacyt Press officer comments to Reuters on the CDTA matter, that the whole industry is affected and they together with commercial partners are working to resolve the bottlenecks encountered at the UKHSA”


The company needs to understand that when trading as a public company, they need to not only market their products to their clients but also market themselves as a good investment to potential buyers and they are failing at this.

If anything, the AGM should have shown just how supportive and active current shareholders are. To get 21% voter turnout on AIM/Euronext from pretty much exclusively PIs is quite impressive despite what some may think (have a look at some other AIM companies that don’t have large II/Director holdings)

Yes, they have tried to improve communications with for example the Investor Presentation but it’s not existing investors that need to be convinced, it’s new ones both private and institutional that need to be targeted.

As a current holder, it appears the company is doing nothing to market themselves as a good investment.

A new CEO joining the company would have been a perfect opportunity to get some press rounds in, get on the usual AIM investor podcasts and Youtube channels just by way of introduction of David Allmond. The best thing is he’s done them before for Amryt so knows exactly what they’re looking for in terms of answers and how to present himself. And it’s not like it’s not all pre-scripted and he has to know the companies articles of association off by heart, the Marketing team will have prepared the answers for him to deliver it’s PR 101.

But instead, it’s more silence, the same silence that I believe is a strong factor behind the fall to this early pandemic level. Again to reiterate, it is not RNS’s count in general that is the issue. The kind of communication required should perhaps not even be coming by way of RNS, however the tone of those that do come does need to be evaluated.

The directors can hide behind a certain justification of “the share price doesn’t influence daily business and we don’t control the market”, but when they appeal for shareholder support for the level of dilutive powers they asked for at the EGM, citing its requirement to grow the business, this becomes a direct contradiction. For the company to maximise the value of these resolutions, they need to to improve the performance of the underlying asset – their own share price.

They are correct in that they don’t control the market, but it’s time the Directors start a proper campaign to show why Novacyt is a good investment both now and in its post covid strategy. Currently, I can’t even be sure they feel it is themselves.

#NCYT guest post – Blackbird Investing

Disclaimer: I hold shares in Novacyt, and of course that makes me an optimist regarding its future. I am however not a financial advisor and as such the post below is merely my opinion and you should always do your own research and make your own decisions when it comes to investing.

11th April 2021

Stock: NCYT (Euronext: ALNOV)

Current share price: 424p

Market cap: £300m


At this point I think every single AIM investor has heard of Novacyt, and if you’ve found this article you for sure know who they are anyway so I’ll spare the blurb about who they are, what they do etc and get right into it. The news that landed intraday on Friday regarding disputes with the DHSC sent the shares tumbling and likely left a lot of investors with a lack of sleep to start their weekend, anticipating the future and what will happen on Monday.

Now I obviously can’t predict what the share price will do, but I can determine what my own personal course of action will be and explain why – buy and hold. It’s more important than ever in rough times to take a step back, take emotion out of the equation and get back to the basics of investing which is research. I’m not planning on holding based on some “Diamond hands YOLO” strategy, and I’m not either doing it out of pride. I’m doing it out of what I believe to be an overwhelming amount of publically available numerical data showing that this company is just way way undervalued, and that the risk to reward profile has just got a whole lot better with this drop, not worse as some believe.

For the purpose of this article, I will not be speculating on the DHSC news and trying to analyse the words to come to a speculative conculsion, I will be looking at the current and future situation from a numbers perspective.


Valuing companies on AIM is a science as accurate as crystal ball gazing, and more often than not the fundamentals of a Company seem to account for at most 5% of the valuation equation, with the remaining 95% being a mixture of so called “sentiment”, whether certain “news” outlets have posted an article (usually a strong buy signal, even if the article usually says “short”) and just plain coin flipping.

But we have to start somewhere and that somewhere is the balance sheet, especially I think with companies that are at a certain stage of maturity. And by maturity, I mean companies that are actually making money to even actually have a balance sheet worth looking at.

So quick look back to 2020. These are the unaudited numbers Novacyt ended the year with:


Now hopefully, like me you’re already thinking “whoa whoa whoa, you’re telling me this company had £277m revenue and are valued at only £300m?!”. Crazy I know.

