Small Cap Value Report (27 Mar 2017 - Part 1) - BVXP, DPP, SAL

Monday, Mar 27 2017 by

Good morning!

I'm reporting on 3 companies today - Bioventix, DP Poland, and SpaceAndPeople. Then this afternoon I'll be interviewing the CEO & CFO of Tracsis (will publish the audio of that tonight).

EDIT: here is my audio interview with Tracsis, recorded this afternoon, which I hope you find interesting. Thanks to readers who submitted most of the questions I asked.

Graham is also working today, and is reporting on results from: Elecosoft, K3 Business Tech, and YouGov.

For logistics reasons, Graham's work is in a separate article today - which is here.

Bioventix (LON:BVXP)

Share price: 1840p (up 4.2% today)
No. shares: 5.1m
Market cap: £93.8m

Interim results - for the 6 months to 31 Dec 2016.

These are sparkling interim figures.

The company says it doesn't hedge forex, therefore that has given a 15-20% uplift in reported sterling values for sales denominated in foreign currencies. Looking back to last year's results, 5.7% of turnover was UK, and the rest was overseas. So there's no doubt that unhedged forex will have had a major boost to these results.

Amazingly high profit margins will have further helped, profit before tax of £2,484k is an astonishing 79.5% of revenues - I don't recall ever seeing such a high net profit margin.

Profit growth is 49% against H1 last year, which is terrific. Although, I reckon forex movements will have been a major driver of that.

Balance sheet - looks terrific. Net cash has risen to £5.1m, and the company is paying out decent divis now. Debtors look high, but I flagged that last time, and there was some reasonable explanation for it, but I can't remember the detail, but it's not a worry anyway. There are hardly any creditors.

New products / outlook - there's some interesting stuff in the narrative about new products. It's outside my remit to try to work out the future prospects of the company, but it sounds interesting.

My opinion - this is a unique company. It's absolutely tiny, with only about a dozen staff, but clearly has some remarkable IP. That's delivering spectacularly high profits, and good growth as well, so I can certainly see the appeal.

Forex gains are layering on further gains too. So it looks an attractive share, providing nothing goes wrong. Apparently there are very long lead times for these products, which restricts competition. So it looks as…

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Bioventix PLC is a United Kingdom-based biotechnology company. The principal activity of the Company is the development and supply of antibodies. The Company specializes in the development of sheep monoclonal antibodies (SMAs) for use in immunodiagnostics focusing on the areas of clinical diagnostics and drugs of abuse testing. The Company's non-vitamin D business consists of antibodies, NT proBNP (heart failure), testosterone, Free Triiodothyronine (FT3) (thyroid hormone), estradiol, and various drugs, such as tetrahydrocannabinol (THC)/cannabis, and progesterone. The Company offers products for indications, such as thyroid, fertility, oncology, cardiac, vitamin D, drug of abuse, infectious disease and miscellaneous. Its sheep hybridoma technology produces cell lines that secrete SMAs. The Company offers a panel of SMAs to 25-OH D and has various 25-OH D2 and 25-OH D3 specific antibodies. It sells its products through direct sales and through distributors. more »

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DP Poland PLC is a United Kingdom-based holding company. The Company, through its wholly owned subsidiary DP Polska S.A., is engaged in the operation of pizza delivery restaurants. DP Polska S.A. has the exclusive master franchise in Poland for pizza delivery brand Domino's Pizza. DP Polska S.A. has the exclusive right to develop and operate and sub-franchise to others the right to develop and operate Domino's Pizza stores in Poland. The Company has approximately 20 Domino's Pizza stores in over five Polish cities, Warsaw, Krakow, Wroclaw, Gdansk and Szczecin, approximately 20 corporately managed and over 10 sub-franchised. more »

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SpaceandPeople plc is a United Kingdom-based media specialist company. The Company is engaged in marketing and selling of promotional and retail licensing space on behalf of shopping centers and other venues throughout the United Kingdom, Germany, France and India. The Company's segments include Promotional Sales, Retail, Head Office and Other. The Company markets, sells and administers promotional space in a range of footfall venues across the United Kingdom, including shopping centers, theme parks, garden centers, retail parks and airports. The Company offers a service covering from consultancy services to the provision and management of retail merchandising units in shopping centers. It enables venues to market, administer, promote and sell their promotional space. Its subsidiaries include MacPherson & Valentine Limited, SpaceandPeople GmbH, Retail Profile Holdings Limited, POP Retail Limited, Retail Profile GmbH, SpaceandPeople India Pvt Limited and S&P+ Limited. more »

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  Is LON:BVXP fundamentally strong or weak? Find out More »

21 Comments on this Article show/hide all

cojode 27th Mar '17 2 of 21

Hi Paul, any chance of a look at SAL .F/Y results out today. Poor by any metric but S/P up 50% as I write. Bonkers!!....or am I missing something?

