Tekcapital - Full Year Update
Full year results highlight value creation and growth in services – shares now trade at a discount to NAV and the UK IP sector
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.
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FY2017 results show good progress and value creation
For the year to 30th November 2017 Tekcapital grew total revenues to $7,263,048. Combined with administration costs falling by 16% to $2,417,284, this resulted in a pre-tax profit of $4,153,154 compared to loss of $2,558,198 in 2016. On the balance sheet, net assets were up 240% over the year to $10,675,961, with NAV per share up from 9 cents to 25 cents.
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Upward revaluation of two companies drives NAV
Tekcapital’s investment portfolio was valued at $7,307,696 at the period end following rises in the value of medical device business Belluscura and smartglasses company Lucyd. Belluscura’s value was up from $731,930 to $981,762 despite an aborted IPO and the fair value of Lucyd was increased by $5,833,393 to just over $6 million after an external valuation of the company following a successful token generation event.
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Shares now trade at a modest discount to NAV and more substantial discount to the UK IP sector average
Following the rise in NAV, combined with a modest slip in the share price, Tekcapital now trades at a discount of 2% to net assets as at 30th November 2017 and at a 30% discount to the sector’s average price to book value. A 40% premium to NAV, in line with the sector, implies a share price of 25.84p, implying 44% upside from the current price. We therefore move our stance from Speculative Buy to Conviction Buy.
TekCapital is a holding management company. Through its subsidiaries, Co. provides universities and corporate clients with a range of technology transfer services. Co. has three segments: professional services, including the provision of recruitment services via Vortechs Group, and the provision of reports and services provided to locate and transfer technologies to customers; licensing activities, including acquiring licenses for technologies and their subsequent out licensing; and product sales.
Align Research is a commissioned research company founded in November 2015 in order to provide the under-served smaller company space with high quality analysis. We have an initial focus on the natural resources sector, in which we see significant opportunities given the current once in a generation bear market, however all undervalued small caps (sub £100m) are considered by our team. Align was founded by industry professionals with decades of experience in the stock markets, headed up by highly qualified individuals from both fund management and analytical backgrounds.
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