Batm Advanced Communicat... Share Discussion Threads

[car1pet] 22/8/2019 15:38

I like being proved wrong good increase today

[fse] 22/8/2019 14:50

FWIW I agree with Simon Thompson's evaluation of BATM.
Its the value of the company's IP, which is at advanced stage of development, that is severely understated.
Incidentally the share price rose on TASE some 8% ahead of LSE open

[paulisi] 22/8/2019 12:49

Cheers for that - not seen the forecasted revenues, so that is a big positive.Another price tick up today and the potential based on IP and patents is huge.

[reeltime] 22/8/2019 12:37

Just spotted this...very positive article from Simon Thompson IC.

Exploit BATM’s hidden value
Simon Thompson

Simon Thompson
I have had an enlightening results call with the directors of BATM Advanced Communications (BVC:45p), a provider of medical laboratory systems, cyber security and network solutions with extensive operations in Israel.


The £197m market capitalisation company is celebrating its twentieth anniversary on the main list of the London Stock Exchange. It’s shaping up to be a vintage one, too, as analysts at house broker Shore Capital predict that BATM’s full-year adjusted pre-tax profits are set to more than treble from $2m to $6.7m (£5.5m). This is partly driven by a forecast $8m increase in revenue to $128m, but also by gains on investments in joint ventures, highlighting the hidden value in the company’s balance sheet.

For instance, at the start of the year, BATM secured a $30m (£24.8m) investment from new investors to provide the funding for the commercialisation of its molecular biology diagnostics joint venture business, Ador Diagnostics, a company that is developing a new molecular diagnostic bench-top analyser that is able to probe 100 targets in a single proprietary carbon array. Existing products only probe on average between four and six targets per test sample. It is being targeted at screening for hospital-acquired infections such as MRSA and C. Diff, and to identify tropical infections in travellers returning home with fevers.

BATM’s retained 38.2 per cent stake in Ador is worth $17.2m, a hefty sum in relation to BATM’s $4m investment prior to the $14.5m initial investment by the new investors. Furthermore, an additional $15.5m at a valuation a third higher than Ador’s current enterprise valuation of $45m will be funded by the same new investors at the end of 2020, subject to certain milestones being achieved. Bearing this in mind, BATM chief executive Zvi Marom says that the meningitis cartridges have already gained CE approval, and the bench-top analyser machines are likely to gain CE approval in the coming months, ahead of in-hospital testing and full commercialisation of the product.

The point being that BATM has only booked a $3.2m gain on its Ador investment, and carries all investments in associates and joint ventures at just $9.4m on its balance sheet. The retained 38 per cent stake in Ador is worth almost double this sum alone, and that doesn’t factor in a likely sharp increase in the value of the stake when commercial quantities of the diagnostic bench-top analyser and cartridges are shipped in 2021.

Tapping into 5G potential

There are exciting prospects in 5G, too, as BATM’s network and cyber security division is accelerating the network function virtualisation (NFV) ecosystem project that it is developing in partnership with the world’s leading chip designer, Softbank-owned Arm Holdings, as the only worldwide software vendor to provide NFV functionality to Arm and Intel platforms. The partnership is developing infrastructure solutions for NFV, a technology that decouples the network functions, such as firewalling, intrusion detection and caching from proprietary hardware appliances, so they can run in software. The technology will be critical in the functionality of mobile applications in 5G and can also be used to run applications such as autonomous vehicles.

Dr Marom notes that Arm Holdings could be ready to sell the technology to its customers shortly and is “planning some very large proof of concept 5G trials.” The point being that having made its investment in NFV technology, and integrated it into products of major chip makers including NXP Semiconductors (US:NXPI), a $34bn market capitalisation company listed on the New York Stock Exchange, then BATM is incredibly well placed to reap the rewards as consumer demand for 5G really takes off. Moreover, network operators and virtualised network function providers will be able to deploy their applications and operate across all major hardware architectures, so leveraging the advancements in different processor technologies.

It’s well worth noting that analysts at Shore Capital have not included any contribution from NFV sales in their 2020 revenue estimate of $137m, nor in their 2021 revenue estimate of $148m when they predict BATM will be making pre-tax profit of $9.4m. Both forecasts also exclude any contribution from Ador, too, thus highlighting scope for outperformance.