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Ramridge 27th Mar '17 3 of 21

Re. Bioventix (LON:BVXP) The numbers are truly amazing.
ROCE : FY2016 = 51%, FY2015 = 46%
On today's results I make projected ROCE for full year to be north of 60% . .

This stock almost looks like a sustainable high flyer as discussed in a separate thread by Ed.

No position but seriously thinking about it.

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rajshah 27th Mar '17 4 of 21

Hi Paul,

Any chance you could have a look at Parity (PTY) whose recent results seem to indicate a long awaited turnaround in the fortunes of the company post the Swinstead era.


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herbie47 27th Mar '17 5 of 21

In reply to post #177825

Hi Ramridge, I have held Bioventix (LON:BVXP) for about 2 years, I think it was the first share I bought after I found this site. The share price did go down considerably last year, I topped up at 962.5p, there were doubts caused by their licenses expiring on one of their leading products and over whether there would be anything to replace it for a while. These doubts have now somewhat diminished. Sustainable high flyer maybe but I think there is some risk. It's also very illiquid and spread can at times be very wide currently 5.5% but I have seen it around 8% and also down to 1%, so a few things to bear in mind. The forecast EPS for 2017 is -8.5%, I would expect that to be upgraded now.

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chillyhill1 27th Mar '17 6 of 21

Cheers Herbie,

I don't hold but was thinking about it but was concerned about predicted EPS going into reverse as you mentioned. So I'm currently wavering.

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Whitbourne 27th Mar '17 7 of 21

In reply to post #177822

Deleted as I see Paul made exactly the point I was making, but better... is it possible simply to delete a post rather than just editing it?

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VegPatch 27th Mar '17 8 of 21

In reply to post #177837

Hi, there is a specific reason for the EPS likely going into reverse next calendar year. I mentioned it in depth in my write up in November. Its because the NT proBNP licence ends in August 2017. The company is hoping its new Troponin test will cover, then exceed, the shortfall on revenues from the loss of the NT proBNP test, but the timing on the launch of Troponin is not certain. Bioventix has developed an antibody used to detect the presence of Troponin in the blood stream which is a key indicator of heart attacks. This test has been licenced by Siemens who hope to launch it ex US later this year.

FWIW I see that kind of a temporary EPS decline as BIG opportunity as its the loss of a finite royalty agreement for NT proBNP whereas the majority of agreements the company makes these days are perpetual licences (apart from Troponin which is only a 15 yr licence as it was first signed before Bioventix had the financial muscle to sign perpetual licence agreements).

Any fall to around say 17x PE and I will back the truck up.

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Brackendale 27th Mar '17 9 of 21

Thanks Paul, any chance of covering Gama Aviation GMAA, they reported today?

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Trigger14 27th Mar '17 10 of 21

FYI Maynard Paton has written some good posts on Bioventix (LON:BVXP) on his blog for those interested in buying:

Blog: Quality Share Surfer
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runthejoules 27th Mar '17 11 of 21

Has anyone got any thoughts on Inspired Energy? Inspired Energy (LON:INSE) Great results but down due to some confusion about EPS figures...

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Samsgrandad 27th Mar '17 12 of 21

I hope no one oblects to me putting a link to a presentation for accesso Technology (LON:ACSO) who were reviewed last Tuesday. Vote down if you object. I watched it and was so impressed by the revenue streams being developed for the future. They are spending about $18M per year (about 1/6th of revenue) on R&D to give users what they want. The new CEO really gets service and talks and I'm sure will deliver a great future. Quality costs.

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chillyhill1 27th Mar '17 13 of 21

Thanks for your responses

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Ramridge 27th Mar '17 14 of 21

RE. Bioventix (LON:BVXP) Thanks for all the feedback, guys. It will make my task of analysing this share a lot easier.

