Optibiotix - buy targeting more than 100p by Christmas says HotStockRockets

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There is no news of new distribution or partnership deals in this release but fear not they will come soon. Very soon. But none the less, the latest update from Optibiotix (OPTI) on progress at Slimbiome is very positive indeed and, yes, Tata, is mentioned. The company starts by saying that thanks to its work with Knighton - part of Premier Foods - it has improved the formulation of Slimbiome making it easier to dissolve, greatly enhancing ease of use, flavour and mouth feel. Optibiotix asserts that this will provide a range of new product and application opportunities with partners in the bakery (e.g. in store bakeries), snacking, food service (e.g. coffee shops) and beverage categories and meet growing consumer demand for 'on the go' products.

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The new formulation will be sold both as part of the in-house GoFigure range but, more importantly, via a series of white label partnerships. We are told "New flavours and additions to the SlimBiome® and GoFigure® product range will be introduced in early 2018 including morning muesli pots, healthy bites and coffee and tea blends as part of a healthy lifestyle brand. This creates the opportunity for multiple revenue streams from sales of ingredients to food manufacturers, white label products to large retailers, and branded products in multiple presentations to meet the needs of a diverse range of national and international markets. This is all part of a series of ongoing developments with a number of international partners and large retailers to extend SlimBiome's® application into a broader range of 'Health & Wellbeing' food and beverage products." That sounds like blather and jam tomorrow but read on; Further product development is ongoing with a number of international partners to include SlimBiome® in territory specific applications including bakery products (e.g. cookies, tortillas), breakfast cereals (puffs and flakes), food toppings (e.g. salad, breakfast) as well as developing country flavour specific options for healthy snacks, yoghurts and cereal bars. These include Tata with specially formulated and flavoured products ranges for the Asian markets, and a number of US partners looking to improve the health and nutritional status of existing snacking, bakery and cereal products.

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Tata - remember them? Getting even a tiny share of the giant US and Indian markets will be transformative for Optibiotix's bottom line. Stephen O'Hara, CEO of OptiBiotix, commented: "This announcement updates investors on the significant progress we have made with partners developing new application and product opportunities to extend the use of SlimBiome® across a wider range of products opportunities and territories. We anticipate SlimBiome® being the first in a family of products to include: ImmunBiome, WellBiome, OptiBiome® and CardioBiome®, developed using our advanced microbiome modulating technology platforms, to meet industry and consumer need for scientifically proven products to improve health and wellbeing. As the promise of the microbiome materialises into a wider the range of applications and products and we extend into overseas territories the scale of the opportunity enlarges allowing us to fully exploit the revenue generating potential of our products." Quite right Steve!

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We noted in our recent special report that the company has already signed six deals for its LPLDL cholesterol product worth £250,000-£500,000 per annum at a gross profit level. That and the recent Slimbiome deal with Knighton (worth the same again or more) will be enough to deliver profitability in 2018. But the joy of this model is that there are so many more deals to come on LPDL (we expect at least four more by early 2018) and also on sugars but clearly also on Slimbiome and deals with folks like Tata could be on a whole different scale. With fixed costs covered new deals just see the cash drop straight to the bottom line. Today's statement reaffirms our thesis. In that special report we noted:

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"But we can say that on the deals signed to date sales should be at least £1.5 million and could well be well over £E2 million and that some sort of profit will be delivered. But by 2019 it is hard to see how sales are not going to be £4-5 million and thus profits £3 to £4 million with the potential for 2020 to be perhaps twice as big again. Thus on a forward PE of 25 you get a market cap of £75-100 million or 96.5p-128.6p by the time we are in 2018 ( just 10 weeks away). And that is what investors will be focusing on as 2017 becomes 2018. As 2018 rolls on folks will start to look at the run rate and start to make assumptions about 2020 which would make even 128p look like a modest target." Ends. We stand by that view. The shares are a buy at 74p and at up to 80p with a target to sell of well over 100p by Christmas. There will be more deals announced in the coming weeks and they are coming thick and fast now. That will drive the re-rate.

This article first appeared on HotStockRockets - to catch the next red hot share tip from the HotStockRockets team for just £5 click HERE

Filed under: Optibiotix, BOS Global, Adam Webb, Woodlarks, Boxhill Technologies, Tern, Premier Oil

2017-11-10 12:29:06

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