These numbers don’t even tell the full story though of the growth of the company through the year. Let’s instead look at the split between H1 & H2 numbers:

*This is the growth in cash in H2 and does not factor in e.g cash spent on the acquisition of IT-IS

So H2 provided over 3 times the amount of each figure than H1, huge growth. Now I know what the pessimists are thinking, “yeah but that was peak covid, since Christmas its all gone down hill and the company won’t make any money anymore!”

Well luckily the main point of the RNS yesterday was to actually be a Quarterly trading update which many seem to have missed, so we now have more data to analyse and see just how bad the “drop” in revenues is. Unaudited results for Q1 2021 have come in at £72.6m. Unfortunately, we didn’t get a Q3 2020 update so we don’t know the exact split of the revenues in H2 but splitting it down the middle, and assuming ~75% of H1 revenues came in Q2 (after the covid test hit markets) the picture of the last 5 quarters is as follows:

So looking at just the last 4 quarters to create a full year of pandemic related revenue (Q2 2020 to Q1 2021), that’ll I henceforth refer to as my “Interim FY” – that’s £333.8m of revenue. And the company MCap is 10% below that.

As I said, AIM company valuations are completely disjointed from the reality of fundamentals but luckily for me, this is usually observed more in the short term, with the time eventually filtering out what’s what, and what I as an investor try to take advantage of.


A lot of the chat on various forums relating to NCYT valuation is its very low Price to earnings ratio, or the “P/E” Ratio. At this stage I’m not a huge fan of using that metric as it doesn’t take into account the absolutely huge pile of cash the company is sitting on. And it is by all measures, a huge pile of cash.

For that reason, I prefer to use the Enterprise Value/EBITDA as the calculation for enterprise value takes into account cash.

Enterprise value = Market Cap + Debts – Cash

So as we now have Q1 revenues I will keep using my special “Interim FY” in the calculations rather than 2020 FY. MCap at the time of writing is:

70,626,048 * £4.24 = £299.4m

Let’s call it an even £300m shall we?

Debts = £0, easy (however, debt ≠ always bad especially if its productive and at low interest. I personally feel NCYT should go big or go home with debt for bigger acquisitions)

To get the cash for my “interim FY” we need to do a little maths on the cash position growth from the £91.8m in Q1 2020. Starting off, we can calculate that EBITDA ratio to revenue for FY2020 was 67.5%, and in the 2020 Trading update we got the following line:

Figure 1 – quote from RNS 29/01/21

So Revenue in Q1 2021 was £72.6m, which becomes and EBITDA of £49m, which in turn becomes £39.2m pure cash added to the already massive pile.

Side note, that’s nearly half a million pounds in PURE CASH added to Novacyts bank account EVERY DAY! It’s an important observation that has to be made to understand the value of this company moving forward despite opinions on revenue direction, so important in fact I’m going to underline in, put it in bold and in font larger:

Due to the upfront cost of production ramp up and IT-IS acquisition being out of the way, the conversion of revenue to free cash flow is significantly higher than in 2020.

Don’t believe me? Just look at the numbers – £91.8m cash for all of 2020 and estimates are the company got nearly half that in the first quarter alone despite reduce quarterly revenue.

Sorry, bit of a side track from the EV/EBITDA calcs again but getting back to it we get cash = £91.8m + £39.2m = £131m

So baking it all together:

Enterprise Value = £300m +£0 – £131m = £169m

That is, again in my opinion, crazy insane low.


EBITDA is a quick one, in 2020 EBITDA conversion was 67.5% and we’re working on a revenue of £333.8m for the “Interim FY”:

EBITDA = £333.8m x 0.675 = £225.3m


So smashing these two figures together to get a ratio we get 0.75

As a number on its own, this doesn’t mean much at all, is it high? Low?. We need to compare to other companies and sector averages. Doing some good old googling:

  • Investopedia says in January 2020, the average EV/EBITDA ratio of the S&P500 was 14.2
  • Roche Holding = 11.28 (Source: gurufocus.com)
  • Thermo Fisher = 19.76 (Source: gurufocus.com)
  • Perkin Elmer = 13.94 (Source: gurufocus.com)

No the decimal is not in the wrong place.

Averaging the numbers of these 3 big players gives 15. This means at this current level of revenue, EBITDA, and cash and doing the maths in reverse, for Novacyt to also have a EV/EBITDA ratio of 15 it would have to have a MCap of £3.51 BILLION

That’s a share price of £49.69.

