IPo-yeah
More good news from Britain's IP Group
Dear reader,
#1 IUG
I spoke positively about hidden value at IP Group’s holding Intelligent Ultrasound in my article “I spied a bargain”.
In that article I suggested a valuation by 2026 of £83m might be possible. Heartening then to hear today - two years ahead of that - that half its business has a proposed sale for £40.5m.
But is it selling half the business?
From a capitalised intangible assets perspective then yes, a £2.1m intangible being sold for £40.5m. But as a proportion of 2023 revenues it’s a sixth of revenue (£2m of £11.2m) albeit the part with a contract with GE Healthcare and an ongoing royalty, and which was growing rapidly.
Is IUG selling the crown jewels? No, the ScanTrainer Simulation and Needletrainer business is a £9m turnover business with 2024 forecast growth (by Cavendish) from £9m to £12m turnover. In no small part due to its new endometriosis training, the heartworks training, lines and lungs training added during the past year.
It’s a fact that 176m women (and humanoids who no longer identify as women) suffer from endometriosis. Horror stories abound of the many years - 8 years on average actually in the UK - it takes to get a diagnosis. Members of the Oak Bloke’s copse are among those statistics - and experience of slow, inaccurate, ignorant diagnoses. Forget about letters after their name, the GP in question was granted certain prefixes before theirs. This story may resonate with female readers or those who identify differently, but biologically still have wombs.
Therefore it’s no surprise that the simulation and training part of Intelligent Ultrasound has bright prospects ahead regardless of today’s news.
Sale of assets:
The proposed £40.5m transaction values IUG’s Clinical AI Business at 33.8 times full year 2023 revenues, and a premium of 70.9% to Intelligent Ultrasound's closing share price yesterday. Today it’s up 44.8% valuing the whole business at £34m (in other words buy IUG and you get £6.5m for free and a free business besides. Bonkers!
The intangible asset being sold is held on the books (as at 31/12/23) at a value of ~£2.1m. So a gain of £38.4m.
In addition, Intelligent Ultrasound announced that its Board intends to make a material return of capital following a review of the growth potential and capital requirements of the post-transaction business. IP Group has an undiluted beneficial holding of 20.8% in Intelligent Ultrasound. In addition, the Group's EIS fund management business, Parkwalk, holds 11.0% of Intelligent Ultrasound.
Intelligent Ultrasound expects to make an announcement detailing the proposed use of funds and future strategic direction for the post-transaction business by the time of completion, which, dependent on the timing of the Regulatory Consents, is expected to be in September/October this year.
20.8% of £40.1m is £8.4m to IP Group. Assuming half the proceeds stays with the business and half is returned to shareholders then a £4m special dividend will follow later in 2024.
If 50% of the proceeds is correct then that’s 6.5p per share returned perhaps, and you today are buying a business for a net of 5p following the news (i.e. after the 45% incraese) which has £20m+ cash (i.e. 6.1p per share) and a £12m+ turnover generating a £1m or more profit going forwards.
The transaction is subject to shareholder approval under AIM Rule 15 (errr yeah!!), as well as confirmations from the Competition and Markets Authority under the Enterprise Act, and the Investment Security Unit under the National Security and Investment Act, that they do not oppose the transaction.
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#2 ONT
The good news doesn’t stop there. Oxford Nanopore, ONT has made an appreciable bounce back from recent lows of 86p to over 112p today.
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#3 TRX
A 3rd listed IP Group holding is Tissue Regenix: (IPO own 9.25% of a £49m market cap)
For the six months ended 30 June 2024 trading has been strong, and remains in line with the Board's expectations. (NB 20% growth are “expectations”).
H1 revenues are ~$16.4 million (H1 2023: $14.1m; H2 2023: $15.4m), so a 16% increase from the prior year and a record first half for the Group. Furthermore, this performance marks the seventh consecutive reporting period of growth for the Group, which gives the Board confidence in the future performance of the Group.
The BioRinse® segment continued to deliver solid growth driven by increased efficiencies, while the commercial reorganisation of the dCELL® segment continued to show benefits, demonstrating robust growth within the Period.
