Ekf Diagnostics Share Discussion Threads

[retirementfund] 16/7/2020 11:01

Renalytix Ai flying this just keeps getting better in my view.

[malcolmmm] 16/7/2020 08:29

Testing is vital and there will be a vaccine, very promising news from Oxford Uni that a double wammy vaccine is showing great promise. The world wont come to an end despite the doomsters predications which have gone on for centuries

[dibs61] 15/7/2020 14:10

wan agreed fcf very attractive indeed.

On share price there's clearly an overhang currently. I suspect its due to the dumping on news that was obvious yesterday and held back gains which could be reasonably expected on the back of such an outstanding update. Once overhang clears I can see a slow steady rise here into the 50's.

[wan] 15/7/2020 10:47

Free cash flow generation is perhaps overlooked, and I know from experience how important that element is. In short, if your company isn't making healthy underlying profits, the cash at the bank won't grow. In this regard, EKF's cash generation has been on a relatively steep trajectory.

[retirementfund] 15/7/2020 09:38

Markets are slow to react and investors tend to look and see something has gone up 40% and think it should retrace. Given the level of sales related to CV19 in the past few months I have an opinion that the re-rate is very underdone. The longevity is a question but the likelihood is this is going to be around for a long while and also likely we will see varying virus' in the future. The Bonanza I suspect will get greater over the coming months.

All in my view/opinion

[mad foetus] 15/7/2020 09:35

Should add that RENX is up 50p since 30 June so that's another £1.3m on the EKF holding. And with a US listing imminent there may be significant upside to come. Plus RENX has spun off a subsidiary and EKF will have a substantial holding there, valued at nothing presently but hasn't cost anything either

[dibs61] 15/7/2020 09:16

retirementfund - I totally agree with you I believe this stock is undervalued. For example, although it may be a crude measurement the stock was trading (presumably near fair value - but thats arguable) in the mid thirties just 3 or so months ago. It is now trading in the mid forties which represents an increase of roughly a third in share price
During the same period we have seen revenues transformed and likely will double or more in this financial year. That represents a dramatic upturn in earnings growth. This is not reflected in the share price You cannot just measure via PE ratio.

I think two things perhaps holding this back currently.
1.) There is a seller - dumping at 25k blocks typically.
2.) Market has doubts over longevity of the Covid test bonanza

If we can overcome just one of the above we start to move north. Remove both and its full on rerate time.

[tole] 15/7/2020 08:30

Cravencottage..Yes i got part of that trade reported after the close. Am using direct market access.. usually leaving smaller orders below the bid in hope of them getting filled. Especially helpful if there is a seller in the market and works best when the seller is looking to clear a line of stock. Usually use IG trading cfd's. But actually this trade was placed through trading212.

[retirementfund] 15/7/2020 08:10

This is a fascinating company and I do wonder which way they will go. At this time they are massively undervalued and the market has ignored yesterday's stunning upgraded results and outlook.

Withe their cash/asset position will they acquire at current levels may potentially receive a bid themselves. Next set of results will be stunning I hope they get there.

All in my view/opinion

[wan] 15/7/2020 07:57

To further underscore the level of testing demand -

14th July 2020
Quest says some COVID-19 test result wait times top 7 days, with no sign of improving

Dive Insight:
Despite their efforts to rapidly increase testing capacity, commercial labs such as Quest and LabCorp have been struggling to keep up with the growing demand for COVID-19 molecular tests as coronavirus cases and hospitalizations continue to rise sharply in some parts of the country.

Quest's latest update called out "specific drivers" for the soaring demand for diagnostic tests including: pre-operative patients undergoing procedures in hospitals and surgery centers; high-risk populations, such as those receiving care in federally qualified healthcare centers, nursing homes and correctional facilities; and individuals seeking testing from community drive and walk through events.

The American Clinical Laboratory Association, which represents LabCorp, Quest and other labs, warned that its members have seen a steady increase in the volume of COVID-19 test orders which are outpacing their testing capacities.

"While our suppliers of test platforms and reagents continue to be responsive to our need to add capacity, they are limited amid surging demand in the United States and globally," Quest said in Monday's statement.

Although Quest is finding it impossible to fully keep up with U.S. demand for coronavirus diagnostics, there are silver linings. The company early Monday reported preliminary second quarter revenues of about $1.83 billion, a better-than-expected 6% decline from the year prior. The company attributed the results to a recovery in its routine testing business as well as rising COVID-19 testing demand.

Full story -

Given the attributes of PrimeStore MTM, and the increasing delays referred to in processing tests, PrimeStore MTM sample contents remains intact and ready without the need for any cold chain logistics or storage, and thus PrimeSrore MTM does not add any limitations caused by the need for refrigeration, or refrigeration capacity.

[cravencottage] 14/7/2020 21:02

Tole

Was that your trade for 5540 @ 45p - Very good buy Sir...