Ok of course that’s even in my bullish opinion a bit high of a target though as it’s especially a bit unfair to compare NCYT to huge players with multiple revenue streams, so lets instead use what is considered by Investopedia a “healthy” number of 10. This would require a share price of £33.75

What about the future

Now I can imagine the “derampers” if they were to read this (they’re probably not) would at this point scream at their monitors and furiously type on LSE “whoa who is this idiot! That’s a multibagger impossible! Covid is over! There’s no revenue left! DHSC have gone ! LFTs fo’ lyfe!!” yada yada yada.

And you know what? They have a point to a degree, who would have though. Its always good to evaluate both sides of the coin. What I mean is all this maths has been based on what is now historical returns and as the saying goes, past performance is no guarantee of future results. Who am I kidding, you all know that you’re all invested on AIM.

So we need to redo the maths to give us a range of potential options on assumptions of future revenue. So lets change some factors and recalculate.

We know from the previous RNS that of the £72.6m revenue in Q1 2021, 50% of it was DHSC. So lets assume that this is no longer applicable moving forward. That gives us a potential forward looking quarterly revenue figure in this “quieter” Covid period (in the UK at least, RoW is a different story) from private and international sales of £36.3m from private and international sales.

From here one can take several approaches, we either assume this number will:

  1. Go up quarter by quarter as the company are growing sales abroad and the private PCR sector is set to boom for international travel over summer
  2. Drop quarter by quarter as “covid goes away”
  3. Assume it will largely on average stay flat for the next year as testing requirements drop over summer but pick up again next winter

Rather than guess, let’s make a range then so we cover all bases. For the best-case scenario, I will assume Q2 2021 will have bang on £36.3m revenue which then grows by 25% quarter on quarter for the next year. For the worst-case scenario, I will start with £36.3m in Q2 and then drop the revenue 15% quarter on quarter. Why have I selected different percentages? Because we have already slashed the known revenue by 50% we are already in a predominantly bullish case, and because my personal opinion is that the former is more likely. When you do you own calculations, I urge you to use the figures you believe to be most likely. You will do your own calculations yes?

Please note, all these calcs assume that the Novacyt Group is a dragon sitting on a pile of gold, and refuses to spend any of the cash they currently have in favour of sitting on it, and also in each quarter the new cash is merely added to the pile (this changes the Enterprise value remember).

Here’s a little table outlining the “Interim FY 21 results” which would be Q2 2021 to Q1 2022. I’ve formatted such that you can try and follow along the calculations, and I’ve even also at the end shown different bullish/bearish multiples of EV/EBITDA ratio targets as this is also an unknown based on forward looking market opinion.

Again, we are trying to figure out a range of options, not a “what is it worth to the penny”.

Highlighted in yellow is the mid EV case calculated for a “healthy” company. And then averaging the bullish and the bearish cases gives a finger in the air of ~£18.50

This table shows me that potentially even in the bearish of the bearish cases, that is with a low EV/EBITDA ratio and assuming our revenue gets slashed by 50% by Q2 and drops continuously – the company is still perhaps 50% undervalued.

Keep in mind with this table that even the bullish cases slash the revenue by 50% from next quarter. This also even fits the narrative that the company outlines in the RNS that “overall 2021 revenues may be lower than market expectations”. This because he market is perhaps expecting more than the £333 over the past 12 months, and even the bullish case above only therefore assumes a £209m revenue of the next 12 months.

Another factor to keep in mind – the Novacyt Group is not a dragon. By this I mean they won’t forever be sitting on this pile of cash doing nothing, they have already said they are looking at bolt on acquisitions for the group with although will affect the companies Enterprise Value in the equations, will likely have a bigger effect on the EBITDA line. These acquisitions will also be such that they ensure this level of EBITDA remains long after Covid is gone.

Of course, with the share price being so disjointed from my calculations I have to ask myself if I have plugged in something horribly wrong. I’ll let you make your own minds up but I personally think no, as the amount I would have to tweak the input data such as revenue drop, to get to “yeah £4 is fair value” just doesn’t make sense to me.

Others may of course dispute this, and will say “your EV/EBITDA should be 2 and your quarter on quarter drop in revenue should be 40%”. But there is no strong evidence in my opinion to support that case but always happy to hear the other side of the coin. At the end of the day, undervalued companies do exist and the market isn’t always right, just look at Eurasia Mining that sat well below a penny per share despite public information being available on the resource they were sitting on.