I would also flag up that BATM’s network and cyber security business is set for a storming second half, and beyond. Finance director expects the division to report annual revenues of $61.5m, up from $57.5m in 2018, and at similar margin, thus offering scope to increase the unit’s adjusted operating profit of $5.5m. Please note the 2018 profit has been restated due to new accounting standard IFRS16.

Of course, BATM will be absorbing short term losses on some joint ventures as the businesses develop, too. For instance, the $3.2m gain on the Ador investment will be halved once you take into account BATM’s 38 per cent share of Ador’s losses this year, but this is already factored into the aforementioned analyst profit forecasts.

Creating shareholder value

What’s clear to me is that BATM is in the process of creating significant value for shareholders through its joint ventures, and potentially a multi-million dollar royalty stream from its partnership with Arm Holdings. That’s not in the price which is why having first advised buying BATM’s shares, at 19.25p, in my 2017 Bargain Shares Portfolio, and top-sliced half the holding, at 50p, to bank a 159 per cent partial gain (‘Bargain Shares: Exploiting pricing anomalies and top-slicing’, 3 Dec 2018), I subsequently advised reinvesting the proceeds from that share disposal to take advantage of a repeat buying opportunity, at 43.5p, earlier in the summer (‘BATM armed for a re-rating’, 11 Jul 2019).

I feel that my sum-of-the-parts valuation of 60p is a very realistic target to value the company’s equity at £262m, or treble the last reported net asset value of $100m after taking into account last month’s $17m (£14m) equity raise at 42.5p, details of which I covered in some detail in my last article. That’s because BATM now has net cash of $34.6m (£28.5m); the retained stake in Ador is worth £17.2m and could easily be worth double that valuation by the end of 2020; BATM’s 95 per cent stake in Adaltis, an Italian manufacturer of medical diagnostics equipment has a read-through valuation of £45m; and BATM owns conservatively valued property assets worth $16m (£13.2m).

Furthermore, even if you value BATM’s networking and cyber security division on 16 times last year’s operating profit then it’s still worth around $90m (£74m) as a standalone entity. Add to that the value embedded in the Arm Holdings partnership, and the rest of BATM’s biomedical division, too, and it’s really not difficult to arrive at a 60p sum-of-the-parts valuation. Fund manager Lombard Odier Asset Management clearly sees the investment potential as BATM’s largest shareholder has just purchased 4.3m shares to lift its stake to 26.04 per cent of the 437m shares in issue.

Importantly, there is ample scope for positive news flow in the coming months to focus investors’ mind on BATM’s hidden balance sheet value, and the exciting commercial potential of its technology investments. A return to the April 2019 10-year share price high of 54p, and beyond looks a distinct possibility. Strong buy.

[fse] 21/8/2019 18:58

Larger than normal volume on TASE in Israel ahead of LSE open. Be interesting to know what sparked that interest.

SharesSymbol : BVCDL
Dual-Listed Company
Last Rate (0.01 NIS)
192.2
Change
2.56% Up
Turnover
1,394,299 NIS
Base:
187.4
Open:
187.4
High:
194.2
Low:
188.9 As of 21/08/2019
Market Cap
840,450 NIS Thousands

[fse] 21/8/2019 15:05

hey car1pet did you like the action on the short caught with pants down after Lombard upped the position.

[car1pet] 21/8/2019 12:56

There must some "buys" in the pipeline. "Sell" trades this morning and price increasing.

[car1pet] 20/8/2019 15:33

Lombard Odier has bought another 1% stake. RNS today at 14.34

[fse] 20/8/2019 14:20

Its well worth listening to the Zvi Marom interview. I have repeatedly commented that you can not expect a large surge in revenue until these products have run POC's and actually in the market place for sale. Thats clearly happening.

Most new disruptive technology companies do not post any profits for substantial periods of time. BATM actually makes money and thats even with the costs of developing product thats not yet in the market place.

Medium term gains in the share price will come from the re valuation of the IP not revenue IMO.
In that respect BATM are well placed to demonstrate the value of their IP which is becoming hard to ignore.

I rate these a buy at these levels up to 65p. The shares are IMO currently undervalued.

