Sourcebio Share Discussion Threads

[brummy_git] 29/6/2021 05:22

Just in case you missed it yesterday.

Marvellous insights from Christopher Mills of Harwood Capital - a world class investor - talking about top quality stocks, such as SourceBio.

Heaven personified

www.linkedin.com/posts/paul-hill-a5994116_vox-markets-fund-manager-interview-with-chris-activity-6815288599295123456-BgJJ

[smithless] 16/6/2021 09:16

Just listened to the Q&A at the AGM put out by Invest Meet Company and the FD and Liberum its broker still happy with the forecasts out in the market, so perhaps I've been to pessimistic about the numbers

[rivaldo] 14/6/2021 14:54

A good summary of the investment case by Vox Markets:



Extract:

"View From VOX

There is little doubt FY20 was a transformational year for SBI as the Company repositioned its products and services to face the rapidly expanding COVID related testing markets, whilst broadening its services beyond PCR testing.

Today’s update shows the Company’s year-on-year growth trajectory remains on track with ‘peak earnings’ from travel related COVID testing expected to heavily weight earnings into 2H21 following, amongst other things, addition to the UK Government's approved list for Day 2 & Day 8 coronavirus screening for all international arrivals for both PCR testing & genome sequencing.

Whilst some investors may be concerned that travel related COVID testing earnings re expected to peak during the summer months, SBI offers safe harbour as all its other divisions (Healthcare Diagnostics, Genomics & Stability Storage) have now returned to pre-pandemic levels, as elective procedures begin to return to normal.

Analysts are forecasting FY21e EBIT of £55.6m on sales of £156.8m - closing the year with c.£50m of net cash. The latter providing plenty of fire-power for M&A to further expand internationally & broaden the product portfolio as highlighted in today’s update.

As such, analysts are assuming the base business alone could deliver £9m of EBITDA on revenues of £40m by 2026, which on a 14x multiple would theoretically be worth £126m. Equivalent to SBI’s current mkt cap."

[jane deer] 14/6/2021 14:30

Bizarrely, the difficulty in valuing SBI is not so much the long-term prospects but trying to figure out how much cash it will generate in the next couple of years from the Covid testing regime. This depends on international travel from the UK being permitted - and then on passengers being allowed to travel/return being controlled by testing (rather than vaccination) - and then on SBI getting a good market share of this business. There is such a wide range of possible outcomes and little concrete to build any forecast around.

[boonboon] 14/6/2021 11:37

I think 2023 figures might be light. I expect there to still be some testing and the base business should see strong organic and inorganic growth I expect.

[supernumerary] 14/6/2021 11:19

I doubt they'll just hand cash back to shareholders in any sort of one-off deal. If they're cash-rich a modest progressive dividend policy might attract a different sort of investor, hopefully one with longer timescales in mind.

They're putting too much emphasis on acquisition for me not to believe they've got something in mind. I don't see it as a problem, as long as it's the right company at the right price. Agree using undervalued shares is probably not the best idea, but cash up-front and a strong earn-out would be fine.

[smithless] 14/6/2021 10:05

pireric - you say it absolutely needs earning this year and in 2022 to come, which would leave it with £73m in cash by YE 2022 according to brokers forecast. That would put the business on a current enterprise value of £45m, so not essential. As the business was doing nearly £30m in 2017 and due to surpass that in 2020 pre-covid, I think Liberium's forecast for FY2023 of £32m looks too low. All up in the air at present, but will continue buying at or below the placing price, as my base assumptions of between £45-50m cash by the end of 2023 remains, with £6m of EBIT for the same year. This EBIT figure assumes no acquisition's, because to do so at the current share price would make no sense - 200p+ yes - anything below that and it better off just hand cash back to shareholders. Hopefully get some numbers in the H1 trading update nxt mth.

[mr euro] 14/6/2021 09:28

THe statement reminds me of every time the CEO gets in front of the camera.

No clarification of the numbers and seriously, why use the word "but" here. I dont know if they are trying to pull the wool over peoples eyes or just plain stupid. The comms person who put this together needs to be fired.

"The Board is pleased with progress in the year-to-date BUT recognises that it expects peak levels of revenue and earnings to be generated from the anticipated high levels of travel related testing expected in the coming months."

[boonboon] 14/6/2021 08:39

I can possibly see estimates being revised down slightly for this year as the predicted increase in travel testing is delayed, but increased for next year, as it looks like testing will be around for longer.Overall I think it's a net positive.

[pireric] 14/6/2021 08:35

They wont be paying anywhere near 15x covid boosted earnings given the longevity is short.

The issue from my observers standpoint is that you absolutely need the earnings this year and in 2022 to come in and bolster the balance sheet. Because if they dont, and this business meanders back to what is forecast for 2023 without the big cash injection, the stock is not massively attractive (32m revenue, 5.4p of EPS)

Today is more of a pushout on those demand peaks. Id be surprised if Liberum's forecasts were going up rather than coming down, but lets see

Eric

[smithless] 14/6/2021 08:09

Spoke to a friend who buys these businesses, packages them and sells them onto VC's. They acquire them on EBIT multiples of 15x, Sourcebio is currently on forecast P/E of 2.8x.........? OK, I think the forecasts are weighed heavily to a perfect scenario, thus H2 weighted, but even if these forecasts are 40% out its still v.cheap and with c £30m in cash at the Y/E.