How did you manage to procure such a trade?

I use II and have never seen it as an option..

All the best

[2toptrader] 14/7/2020 20:36

Bought a few as well this morning ( not the share price reaction I was expecting ).
Obviously there is the "temporary covid-19" boost to earnings argument on one hand but there is also the cash pile argument (which will have built up during the period) on the other hand. Together with the RENX stake ( post nasdaq listing) , the NTAV (net tangible asset value) will see a significant uplift by year end . I think that's the upside to the valuation here, let's see if mr market recognizes that in due course.

[tole] 14/7/2020 16:44

Managed to pick a few up in the closing auction at 45p. Will look to add some more in the coming days.

[cambridgedon] 14/7/2020 15:55

Thanks pldazzle/wan. All good points. I've been in here since 2011 so have some significant profits (not to mention patience!) I did sell a few in the mid 30's so looking so an entry to replace those as I agree there's a lot of potential.
Think a little consolidation will take place, but will look to buy in soon.
CD

[malcolmmm] 14/7/2020 14:42

imo these will consolidate a little longer then boom. Looking to sell something else to buy more here

[malcolmmm] 14/7/2020 14:41

Well undervalued, look at TILS going like the clappers, has a duel listing though

[wan] 14/7/2020 14:20

Dibs...No problem.

There is not much doubt that the current ramp in manufacturing capacity is all about servicing the increasing testing demand, which I think will continue to increase and remain high well into 2021.

We also need to consider the likelihood of preparations in terms of strategic stocks for future epidemics and pandemics by various countries, because I cannot imagine countries not wanting to put in place measures to react quickly.....much more quickly and indeed safely.

Current testing capacity is being outstripped by demand, so I don't think the current orders take account of any strategic stock building yet, but it must surely come!

For readers interest, PrimeStore MTM has storage life of 2 years, so any such strategic stock building is not the end of the manufacturing opportunity.

COVID-19 has taught the world to be prepared.....very prepared!

[dibs61] 14/7/2020 14:01

Judging by the share price action this is suffering from a bad case of sell on news. Such a typical phenomenon of todays market.

[dibs61] 14/7/2020 13:59

wan - sorry - I did not see your post above on PEG until after I'd posted mine! We clearly both had the same train of thought. :)

[dibs61] 14/7/2020 13:56

PE ratio is only one specific valuation metric - both current and forward. It does not however singly allow you to value the company based on future earnings growth.

For that we can use PEG. Let us assume that the current PE is 20 and we can expect future earnings growth of 25% pa the PEG ratio would be under one and make the stock look undervalued. But of course we don't have that forward visibility yet.

If we estimate that their sales will double this year to around £110m then the Price Sales Ratio is 2.1 x earnings - modest I would say. I think we can reasonably expect orders to grow further from this level given the global demand for tests. Is that demand likely to go away anytime soon? I would not imagine so, certainly not for as far ahead as we can see, perhaps a year or more...

In terms of EV rather than MC this is cheaper because they hold a lot of cash (and no debt)

Also they become dividend paying this year.

There's a lot to commend EKF.

[wan] 14/7/2020 13:44

edited above to PEG of 0.13

[wan] 14/7/2020 13:42

Pldazzle...Thanks for your thoughts/input. The title of this thread, I hope, is quite appropriate and accurate. I agree that a PE in isolation is meaningless.

As you mention, future growth will also be another factor/consideration. Some use the Price/Earnings-to-Growth – PEG Ratio to try and arrive at some form of conclusion. The lower the PEG ratio, the more the stock may be undervalued given its future earnings expectations. Adding a company's expected growth into the ratio helps to adjust the result for companies that may have a high growth rate and a high P/E ratio, a stock with a PEG of less than 1.0 is considered undervalued.

Based your arbitrary figure of £10m (circa 2p eps), this would represent earnings growth rate of around 150% (keeping things simple and in round figures).

PEG Ratio= PE/growth in earnings
20/150 = 0.13 which obviously indicates EKF as potentially being significantly undervalued.

So, it obviously depends on what ratio is used and the inputs used, but as you say the downside looks very limited and there is an inaugural dividend, and in my view decent growth prospects.
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[pldazzle] 14/7/2020 13:30

"(assuming most of it can be maintained)"

That's key though, isn't it!

It seems clear that, once we are rid of COVID-19, there will still be an ongoing demand for the current star product. However, will that demand be just as high as it is here and now in crisis times? And will the product continue to have growth potential above and beyond current levels? Your guess is as good as mine.

Should the answer be No, then a PE of perhaps 15 or less would seem more realistic: you're looking at what used to be called a nine days' wonder.

Should the answer be Yes and that can be conclusively demonstrated, then you might be looking at a PER of 25, 30 or even higher.

Caveat - None of the above should be taken as factual: it's my personal point of view only.