MIDAS SHARE TIPS: Holy Covid tests! Israeli tech and diagnostics company BATM, called Batman, gets a lift by fighting the coronavirus
Long-memory investors may shudder at the name BATM. The Israeli tech and diagnostics company was once a £1 billion dotcom darling, affectionately known as Batman, before crashing beyond a DC villain at the end of an epic final battle.
In 2000, shares in the company were worth just over £70, but by 2002 they had collapsed to just over 7 pence. But everyone knows that good superheroes never die. Last week’s interim results showed that BATM is back on track and that it might be worth taking a ride on the Batmobile.
The company currently has two divisions: Networks and Cyber, and Biomedical Solutions. Together, they neatly place BATM at the heart of two major preoccupations of our time: our own defense against disease and computer security against hacking.
Returning Hero: BATM to Roll Out New Virus Test Kits and Develop a Rapid Test for Tuberculosis
The biomedical solutions sector has performed well during the pandemic. First it supplied respirators and then it focused on Covid testing, producing both saliva-based test kits and the more familiar nasal swab versions.
Sales for the division were up 10 percent in the most recent interim results, although comparisons were difficult due to a sharp increase in fan production in the previous year. The company has high hopes for its new diagnostic kits, which simultaneously test for a number of respiratory viruses and are expected to be rolled out by concerned public health authorities around the world this winter. It has also developed a rapid test for tuberculosis.
The figures in the network and cyber division look bleaker, partly due to the divestment of a non-core subsidiary. Revenues have declined slightly year on year, even within continuing operations.
Chief executive Dr Zvi Marom, who has been with BATM through thick and thin, however, is hopeful for the new Edgility networking product, which protects small offices and home workers, as well as a new $10 million (£7.28 million) cybersecurity project for a Department of Defense.
In presenting the interim results, Marom said he expected full-year sales to be higher than expected and EBITDA (earnings before expenses) to increase 40 percent year-over-year. The shares rose on the news and are now at 93p.
Financial analyst Shore Capital has upgraded its forecasts for the stock and now expects £23m pre-tax profit on full year sales of £138m. That is a five percent increase in revenue expectations.
Robin Speakman of Shore Capital points to the company’s strong balance sheet, strengthening order book and the potential for additional investor interest to support rapid revenue growth as positives for the company.
Early BATM fans will be forgiven for thinking this is an annoyingly familiar storyline. Since the days of the dotcom darling, BATM has provided us with some false dawns, most notably in 2010, when the mobile company Nokia cut its trade with the company, causing revenues, profits and stocks to plummet. In addition, the current valuation of 29 times future earnings doesn’t look exactly cheap.
Nevertheless, with Shore indicating that it expects further earnings upgrades in the future, and the company’s products in a sweet spot, there might be something worth checking out in this Batman reboot.
Midas verdict: Midas last looked at BATM in 2011, and recommended a purchase when the stock was 24 pence. If you’ve lasted for ten years, you’ve done pretty well and it doesn’t hurt to lock in some profits, but more excitement can follow. As a money-making, forward-thinking company run by a tech whiz kid, there’s a lot to like about the current iteration of BATM. It could be just the superhero your portfolio needs. To buy.
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