Venture Life Share Discussion Threads

[disc0dave45] 18/8/2021 08:53

Only about £21m of the RCF left after how many months!.
What’s the conditions for the extra £20m, can’t see they’ve said.
IMO 3p eps tops.
Why keep ignoring the facts that the BOD are untrustworthy?!.

[rivaldo] 18/8/2021 07:34

I completely agree with ST that VLG looks cheap at these levels and there's been a huge over-reaction.

VLG are forecast to make 6.21p EPS next year after the acquisitions already completed, and including almost nothing for hand sanitiser and Dentyl China.

That's a P/E of just 11.3 at 70p.

Then there's further upside from additional acquisitions, and indeed from any further gains from sanitiser or from China.

[farnesbarnes] 17/8/2021 12:54

Further fair play to those who bought around 30p when ST first tipped, on the strength of director buying (for his 18 year son I believe?). Shame ST didn't follow up with a sell tip when a) BOD offloaded and b) issued a shed load of new shares. It's like no one cared that there was 50% more stock overnight, issued to a bunch of institutional suckers.

[red ninja] 17/8/2021 12:28

ST does not appear to believe he has had a left hand wallop, from 1109 :-

"In my view, there has been a massive overreaction to last week’s trading update – 2022 forecasts are in line with the expectations I outlined in last week’s article – and the share price fall is not only overdone, but is likely to prove a cracking buying opportunity. I am certainly not changing my 130p target price. BUY."

I guess it will become clearer who has had the left hand wallop in a year to eighteen months.


even fairer play to those who bought around the 64.5 - 65p level before ST updated backing.

[qs99] 17/8/2021 11:20

fair play anyone who has followed ST and bought the dip....

[melody9999] 17/8/2021 10:04

quite a few buys at under mid point of spread ie reported as sells. My buy was one of them at 69.58 when the spread was 69/71.

[sphere25] 17/8/2021 09:42

Interesting events here recently - unfortunate one for ST. Plenty of good calls from ST, but everyone gets a left field wallop now and again. That is the nature of the arena we participate in.

Following the move down, intrigued to see how the market reacts to the write up from yesterday. The sell off was on massive volume at over 6 million. VLG has rarely traded that much. You can get the odd bouts of large shares being exchanged, but to get a sell off like that on very significant volume really shows the market voting with its feet and a real distrust in management.

Normally the shares don't recover quickly when you get that kind of a thumbs down, but there can be some very short term overreactions that get bought back, up so just watching in to see if the buying does pick up to at least match that 6 million.

VLG has currently traded just over 2 million and there are sellers in size drip feeding at 69.5p (edit and now 69.76p) at the moment, closing off that 70p mark. There are some rogue buys going through at full ask to try to encourage market participants to buy (see this alot when there are sellers in size at work).

It looks like buying needs to pick up significantly from here to get a bounce or the strength today could get sold into.

All imo
DYOR

[melody9999] 17/8/2021 08:45

Hew - I think that VLG might have reported the Chinese distributor issue earlier. But the hand gel is just market demand. Overall, with other product lines performing well, it is not clear to me that management should have put out an additional RNS before the TU.

Having said that, given the share price reaction, it will certainly focus management's attention on the issue.

Meanwhile I concur with ST that this is a buying opportunity

[hew] 17/8/2021 08:15

Re ST, IMO, crunching numbers cannot compensate for what I perceive as a lack of prompt information from management.

[sev22] 17/8/2021 08:14

Here is Simon Thompson's latest column released last night:

Venture Life: Investors overlook massive earnings upgrades.

It’s not often that a company releases a trading update, analysts upgrade their current year EPS estimates by 19 per cent and introduce estimates that indicate 38 per cent EPS growth next year, and the share price sheds a third of its value. However, that is exactly what has happened to Aim-traded Venture Life (VLG:65p), a developer, manufacturer and distributor of products for the self-care markets.

Clearly, investors have been spooked by news of materially lower sales of hand sanitising gels and sales of the company’s Dentyl products to its Chinese partner. In the first half of 2021, these two segments delivered £0.3m of combined revenue, down from £5.5m in the first half of 2020, which explains why Venture’s first half revenue declined from £16.8m to £13.8m. Please note the latter figure includes a £1.1m revenue contribution from the recent acquisition of BBI Healthcare, a highly profitable global market leading women's health and diabetes/energy management company. Excluding these revenue streams, Venture’s other legacy businesses performed well, delivering 9 per cent higher revenue of £12.4m in the six-month period.

The shortfall prompted house broker to rein in its 2021 revenue estimate from £33m to £29.2m for Venture’s legacy businesses, before accounting for the contribution from this summer’s earnings enhancing acquisitions which has prompted earnings upgrades. Though that’s disappointing, it is in no way a disaster given that the same businesses posted revenue of £30.1m in 2020, so effectively their revenue could only decline by 3 per cent year on year. I am not sure that many investors selling out have grasped this fact.

