LON:VLG | Venture Life - In-vitro Clinical Trial

16th Nov '20 by Michael Tee

34 comments 1588 reads

#VLG.

Today's RNS is great news indeed.

When I spoke last week with Andrew Waters CFO, he went into quite a lot of detail about these trials but I did not write much about this in my note here on Stockopedia as I did not want to get side-tracked from the already excellent newsflow.

These are clinical studies at the University of Cardiff on a number of mouthwash brands including VLG brands Dentyl and I think Ultradex also. Dentyl is a unique formulation including CPC. There are 2 trials:

The first is a test tube trial and tests to see how quickly the virus is eradicated in a test tube. The result was released today show that Venture Life's two CPC based mouthwashes eradicated the SARS-CoV-2 (COVID-19) virus completely (>5log reduction, equivalent to 99.999%) within a 30 second exposure.

The second test is on infected people and tests the effectiveness of mouthwash at eradicating virus after 15, 30, 45 and 60 minute intervals. The result will appear early next year.

If effective, it is hoped that Venture Life's mouthwash brands Dentyl and Ultradex become part of the virus toolkit along with handwash, masks and social distancing.

https://www.investegate.co.uk/...

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Michael Tee

18th Nov '20

Thanks Ed. I just added a reply here to Paul / Mojomogoz which may help.

Hi Jack.

The strategy is not a Covid strategy at all. These trials are just a possible cherry on the cake. Please see my reply to Mojomogoz which gives quite a bit of detail. I have written 3 articles on here with detail after lots of discussion with CEO.

Strategy is 10% organic growth /year and 10% via acquisition.

Yes, I do now think that there is some mouthwash excitement in the price, maybe 100p might be right until FY which I think will lead to broker upgrades.

Michael

Effortless Cool

Hi mojomogoz,

You make good points, some of which I can pick up on below.

The sp is clearly priced for fabulous.

With a 12-month rolling forecast PE ratio of 18.7, versus a market median of 15.2, I don't consider Venture Life (LON:VLG) to be "priced for fabulous". However, if they deliver on their PEG ratio of 0.86, I would consider that fabulous.

Working capital is high relative to sales ...

Yes it is. This is part due to a regular H1 peak in receivables, payables and inventories, although that is as secondary factor. It is notable that all three are showing a downwards trend relative to sales, so the issue is gradually diminishing with scale.

I note that brand sales have shot up so have inter-segment sales (ie sales from manufacturing to their own brands biz). This needs some explanation..

I agree that specific explanation would be helpful, but I think this is very likely due to the new DISINPLUS hand gel. This is their own brand that they manufacture themselves, which might also explain why their brands profit margin has risen so much.

Vsihv

20th Nov '20

My key concern was cash generation on half year - fact that they are raising cash and directors are selling suggests cash generation is not that great.

A few days after an announcement using the fabled CoVid (which really did not say anything) and looking at the study itself, I am not sure what Dentyl did that other mouthwashes didn't.

Placing at a discount few days after CoVid announcement.

Mid market announcement on a Friday with directors selling - not indicative of a lot of confidence in the business, but I am sure there is a lot of institutional demand to satisfy.

Will leave each to their own judgement but quite frankly this does not pass the smell test

mojomogoz

Pump, pump, dump...

I think mgt just told you they don't really believe in the organic potential of the business they have...and perhaps that they've got something a bit wonky in their working capital (ie it hides net debt rather than delayed revenue).

My questions re durability of covid surprise, brand power, defence against bigger competition, what's going on in brand versus white label sales, why WC is so high, etc not answered. Also, why this raise when they've got that fat Chinese pipeline to fill up with what they already do and supposedly have nice cash flows?

Do you now value the 'bullet proof' balance sheet and that 2-3 years from now 'excellent' mgt will have made acquisitions sing in their model? Or do you you look at the earnings dilution and operational hiatus this flags and think it quite overvalued?

Speak to management and many will whisper sweetly into your ear whilst f.....

TBF there's a chance that they have a really nice scalable model and big plug and play potential...maybe they have sold this well to insider institutional fund managers and laid out the path really well to that...its possible...but it doesn't seem to be info sitting in sight of PIs

EmptyPockets

Hi guys,

Did you see today's news this afternoon of VLG placing another 40 million plus shares to raise £34-36M share price drop by 10p as at 4pm?

Caper4

28th Nov '20

I own 12000 shares in Venture Life and am still undecided whether to take up the rights at 90p. Still have a lot of confidence in the company but not sure I want to own anymore than I have already .

So I assume you will be taking up the rights Michael ?

Rusty2

I went to take it up but the amount was so small but my holding is somewhat less than yours. Now the share price has gone up, probably worth taking it up, if you have a sizable holding.

1st Feb '21

Have you sold yet Effortless?

