MIDAS SHARE TIPS UPDATE: Covid-19 testing should be safe, fast and accurate, but UK falls short – EKF Diagnostics could almost certainly help
Ensuring that tests are safe, fast and accurate is essential in the fight against Covid-19. But the UK falls short. EKF Diagnostics, a medical device company based just outside of Cardiff, could almost certainly help.
More than a decade ago, the group devised a way to transport highly contagious cotton swabs in a way that killed the virus while keeping the molecular markers alive.
The equipment was created in preparation for a global pandemic and has been used to test for diseases such as TB and HIV for years, with production taking place in America.
Planning ahead: EKF Diagnostics benefited from rapid response to pandemic, but company also has long-term potential
In March, CEO Julian Baines saw that his equipment was needed closer to home. The Cardiff offices, largely used for administration, were transformed into laboratories, new staff was recruited and the company soon began making its devices for the UK.
Most Covid-19 tests carried out in the UK today must be shipped in refrigerated containers to laboratories that specialize in dealing with highly contagious viruses. However, using EKF equipment, cotton swabs do not need to be kept cold, can be stored for months, and because they are not contagious, they can be tested in most labs across the country.
Companies, schools and universities have taken over the technology from EKF, sales have increased enormously and the group is moving to a new location to increase capacity.
Its use is also widespread abroad, especially in the US, where clients include the Department of Homeland Security and the Centers for Disease Control and Prevention. The NHS is slow to deal with EKF. However, now there are signs of change. NHS Wales is not a customer, but Public Health England recently endorsed the EKF kit and recognized that it is both safe and effective. That should boost sales in the coming months.
Even without widespread adoption by the NHS, EKF’s testing division has had a significant impact on the group’s sales and profits.
Revenues are way ahead and brokers forecast profits more than doubling to £ 20.2m this year. EKF will also pay a 1 pence maid dividend in December to all shareholders registered on November 5.
The company isn’t just a volatile beneficiary of Covid19. EKF, a leading manufacturer of specialized medical diagnostic equipment, is known for making advanced gadgets used in surgeries around the world that show in minutes whether people are anemic or diabetic.
Its rapid diagnostic tools are a global leader and have maintained a strong position throughout the months of lockdown.
Midas recommended EKF in 2012 when they were 28.5p. In 2016, shares had fallen below 7p after a disastrous US takeover.
Veteran investor Christopher Mills has since come in as chairman, the company has regained its focus and the stock now stands at 59p.
EKF has brought shareholders other benefits. The group spawned kidney disease specialist Renalytix AI, recommended by Midas in June 2019 at £ 2.40 and now £ 4.38.
Shareholders in EKF received prorated shares in Renalytix and they will soon be offered shares in other spin-offs, Verici Dx coming to AIM this month and Trellus Health, which will float next year.
Midas verdict: EKF has benefited from its rapid response to the pandemic, but the company also has long-term potential. At 59p, the stock remains a buy.
Traded on: TARGET Ticker: EKF Contact: ekfdiagnostics.com or 029 2071 0570