True, the overstocking of hand sanitising gel in retail channels (that resulted from panic buying last year) will take time to unwind, so the contribution from this opportunistic segment isn’t going to be anything like last year. However, analysts weren’t factoring much in the way of second half sales in any case.

More importantly, Venture’s partner for Dentyl in China is still suffering from the effects of the Covid-19 lockdowns in 2020 on its offline business, so is not taking new stock at the rate anticipated when it entered the distribution agreement in 2020. With a debtor balance of less than £300,000 outstanding, below the provision made in last year’s accounts, Venture could terminate the distribution agreement, as it’s entitled to, and take its business elsewhere effectively at nil cost. Chief executive Jerry Randall confirmed that he is talking to other European based companies which have operations in China with a view to entering an agreement with them unless the current distributor fulfils its obligations.

Mr Randall also points out that Venture’s order book (pre-acquisitions and excluding orders for the China partner) is higher year on year despite the lockdowns across many markets, and expects Venture to produce meaningful revenue and profit growth in 2021. Unfortunately, the lack of earnings guidance in last Friday’s trading update has left retail investors in the dark, which has exacerbated the share price fall. I can shed some light on the matter.

Crunching the numbers

House broker Cenkos Securities produced a detailed note for clients which included material earnings upgrades, even if investors have ignored them, or perhaps more likely are simply unaware of them.

The broker expects BBI to produce annual gross profit of £6.1m on revenue of £10.5m in 2021, and has taken a seven-month contribution from this high margin (58 per cent) business in its 2021 forecast. Cenkos also expects the more recent acquisition of Helsin Healthcare’s oncology support products to deliver 2021 gross profit of £1.3m on sales of £2.5m, and has embedded a five-month contribution into its 2021 forecasts.

Combined the two acquisitions add £6.74m to 2021 revenue which when added to Cenkos’ £29.2m reduced forecast for Venture’s legacy business means that annual revenue should still rise 20 per cent to £36m. On a gross margin of 43 per cent this produces gross profit of £15.6m, up from £12.8m in 2020 and £14.3m previously forecast, hence the upgrade in current year Ebitda from £7m to £8.4m and the £1m upgrade in operating profit to £5.6m. On this basis, earnings per share (EPS) rises by 19 per cent to 4.53p. Mr Randall is comfortable with these forecasts. He also notes that proforma net debt of £5m (after accounting for all acquisitions) should unwind to Cenkos’ forecast (£2.1m) by the year-end after factoring in the second half profit contribution and working capital flows.

More importantly, the cost savings (staff costs, facilities etc) and revenue synergies (extension of distribution agreement into new territories) from BBI underpin bumper profit growth in 2022, hence why Cenkos believe that BBI can contribute £7m of gross profit (up from £6.1m forecast in 2021) on £12.1m revenue next year. Analysts also believe that Helsin will generate gross profit of £1.6m on revenue of £3m in 2022, too, a sensible prediction given that sales are set to rebound as hospitals restart oncology treatments post pandemic.


2022 earnings growth materially under priced

The point is that the contribution from both acquisitions accounts for 40 per cent of Cenkos’ £21m gross profit estimate for 2022 and a third of its £46m revenue estimate. Their contribution de-risks the investment case by diversifying the product offering, while offering a source of profit growth by reinvigorating the brands through self-help measures. Moreover, the acquisitions generate higher gross margins, which is why Cenkos expect Ebitda to rise from £8.5m to £11.95m in 2022.

To put that figure into perspective, it’s more or less in line with the upgrade I was looking for in my article last week (‘Exploiting an earnings upgrade opportunity’, 10 August 2021). So, with Ebitda forecast to rise by £3.5m and depreciation charges and amortisation charges only rising by £0.5m, then effectively 85 per cent of next year’s Ebitda growth should be converted into operating profit, hence why Cenkos expect operating profit to rise from £5.6m to £8.5m in 2022 and deliver 38 per cent higher EPS of 6.21p. On this basis, the shares are trading on a miserly, forward PE ratio of 10.5.

If anything, the risk to 2022 earnings estimates is skewed to the upside. That’s because Randall confirmed that the company has firepower of £20m plus through Venture’s new bank facility to make further earnings accretive acquisitions.

In my view, there has been a massive overreaction to last week’s trading update – 2022 forecasts are in line with the expectations I outlined in last week’s article – and the share price fall is not only overdone, but is likely to prove a cracking buying opportunity. I am certainly not changing my 130p target price. BUY.

[melody9999] 16/8/2021 22:19

I agree with Simon Thomson from the Investors Chronicle that the share price fall has been a massive over-reaction; hence why I did not sell a single share. His summary below:

So, with Ebitda forecast to rise by £3.5m and depreciation charges and amortisation charges only rising by £0.5m, then effectively 85 per cent of next year’s Ebitda growth should be converted into operating profit, hence why Cenkos expect operating profit to rise from £5.6m to £8.5m in 2022 and deliver 38 per cent higher EPS of 6.21p. On this basis, the shares are trading on a miserly, forward PE ratio of 10.5.