[mr euro] 14/6/2021 07:32

Thanks Brummy-giy, this seems about right and is important;

Here analysts are forecasting FY21 EBIT of £55.6m on sales of £156.8m - closing the year with c.£50m of net cash. The latter providing plenty of fire-power for M&A to further expand internationally & broaden the product portfolio.

As such to me, the base business alone could deliver £9m of EBITDA on revenues of £40m by 2026. Which assuming a 14x multiple, would theoretically be worth £126m. Equivalent to #SBI’s entire mrkcap – implying Covid testing & the cash is in the price for free.

[jaf111] 14/6/2021 07:30

Overall sounds positive but (as is often the case not just with SBI) there is a lack of hard numbers....

[boonboon] 14/6/2021 07:30

Full year revenue last year was around £51 million. The forecast for this year is over £150milllion.So we could currently be on for £100million and be below forecast but significantly up on last year at the same time.I'm not saying that's the case but I don't think we're ahead of the £150 million forecast.

[charlieej] 14/6/2021 07:27

I think you should read it again

[boonboon] 14/6/2021 07:26

That was always going to be the case with testing for the full year this time round. Doesn't mean it's ahead of their forecast.

[mr euro] 14/6/2021 07:25

Boonboon - You need to read it again lol How can you miss;

SBI have confirmed that revenues, earnings and cash generation are "significantly ahead of the equivalent period last year".

[brummy_git] 14/6/2021 07:25

Encouraging AGM trading update from SourceBio today.

Find out all the analysis & news here.

www.linkedin.com/posts/paul-hill-a5994116_sbi-activity-6810084800301465600-_H5m

[boonboon] 14/6/2021 07:20

Did I miss the trading ahead of forecast bit? Don't remember reading that. If anything the peak they were expecting has been pushed back. So maybe slightly below forecast at the moment?However all these new variants means testing stays relevant and will do so for longer.

[rivaldo] 14/6/2021 07:18

Looks good to me. In particular the market should be very reassured by:

"The Group's base business lines have now all returned to pre-pandemic levels of trading",

SBI have confirmed that revenues, earnings and cash generation are "significantly ahead of the equivalent period last year".

Acquisitions are looking increasingly likely, and in particular today's narrative stresses that they should be earnings-enhancing.

And of course testing will be huge once restrictions begin to lift.

[mr euro] 14/6/2021 07:17

The peak maybe slightly pushed back as we wait for travel. As some of these pathetic governments are acting globally, I dont see testing going anywhere for years.

[boonboon] 14/6/2021 07:10

So looks like the peak of testing we are forecasting has been pushed back somewhat by the delay in travel reopening. However it should push the whole timeline back and make the testing division relevant for longer.

[mr euro] 14/6/2021 07:09

Nice statement;

- Other businesses returned to pre-covid levels
- Trading well ahead of forecast
- Gearing up for travel to re-open

[masurenguy] 14/6/2021 07:08

The Executive Chairman's AGM statement:

"SourceBio has continued to trade well since 31 December 2020 with revenues, earnings and cash generation in the year-to-date significantly ahead of the equivalent period last year.

In relation to COVID-19 testing opportunities, the Group has moved quickly to evolve with the fast-paced and ever-changing market requirements necessary to support the ongoing testing needs in battling this pandemic. The Group remains focussed on expanding its offerings, technologies and routes to market and has also pivoted away from the heavy reliance on PCR testing for the Department of Health and Social Care (DHSC) that initially underpinned the Infectious Disease Testing business unit. SourceBio now supports a much broader portfolio of customers with whom we are already working or who are part of our growing pipeline. The Board is pleased with progress in the year-to-date but recognises that it expects peak levels of revenue and earnings to be generated from the anticipated high levels of travel related testing expected in the coming months. The indicated demand of such travel related testing has provided the impetus to further expand the capacity of our Nottingham laboratory. We are also pursuing additional laboratory capacity elsewhere in the UK in order to cope with the anticipated peak in demand. If the forecasted volumes of business materialise, we would expect the 2021 financial results to be materially second-half weighted.

The Group's base business lines have now all returned to pre-pandemic levels of trading. In the Healthcare Diagnostics business unit, we are pleased to report that we have seen progressive increases in the volume of Cellular Pathology business returning to us in recent months as the numbers of elective surgeries now appear to be increasing with some momentum. This business was the final offering within our three well-established business units (Healthcare Diagnostics, Genomics and Stability Storage) to return to more regular pre-COVID-19 levels of trading. We continue our pursuit of strategically relevant, earnings enhancing acquisitions to augment the growth of our established business units and to further strengthen our capabilities and offerings to customers. The key criteria when exploring potential acquisitions will be how we can integrate these businesses into our current model to achieve accretive earnings. The Group remains well positioned to support its customers and their requirements and we remain optimistic for the remainder of the year and beyond."

[boonboon] 12/6/2021 17:35

Still high testing levels. Can only see it increase once travel opens up. I think Source are going to benefit from testing for a good while yet. htTps://coronavirus.data.gov.uk/details/testing