[car1pet] 20/8/2019 09:58

Reeltime I watched the you tube interview. Telco seemed ok but the medical side is research and POCs I don't see revenue/profit growth on that side of the business. He said its "all expense at the moment" it sounded very speculative. There is a risk that the medical side with high costs and low revenue will impact the overall growth/profit.
I'll give him another 12 months
All IMO DYOR

[rawdeal1] 20/8/2019 00:21

1.6 miles shares traded and the price drops by 0.3. Some are definitely selling, but some are definitely buying. I've been with this share for a lot longer than 10 years, and I've built up a stash, and I'm definitely holding. Now is not the time to get cold feet.

[reeltime] 19/8/2019 21:28

Below is a link to an in-depth interview with Zvi, it helps to clear up some of the concerns posters have raised based on today's results......

[cumnor] 19/8/2019 21:22

Fair enough comment car1pet. Hope your rewarded sooner than later.

[car1pet] 19/8/2019 20:54

I'll believe it when I see it. I've held for 10 years and there has always been potential which is why I hold but it never materialises.it behaves like a research lab always looking at new ideas but never turns them into commercial propositions that will generate growth revenue and profit. I will wait another year.

[cumnor] 19/8/2019 20:52

Thanks FSE for your analysis of the results. I am happy with them-and the nice cash cushion. It feels like things are coming together and the company is about to step up a gear in terms of sales and profit. Next few weeks could be the last opportunity to get in before this moves onto another level, given its positioning in the cyber security field and its alliances.

[james dean] 19/8/2019 20:15

Agreed FSE

After many years I feel the company is making good progress IMHO.

.

[fse] 19/8/2019 19:34

The three main driving components in BATM divisions which will redefine the company are in Cyber security, NFVTime and related solutions/ ARM neoverse/ Ador diagnostics.

Cyber security


NFVTime link


Here is a link to Ador.


There are several other avenues that look extremely promising but the three I have highlighted above are revolutionary new approaches. Its these area that will drive revenues in the future.

[alphabeta4] 19/8/2019 17:22

Yes but they highlighted order backlog on the finals yet they are now talking about H2 weighting.

[fse] 19/8/2019 14:02

OK no surprises here but I agree rather underwhelming at first sight with respect to revenue. The company are breaking even on the back of existing products, and the main future sources of revenue are just starting to come on the market.

This is frustrating but this period is anything but business as usual.
They look to me to be "on their way" at this point in time. I have posted the most relevant outtakes from the 6 month results.


Outlook

-- Entered H2 2019 with a substantially higher order book
-- Networking and Cyber division expected to deliver significantly higher revenue in H2 2019 compared with H1 2019

-- Ramp-up in NFV-related revenue
-- First NATlab instruments to be installed in hospitals this year
-- Group expects to report good growth for full year 2019, in line with the Board's expectations
Commenting on the results, Dr Zvi Marom, Chief Executive Officer of BATM, said: "BATM delivered a good performance in the first half of the year, with increased sales in the areas that we have identified as key to our future growth. We established a strong backlog, with orders from new and existing customers in both divisions, which we expect to deliver in H2 2019 resulting in significant sequential growth. Consequently, we expect to report good growth for full year 2019, in line with the Board's expectations.

"Looking further ahead, we are gaining increasing commercial traction in two key areas that we believe will secure the success of BATM for many years to come. In the Networking and Cyber division, we are making great progress with our NFV strategy that will leverage the transformation brought by 5G that is accelerating worldwide. In the Bio-Medical division, our new molecular biology innovation attracted prominent US-based investors as well as several leading research institutions. We eagerly anticipate the first NATlab instruments being installed later this year. As a result, we are well-positioned for sustained growth and the Board continues to look to the future with confidence."

[owenski] 19/8/2019 13:33

Although the recent fund raises - cash injections yada ya - seemed to make sense, they raised a red flag for me.

[sphere25] 19/8/2019 13:16

Agree with the comments on this one. Looks like a short this.

I can see why Ennismore have been building a short position here - terrible results. No growth, burning through cash, receivables look suspect and plenty of jammy jam!

I'd be surprised if Ennismore didn't continue building their short here. This one looks grossly overvalued.

[mr hangman] 19/8/2019 08:59

Will be interesting what Simon Thompson of the IC has to say

[car1pet] 19/8/2019 08:57

the usual "jam tomorrow" message from Marom. how many years does he need?

[enormouswillie] 19/8/2019 08:22

evans above :-)

[buywell3] 19/8/2019 07:37

uninspiring to be honest john