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JPshares 27th Mar '17 15 of 21

I had to look up "transmogrifies"

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peterthegreat 27th Mar '17 16 of 21

If I could act as a polite devil's advocate for some of today's comments I would agree that the points made by Paul about D P Poland are indeed negative but that there are some positive points which might explain why the share price has risen about 75% over the past year (at the time of writing). I would suggest that the main positive is that investor's like businesses based on proven franchise models because of the financial characteristics of such models. The figures at D P Poland are also still generally moving in the right direction, albeit more slowly than one might like. I wonder if Dominos Pizza UK might also, at some stage be interested in bidding for D P Poland in much the same way that it has hoovered up the franchises for Norway, Sweden and Iceland in June 2016. Perhaps these underlying factors may explain why some investors still find this company attractive.
In relation to Bioventix, I would agree with the previous comment that the results are indeed amazing but I have not invested myself as I am concerned about the relatively high degree of risk at this tiny company. Although it lists many products, their markets tend to be mature. The company's statement today says "Revenue growth compared to the comparable half year has come from our vitamin D antibody (vitD3.5H10) in the form of increased physical antibody sales and royalties. The roll out of our customer's vitamin D assay products has advanced further towards completion." In other words revenue growth is dependent on one product supplied to a company which has not yet commercially launched it. I would also note that the company says "Significant troponin revenues during the financial year 2017/2018 are expected to offset the loss of revenues of around £800,000 from another product due to the expiry of the relevant agreement.". In other words, successful development and launch of the troponin product will be needed for longer term revenue growth. Whether you invest in this company must surely depend on your assessment of the vitamin D antibody and troponin products as these are needed to drive the company's growth. I must admit, even with my biotechnology background I find it hard to assess the future for these products so I have played safe and not invested. However, I would not discourage anyone from investing and I know one of my favourite fund managers, Keith Ashworth-Lord, is a fan of Bioventix and diagnostic antibodies are a very nice area because of the high profit margins, however for many years I have preferred to hold Abcam because of more broadly based portfolio of antibody products.

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iwright7 27th Mar '17 17 of 21

No one has yet mentioned Elecosoft (LON:ELCO) a £32M Mkt Cap construction software company which has today published a strong set of final results. 92Q and 95M with >85% GM and operational gearing. Beaten the brokers forecast and is under the radar. Good start to the new trading year too....

..."I am also pleased to say that the current year has started well, our financial position is strong and Elecosoft is particularly well placed post-Brexit from a trading standpoint."

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herbie47 27th Mar '17 18 of 21

In reply to post #177903

See Graham's report.

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cojode 27th Mar '17 19 of 21

In reply to post #177843

Thanks Whitbourne for your pre-Paul response. Having read the FY results earlier I take all the points you made however was surprised by what seemed a wholly unjustifiable increase in the S/P. Much of the news was already factored in.So could understand c.15 even 20% hike, but 50% left me flummoxed. I sold out at 23 having bought in at 43,27 and 17 (wt'd ave of 29). Pleased to have exited even at loss. Waste of mental energy as Paul would say. Thanks again for your response.
PS and when you can't even get the correct year end (16 v 15) then management lose credibility no matter how good they actually are!!

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Modform 27th Mar '17 20 of 21

BVXP, it's a gem, it will be another ABC in years to come

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 Are LON:BVXP's fundamentals sound as an investment? Find out More »

About Paul Scott

Paul Scott

I trained as an accountant with a Top 5 firm, but that was so boring that I spent too much time in the 1990s being a disco bunny, and busting moves on the dancefloor, and chilling out with mates back at either my house or theirs, and having a lot of fun!Then spent 8 years as FD for a ladieswear retail chain called "Pilot", leaving on great terms in 2002 - having been a key player in growing the business 10 fold. If the truth be told, I partied pretty hard at the weekends too, so bank reconciliations on Monday mornings were more luck than judgement!! But they were always correct.I got bored with that and decided to become a professional small caps investor in 2002. I made millions, but got too cocky, and lost the lot in 2008, due to excessive gearing. A miserable, wilderness period occurred from 2008-2012.Since then, the sun has begun to shine again! I am now utterly briliant again, and immerse myself in small caps, and am a walking encyclopedia on the subject. I love writing a daily report for on most weekday mornings, constantly researching daily results & trading updates for small caps. Cheese! more »


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