Some Supporting data for the Bullish case

So obviously, of the options in the table I lean to the bullish case. I don’t however assume we will get to EV/EBITDA ratio of 15, and I do think until the company proves they can maintain revenues post Covid through acquisitions etc that we will be on the lower end of the range perhaps ~6-7, but I also don’t believe revenues will halve in Q2 and I think they will stay higher than the market seems to be assuming they will be without the DHSC:

Private testing

It is obvious that in the UK moving forward the cost of PCR tests seems to be set to be footed by the consumer, and not the government. This kind of makes sense as those using PCR tests will primarily be being those going on nice holidays and potentially bringing back Covid, so understandable to me that the taxpayer shouldn’t foot this bill. Also the government has been abundantly clear that the variant concern means PCR has to be used to be better safe than sorry as LFTs risk letting through false negatives. I agree also that in this case it is preferable to have false positives than false negatives.

Also, as the DHSC had clauses in their contract they had to be offered the lowest price of anyone on Primerdesign covid tests, all private tests will likely have higher margins.

Here is a link to the list of providers approved for the much stricter on quality “Day 2 and day 8” PCR test required for all arrivals. You will see the list has been updated to also include which lab each supplier uses.


It quickly becomes clear that very few specific labs are actually approved for use as all these suppliers end up sending tests to the same handful of labs, most notably:

  • Nationwide Pathology
  • Biograd
  • 20/30 labs
  • Oncologica
  • Nonacus
  • Alphabiolabs

It appears Nationwide Pathology, Biograd and 20/30 labs all use Primerdesign tests. This means that currently at least 25 of the 108 providers use Primerdesign. That is a pretty big market share in my opinion. I draw this conclusion from these sources:

Nationwide Pathology UKAS accreditation:

20/30 labs website:

Biograd employee post on Linkedin (posted by a Twitter user):

There are also many other private clinics that have been found by other investors to be using Primerdeisgn tests for other private testing applications, here is just a few I found putting nearly zero effort into Google:

Katalyst Labs






At the time of writing, other investors on twitter have uncovered many many more 3rd party suppliers.

International testing

The UK seems to be on top of cases and vaccinations for now, but that does not mean the world is Covid free. There is a big world outside the UK borders, and looking at the WHO covid meter, the second wave is unfortunately in full swing globally:

Furthermore, the company have a new Chief Commercial Officer who is based in South America. You don’t hire people on the other side of the globe in such a senior position to sell to the NHS:

Public Testing

Yes I’m actually going to dip my toe in here despite the latest news. I personally don’t believe that the government can have sufficient quantities Covid-19 PCR tests to last till 2022.

In Q4, 28 million PCR tests were conducted by the UK government. In Q1, this hadn’t shrunk as people though despite no longer being in the peak, but a higher overall daily average meant that 29 million tests were conducted. Here is a graph I have compiled from data available at https://coronavirus.data.gov.uk/details/testing. As you can see PCR testing is still very high in the UK and this could grow as the country now relaxes measures. Keep in mind, its not just those with symptoms that need to PCR test but also people like care home staff and patients in hospital for procedures and operations of which there is sure to be a huge back log.

A £35m order in Q1 is enough to buy around 3.5 million tests. At this rate of testing, that lasts 2 weeks. Of course, there are more suppliers but I believe Novacyt has held more than a 4% market share, which is what they would hold for 3.5m tests to last 365 days. My own observation is that the RNS only mentions they have bought enough PROmate, no word of what their potential plans are for SNPsig, or Pathflow.

NGOs & Other Governments

We have already seen orders from NGOs and the company have said in statements other governments also buy our products. No more needs to even be said.


I think this angle needs its own article as there is a lot of assumptions and cross referencing to look at as well as determining the case for both buyers and seller etc, but just a couple of days ago Hologic acquired Mobidiag for 18 times their revenue. Take that multiple, scroll up, and multiply it by our revenues and you;ve got one more reason I’m invested. The probability is very low, but it adds to the overall positive Expected Value I believe holding NCYT shares has from this level.



I haven’t even mentioned the ties with Astra Zeneca, the SNPsig assay, the LFTs that have been released and are currently in development. They’ll also have to wait till another day, but they all do add value.