Ted Striker

Thanks for this update. I find negative views are most valuable in my stock selection (saving me time and often money).

You're welcome.

That said. My scepticism isn't always right and (particularly during bull phases) I would benefit from being more believing...so adjust accordingly

No, still here, but not with 100% conviction.

I do have a small holding. It is disappointing today after what looks like a good update, that the shares are down 5%.

Clearly everyone must do their own work and views...that said, I would encourage you to look at the available and disclosed information from Venture Life (LON:VLG) closely, take note of their rampy RNS (IMO obvs) and look at how they report revenues on products (H1 was all about hand sanitiser really). China is reported as €168m minimum order over 15 years. So far they've done about €2m....so approx €12m pa for the next 14 years. If they start hitting that in 2021 then I'm totally wrong.

jonno

Hi Herbie47

Yes it is disappointing, but I can't see why management cannot be more forthcoming. They say that profits are ahead of market expectations but have chosen not to give an indication of what pre-tax profits are likely to be, but instead choose to focus on EBITDA. This is somewhat unsettling. I sincerely hope that the company is not being disingenuous.

I have a reasonable holding and have taken some profits, selling about 30% this morning. I remain invested and if I am doing the company an injustice and hopefully I am, I will benefit from a re-bound in the share price on the preliminary results and/or on news of the proposed acquisitions. In the meantime I have some cash to add to existing holdings in which I currently have more confidence

I take comfort from the fact that Mark Slater, one of fund managers I admire, continues, as far as I am aware to hold 15% of the company.

All the best

Yes I agree that they should not be using EBITDA although quite a few companies do. They do state " ADJUSTED EBITDA FOR YEAR ENDED 31 DECEMBER 2020 EXPECTED TO BE NOT LESS THAN £6 MILLION, MORE THAN DOUBLE 2019 ADJUSTED EBITDA."

Many companies don't even give any figures at all, just beat forecasts but fail to mention any figures.

I don't feel after this RNS that the company is worse than before but seems the market does not trust it.

I like Mark Slater but he does not always get it right.

Will S

I work in drug development services and I can tell you that 99% of the companies that have anything that could kill COVID have or are testing it on COVID. I've seen everything from a plum extract (not a normal plum but something from a hard to reach place) to a surfactant (think Fairy Liquid) being touted for COVID.

The complication is that the virus is more likely to be in the nose and respiratory tract so I'm not sure a mouthwash is much use medically. Maybe I'm wrong.

25th Mar '21

I've copied this from SCVR today to carry on my theme of Venture Life (LON:VLG) are pretty rubbish....

Ahhh, the Mephisto of guidance and reporting that is Venture Life (LON:VLG) ...

Market liking their results today as up 5%...taking valuation to 45x 2020 earnings if we use PAT and market cap at c.£107.5m.

Adjustments (mainly amortisation) will take you to c.20x 2020 p/e.....but given that the amortisation relates to acquisition intangibles inc 'product formulations' and development costs (really!...shouldn't they be expensed for a potions manufacturer?) the higher adjusted earnings to lower the p/e ratio looks optimistic.

Add in that H2 2020 sales of £13m were just a touch above the rate of H2 2019 (£10.8m) once the build in inventory is removed (£1.8m build from end of H1 2020 to end of year) -> £0.4m/4% YoY growth comparing H2 2020 to H2 2019 excluding the inventory build

Inventory patterns over time are interesting. As at end of 2020 they hold £8.9m of inventory. Their run rate revenue based on adjusting H2 2020 revenues for inventory build is approx £23-24m pa so they are holding 4-5 months of inventory....this doesn't make sense to me, why does a simple consumer products business 'over produce' like this?

They say they built inventory for Brexit at end of 2020....but then go on to say that UK revenue is only 16% of their total revenue in 2020. So if we take their half year revenue run rate of £11.2m they are implying that they built up a full half year of supply for UK market!

Inventory always seems to be high percentage of sales. Unwinding this inventory should lead to bumper profits given that inventory held at cost so the mark up on sale should be meaningful. But that never happens. Why? Is this inventory sitting on shelves in stores and they have promised to take it back if it doesn't sell? Or do they end up 'discounting' it and selling at cost? (Did they really make money on the China sales in 2020...or did they take knockdown goods?) And why the need to keep expanding production capacity when they aren't shifting more product?

There's much more going on with what VLG report that I've covered before. Unless China pulls through with a mega order I suspect investor expectations are way too high. Add in some inventory or intangible write down and I'm sticking to the view this can go sub 50p.

Of course, credulous investors gave them extra cash last year to do mystery things with....supposedly 3 projects were in immediate sight yet 4 mths later no news....but mgt did get to offload lots of shares in the placing (and then grant themselves some more).

Good luck....I think you'll need it

Venture life - In-vitro clinical trial

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Michael Tee

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