If anything, the risk to 2022 earnings estimates is skewed to the upside. That’s because Randall confirmed that the company has firepower of £20m plus through Venture’s new bank facility to make further earnings accretive acquisitions.

In my view, there has been a massive overreaction to last week’s trading update – 2022 forecasts are in line with the expectations I outlined in last week’s article – and the share price fall is not only overdone, but is likely to prove a cracking buying opportunity. I am certainly not changing my 130p target price. Buy.

[farnesbarnes] 16/8/2021 20:35

Just learned Jerry Randall was ex Sinclair Pharma. Bit of digging on advfn suggests he didn't look after shareholders at SPH either.

The man has form.

[toptomcat] 16/8/2021 17:13

ST not flinched. Retains 130p price target from last week and outlines rationale in IC article released tonight.

[disc0dave45] 14/8/2021 15:21

Yep, wonder as well if ST's article was a nice pump to exit!.

[its the oxman] 14/8/2021 15:01

Be interesting to see where this settles. Will it bounce or drift lower, suspect the latter. If you can't trust the management it's only more difficult and a decent rating is probably unlikely. Hate it when management sell knowing horrendous news is almost certainly just around the corner.

[rivaldo] 13/8/2021 16:10

Absolutely redwing1, I meant the recently acquired Kelo-cote production rights.

[redwing1] 13/8/2021 15:34

Rivaldo - I'm pretty sure they don't own Kelocote. They just manufacture for Alliance Pharma.

Red flags everywhere with VLG. Directors selling whilst raising funds to make deals says it all. Chinese mega order but virtually no actual sales is dodgy too.

Fetch me the barge pole!!!

[jockthescot75] 13/8/2021 15:28

Sold my entire holding. Completely untrustworthy. I can’t think of a worse RNS in the past few years (for my holdings).

[disc0dave45] 13/8/2021 13:47

Wouldn't believe a word this BOD says. So China sales down 91% in H1 yet in their finals in March, all they said as an update was deliveries had commenced, jeez Q1 deliveries would have been virtually zero yet they preferred to gloss over it.In April last year they said they'd received an order from China for €7m (about £6m), but at year end sales were only about £1.6m, again all they could say was they'd seen some "challenges".IMO Can't see 3p eps this FY and on a PE of 23 with potentially more pw's to come then stay clear.Bunch of cowboys IMO, no wonder they offloaded a stack at 90p.

[qs99] 13/8/2021 11:49

Riv, that all may be the case but the lack of delivery mate on China is awful, likewise they've done 2 deals and raised an RCF then delivered IMO a profit warning which will not endear them to anyone.

Management need a time of delivery to consensus IMO before they will get a decent rating again.....maybe I'm wrong but all a little smelly and selling pressure may see it lower and will take newsflow and positive newsflow IMO to get this motoring....

DYOR

[rivaldo] 13/8/2021 11:30

...this management have increased the share price by almost 150% to the current 73.5p in the last 18 months or so. Not so bad.

Cenkos have now raised their forecasts to 4.53p adjusted EPS this year, rising to 6.21p EPS next year.

That's a P/E of 16.2 falling to just 11.8, now incorporating the acquisitions.

It's still possible that there'll be another earnings-enhancing acquisition or two soon.

Management have earned the market's distrust with (a) share sales and (b) failing to flag the extent of the drop in the "one-off" sales of hand sanitiser and Dentyl China.

Nevertheless, this doesn't mean that the core business is not a good, steadily growing business with lots of growth potential from both existing production facilities and the current product portfolio.

Just look at the success of the relatively recently acquired Kelo-cote, which presumably is part of the reason why the order book excluding the "one-offs" is up 9%.

IMO this company may, looking forward, be considered to have been an absolute bargain at these levels.

EDIT - thanks for that Simon. Interesting to see the difference between the Cenkos and Singer numbers. Singer show absolutely no workings or detail, whereas Cenkos' note is far more detailed.

I note that Singer now have a 130p fair valuation "using a peer-based 15x EV/EBITDA multiple".

[simon gordon] 13/8/2021 11:29

Singer - 13/8/21:

2021
T/O - 35.5m
PBT - 5.5m
EPS - 3.1p
Net Cash - zero

2022
T/O - 45m
PBT - 6.7m
EPS - 3.8p
Net Cash - 5.9m

What's a fair forward multiple 13x?

[mallorca 9] 13/8/2021 10:09

What a shambles this Company is !
Hopeless and untrustworthy Management.
Get out !

[melody9999] 13/8/2021 09:06

market clearly expecting a lot more but this is overdone now IMV.

The order book for the business (excluding any orders for the China partner and the acquired BBI business) is higher than at the same time last year, indicating good growth in the core business

guess I should not be surprised that COVID has had a big impact - but the world will progress towards normality as they indicate in the outlook:

The second half will have a more meaningful contribution from the new acquisitions and the business is well placed to benefit from the confidence that can be seen as the UK and global economies recover from the impact of Covid. The Board is excited by the growth opportunities available to the Group and looks forward to reporting further delivery on its strategy.

Simon Thompson certainly has egg on his face this morning - wonder what he will say?!