There is, for we long suffering shareholders, light at the end of the tunnel though a first read of results from Yourgene (YGEN) for the six months to 30 September 2018 does not exactly bring a warm feeling. But there is a new CEO, Lyn Rees, and he seems to have a clue. Of course the Illumina patent issue was only settled during this period and that should be born in mind. To the numbers…
Sales increased by 45% to £3.9 million leading to a gross profit of £2 million up from £1.3 million. Admin/PLC costs eased by 1% to £4.4 million, of which £3.8 million were cash costs. But Rees has now identified a further £1 million of costs to come out. And sales continue to increase fairly rapidly and so the push towards breakeven is accelerating. Is there enough cash? At the period end it was just £200,000 hence the £3.1 million placing in October. Is that enough to take Premaitha through to breakeven and profitability?
We are not sure. We suspect there may be a small placement in the next calendar year. But we note that for the year to March 31 2020, house broker FinnCrap – guided by the company – has upped its EBITDA forecast from £500,000 to £600,000 which suggests that cash breakeven may be achieved within nine months on current run rates. Thereafter operational gearing kicks in big time so we would expect a massive ramp up in profitability.
At 7.8p, the market cap is just £32 million. That more than discounts the risk of a small placement. It fails massively to discount the possibility that within a couple of years, as sales continue to race ahead and with the gross margin picking up, this company could well be delivering post tax profits of £5 million plus. And that is why the shares are a strong buy. House broker FinnCrap has a 16p target. Though we regard FinnCrap as a useless and discredited broker we regard that target as more than realistic.
Filed under: Yourgene, Purplebricks, UK Investor Show, binary options, CFDs, TomWinnifrith.com, HotStockRockets
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