Biofocus Share Discussion Threads

[aquilla] 26/11/2007 21:51

It might also be worth seeing again a summary from a research note on the company written earlier in the year, long before the announcement of talks, by PMH Capital:

Attractive valuation
Clearly with any investment, nothing is an absolute 100% cast iron certainty. However what I like about Bionostics plc is the favourable risk profile. At 21p, it offers substantial upside but in my opinion only limited downside.
I've forecast a 2008 EPS of 2.7p, thus putting the shares on a miserly forward p/e of 7.8. With underlying top line growth of 6% for the foreseeable future, my fair value for Bionostics is 34p - representing a 61% upside on current levels. The company has net debt of around £11m, with interest payments estimated to be covered 2.2 times. Furthermore with the majority of sales transacted in US$s, the group's borrowings are now also denominated in dollars to act as a natural hedge.

Possible acquisition target
Although clearly the debt position is still high, Bionostics could be a very valuable acquisition target to either another healthcare business, or alternatively an aggressive private equity buyer. For instance on a sum-of-parts basis, I estimate that the breakup value of the group could be north of 50p - especially as a large chunk of the £1.2m pa of central overheads would be removed if the company was taken private ....

Strategically then, it would appear that either Bionostics needs to bulk-up or instead be integrated into another larger entity, in order to maximize economies of scale and hence shareholder value. Using this logic, then I would not be too surprised if the new Chief Executive - particularly given his background - decided to either progress a Management Buy Out , or alternatively dispose of the final two divisions.

Indeed from an external perspective it would appear that, other than the occasional common customer, there are few synergies between OC and Bionostics Inc. Thus any break-up plan should be relatively easy to execute.

Note: The improvement in the 2008 % EBITA margin is primarily driven by a halving of the central overhead cost from £1.7m in 2006 to £0.8m by 2008.

Source : PMH Capital

[aquilla] 26/11/2007 16:59

Garth, A further point on the debt. At the interims net debt stood at around £10.4m. Interest on this has been around 7.5-8% pa so was costing around £800,000 p.a. to service but I understood the company was targetting to bring the debt down to around £8m within 18 to 24 months through cash flow, so, hopefully, if the cash flow has been good, and I anticipate it has been, the debt will be brought down to more manageable levels in the not too distant future.

[vlain] 26/11/2007 14:15

thanks cyberpost

[keepitup] 26/11/2007 12:00

thanks cyberpost, makes sense now.

[cyberpost] 26/11/2007 11:58

they are market makers. all market makers have to report their trades the next day when the stock is in a takeover period. INVN as market makers are doing just that.

[keepitup] 26/11/2007 11:56

I dont understand INVESTEC strategy either, just seem to buy and sell like a real small time trader.

[vlain] 26/11/2007 11:54

Can anyone understand/explain the behaviour of INVESTEC BANK (UK) LTD buying and selling!!!

[aquilla] 26/11/2007 11:15

What I would be interested in is anybody's take on that fall. It was extremely aggressive and in the normal course of events one would have associated it with leakage of news of the collapse of bid talks...unless it was being manipulated!

[garth] 26/11/2007 11:06

BlackPerl,

Bad advice from the Nomad, IMO. The fall was considerably more agressive than in other small caps. But thanks for the comment.

G.

[garth] 26/11/2007 10:54

Thanks Aquilla. The debt bloats the valuation of the whole company. I'm trying to make sense of last week's fall.

G.

[aquilla] 26/11/2007 10:51

By the way if you want to take a look at a pharma company with some exciting prospects, have a look at AZM. Several announcements of deals expected over the coming months.

[aquilla] 26/11/2007 10:31

Garth,
There are two sides to this story. On the one hand we have what is now a profitable company. The loss making divisions have been disposed of and the two profitable divisions, IVD and OC, remain. I anticipate the results being good, indeed very good. At the interim results in April we were told that for IVD there had been sharply increased sales in the 2nd quarter. Hopefully this trend has continued. There were also efficiency gains. For OC, the order book level was encouraging. There had been renewed interest in the helium based cooling systems. There have been no profit warnings to contradict these trends.

Against this there are two negatives. Firstly the large debt which hangs over the company. The two sales reduced this but not by as much as anticipated.
Secondly the impact of the US dollar. This has continued to weaken since the last results. However, as debt is drawn in dollars, this is a natural hedge against a weaker dollar.

If the takeover talks were to collapse, I would anticipate an initial slight fall in the share price but hopefully, with the longer term prospects, a gradual recovery. A lot depends, of course, on sentiment in the wider market. And one has to bear in mind that NAV are sitting on 27% of the company!
IMHO DYOR

[garth] 26/11/2007 07:52

aquilla,

What is your take on the share price if the get a negative on the takeover? Or have we already seen it?

G.

[aquilla] 26/11/2007 00:29

KeepItUp - My understanding is that results have indeed been delayed to allow for any announcement-one way or the other. If no announcement is ready then the results would be published anyway. I believe results have to be announced within 120 days of year end, which in this case is end of August, so we should be seeing them soon.

[keepitup] 25/11/2007 22:35

cheers cyberpost - interesting guy, sounds honest i think has done his research here ;)

[cyberpost] 25/11/2007 22:30

KIU.. he stated (above) that he holds 125k.

[keepitup] 25/11/2007 22:28

the results will be out at the same time as the buy-out details im guessing? is there a deadline for there final results? someone mentioned two weeks.

BlackPerl - good to have you here mate, how many have you got now, you going to continue topping up this week?

william - your nickname should be quick-eye ;)

aquilla - yes the trading was odd on friday; the plus markets gave very good prices for those sells if the share price was reflective. who knows, if i had to guess they were sells and the mm's have another buyer in the background and not a seller - price often drops when a large player comes aboard, if im right we should see a good increase after they have filled his order- or not as im only guestimating. good luck here for the coming week.

[william47] 24/11/2007 15:56

keep the faith guys.add on dips

[aquilla] 23/11/2007 21:28

Some strange trading today. Analysing the buys and sells from Plus Markets and the LSE and ignoring the AT trades (which more or less balanced ) there were about 176000 shares bought and 23000 shares sold and yet still the price went down. It just doesn't make sense unless there is a large seller in the background who is soaking up the buys. Another possibility is that as some trades on Plus Markets were only just above the mid price these may have actually been sells...it can and does happen.

[keepitup] 23/11/2007 18:40

Good to hear BlackPerl. Seems like MMs holding this one back. Anytime scales BlackPerl?