Tekcapital - Full Year Update 
 
Discount to net assets reaches record level whilst strong news pipeline for 2019 to come. Stock remains undervalued.

AIM listed Tekcapital is an international provider of technology and intellectual property investment services. The company’s objective is to create value from investing in new, university-developed intellectual properties and to produce returns through capital appreciation.

- Service revenues continue strong year-on-year growth

Numbers for the 12 months to 30th November 2018 showed a 28% rise in revenue from services to $1.04 million. This came on the back of expansion into the Latin American markets and the launch of two new services, technology commercialisation training and an Invention Evaluator report customised for startups. The goal remains to have all operating costs covered by service revenues in the next few years.

- The best year for value creation in the company’s history

The highlight of the year in our view was the 51% increase in net assets to a record level of $16.13 million. The main driver of the increase in NAV for the period was an 88% increase in the value of the company’s investment portfolio, from $7.31 million to $13.7 million.

- Portfolio companies set for major milestones in 2019

Across the investment portfolio, Tekcapital saw its investee companies make further commercial progress and strengthen their management teams in 2018. Into 2019, several companies are expecting to see further milestones including Belluscura receiving 510(K) clearance from the FDA for its POC system in Q3, Lucyd launching further hi-tech products in Q2 and Salarius expected to start selling low sodium salt and snacks in Q4.

- Shares trade at a substantial and unjustified discount to NAV

Despite the progress made, Tekcapital shares currently trade at near all time lows. At the current price of 7.25p the company is capitalised at just £3.94 million, a massive 68% discount to NAV of £12.34 million (equivalent to 22.96p per share), 217% above the current price, which we set as our new target price and remain with our Conviction Buy stance.

Table: Financial Overviev
Year to Nov2015A2016A2017A2018A
Revenue ($m)0.410.767.266.83
Pre-tax ($m)(1.46)(2.56)4.154.55
EPS (c)(4.9)(6.3)10.810.3

Source: Company accounts

 
CONVICTION BUY - Price target 22.96p
 
Key data
Share price7.25p
52 week high/low20p/4.75p
ExchangeAIM
EPICTEK
Shares in issue54,353,042
Market Cap£3.94m
SectorIntellectual Property
IMPORTANT: Tekcapital is a research client of Align Research. Align Research owns shares in TEK. For full disclaimer information please refer to the last page of the full document.

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