If you’ve made it this far, well done – this ended up a lot longer than I anticipated! As shown it is my opinion that Novacyt is a significantly undervalued company even if the DHSC never orders a single additional test and even if revenues halve for the upcoming year. A situation I already find highly unlikely to materialise as people were already claiming the company would have nothing in Q1 but ended up with £72.6m in revenue.

I strongly advise people to do their own calculations on all their holdings using their own judgement on the range of eventualities that need to be accounted for. Also try and think of situations that you would otherwise not expect, take emotion out of the equation. I have some personal more specific targets on the share price at different time frames (all which remain flexible as new information is uncovered and revealed) but in the interest of “DYOR” I will not be giving these out to avoid people skim reading and then hurling abuse down the line if things go tits up. Investing is a game of probability, and probability goes both ways. My opinion at this stage though is the share is at the very least a hold, but with significant upside on the buy – hence why my holding is very likely to increase on Monday. And as new news comes out, I can update my table above e.g plugging in the true Q2 results when they arrive.

Till next time, and thanks for letting me write a guest post!

Blackbird Investing

Novacyt – Testing is here to stay

With Covid19 still dominating global headlines, thought it time to update the valuation charts to reflect the role test/trace/isolate is having as we attempt to unlock communities and repair the economic damage.

Novacyt have launched two new products in June, Exsig™ Covid-19 Direct and Exsig™ Mag

Both of these are designed to enhance workflow in the lab. Exsig™ Direct is an innovative and proprietary RNA extraction reagent that removes the need for complex, automated magnetic extraction systems. Exsig™ Mag is Novacyt’s RNA extraction reagent containing magnetic beads to be used in laboratories which still wish to run their automated RNA extraction systems. , along with a third new product, a high throughput test called COVID-19 HT (details to be released at time of writing)

This seems to be a natural development from their gold standard PCR test launched earlier this year. Making easier the compatibility between other manufacturers’ products.

The development I think changes the game though, is the mobile COVID-19 testing solution. As per recent RNS, we know it is a combination of Exsig™ Direct and the COVID-19 test optimised to run on the Company’s proprietary q16 and q32 instrumentation. The mobile COVID-19 system will launch in July 2020.

Why am I interested in this above all else? Simple, if they can open up new markets, they increase sales. Having the gold standard Covid-19 test available where it is needed, will enable large scale events to take place again with confidence. Already we are starting to see this trend develop. Whether it is countries insisting on a recent Covid-19 antigen test result (Tunisia), or Airlines seeking ways of ensuring passengers are safe to travel (Emirates in Pakistan), the need to conduct more testing is apparent.

Mass testing will work best if it is done by professionals, using kits that are as close to 100% accurate as possible. Done in places where large numbers of people wish to congregate. If a small 5% sample is taken at every event, followed up as quickly as possible by a trace and isolate service, we can unlock the world to some extent and focus on hotspot areas as they flare up rather than a mass lockdown scenario.

Valuation Update

If testing continues at current levels, it would inevitably fall through competition alone. The new product range will enhance the attractiveness of PCR testing again, recognising the near 100% accuracy compared to other as yet unproven methods. This will offset decline to some extent, but launch of mobile testing will provide additional revenue through 2021 and maintain margins.

This could result in EBITDA around £390m for FY 2020, and £520m for FY 2021. After taxes, a large cashpile around £700m would be generated for the company to invest or return as dividends.

At current predictions, a conservative price of £5.80 per share by end of FY 2020 and then £10.45 per share by end of FY 2021 seems a minimum based on cash and little sentiment.

Next update remains key – if they are closer to £200m in revenue these predictions will gain greater accuracy, otherwise happy to remodel as appropriate.

Appendix – chart data in full

 Test Capability 2020 * inc new products
 January  February  March  April  May  June  July  August  September  October  November  December 
 Tests (m) 002481012141212126
 Cumulative 00261424365062748692
 £m Revenue 001751119204306425527629731782
 EBITDA £m 008.525.559.5102153212.5263.5314.5365.5391
 Test Capability 2021 
 January  February  March  April  May  June  July  August  September  October  November  December 
 Tests (m) 14181814101010108642
 Cumulative 14325064748494104112118122124
 £m Revenue 119272425544629714799884952100310371054
 EBITDA £m 59.5136212.5272314.5357399.5442476501.5518.5527
second wave