Having reached adjusted EBITDA profitability in 2023, TRX expects to achieve growth in adjusted EBITDA for the first half of 2024 as compared with the prior year period. The Group's cash position remains sufficient to support the current business expansion plans.
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Moving on to IP Group’s privately listed holdings.
#4 Mixergy
Today, IP Group’s 26%-owned holding, Mixergy with a £7.5m NAV and prior year -£3m loss (to 30/06/23), and who raised £9m of funds in the past year, announced a partnership with Daikin.
Daikin’s New Biz Director said "As the leading heat-pump manufacturer in the UK we really understand how important it is to have an optimum solution for hot-water. Joining forces with Mixergy will help drive heat-pump specification sales and grow our social housing retrofit and new build business. Mixergy has a future proof solution that enables housing providers to provide better homes to homeowners and tenants with lower costs by unlocking value from DSR and dynamic tariffs."
Daikin with its €28.2 billion of sales, employing 96k people and 13,700 across Europe, are a great partnership to have.
#5 Genomics
Yesterday, Genomics, which grew its revenue in 2023 from £3.7m to £5.6m and had a funding round of £33.8m in early 2024, extended its partnership by three years with £97bn market cap heavy weight Vertex Pharma.
The companies have been working together to support Vertex's efforts to develop transformative medicines for serious diseases. To date, Genomics' work has focused on using improved understanding of human genetics to pinpoint causal disease pathways and processes, and to identify novel targets in known and newly identified pathways.
As part of the extension, Genomics will expand the range of genomic insights it uses to support this work and expand the number of therapeutic areas under study. The partnership will now also explore using Genomics' proprietary genetic tools to improve identification of patient populations and to de-risk the selection of biomarkers for measuring early readout of drug efficacy.
Genomics also won work from GSK this year, where Genomic’s technology could help GSK shorten Phase I/II/III trial lengths, but also the NHS, where a cardiology study showed high success rates in better health diagnoses using their technology.
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And that’s just this week folks! Still got Friday tomorrow too!
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#6 Herby
Last week - for IP Group - there was a new herbicide partnership between IP Group’s holding Moa - which has a £22.1m NAV (including £19m cash) as at 31/12/23 - and NuFarm a A$4bn Crop Protection and Seed Technologies provider.
#7 Laundry
And keeping with the 4 billion partner theme, last week, IP Group’s Aqdot (IPO own 37.4% of AqDot) announced a partnership with Clariant, a CHF4bn turnover chemicals company, to commercialise its odour elimination technology.
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Of course the market sat up and took notice of all this positive news….. Not!
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IP Group has a £433m market cap. It has £105m of listed companies (including the free of charge and get £6m for your trouble Intelligent Ultrasound). It had £226.9m of cash at 31/12/23. -£204.2m of Long Term Liabilities.
It is rapidly buying back its shares using that cash, so stripping out the cash is actually happening each week at a rate of about 2m shares of 1bn. Buying back 1% of NAV per month, roughly.
So compounded at today’s share price, at 31/12/24 assuming no change to NAV that delivers around a 14p per share gain by the end of 2024 (12% gain).
Net of current assets and listed holdings £67.6m buys you a portfolio of £1,009m at 31/12/23 (£1,114.2 less £105.2m of the 3 listed by my reckoning) and the £221.3m debt/liabilities.
Or paying £288.9 buys you the same private portfolio with no debt.
A private portfolio where we are seeing positive news day after day and week after week.
A private portfolio where last year during the investment drought and during two really, really tough years where in 2023 three quarters (16/21) of funding rounds were at NAV or above, and in 2022 it was above 90% (26/29) of flat or uprounds.
I suspect the 2024 data will come out stronger even than 2022; and this is evidenced in newsflow like the recent £31.6m realisation at NAV of Garrison, or the funding round of Hysata at book which I recently covered in the article “IPO-Campus”
And that’s why IP Group is one of the Oak Bloke ideas for 2024.
Regards
The Oak Bloke
Disclaimers:
This is not advice
Micro cap and Nano cap holdings might have a higher risk and higher volatility than companies that are traditionally defined as "blue chip".