Friday afternoon 29th July Anteo Diagnostics released their quarterly cash and activities report to the market.
On the surface it has been a tough 18 months or so for the company with sentiment and share price on a downhill slide. I notice at market extremes some details seem to be missed and not digested.
Anteo has struggled following the 30th November 2015 announcement for funding for the acquisition of Diasource a Belgium Diagnostics company. Anteo now 100% owns Diasource but with some messy funding arrangements that are less than desirable and need some sorting out for the company to feel the full benefit of how the overall new Anteo group business now looks and more respect is given through better investment sentiment and therefore a better valuation by the market.
I will make some comments below from certain points from this quarterly and also reference some numbers from the previous one or two quarters.
Anteo Quarterly 4C bits and pieces...
- Signs $1.8m USD ($2.36m AUD) 12 month contract for Diasource to supply the Egyptian Government a variety of clinical tests. Sales to start second half 2016 (now)
- New Anteo products to be launched at AACC 2016 meeting this week (31st July 2016)
- Diasource delivers a record quarterly revenue of $4.077m EURO ($6.178m AUD) - This is the 4th quarter of back to back revenue growth and the second consecutive quarter of record revenue recorded. Total revenue growth of 11% over same period last year.
- See below graph showing quarterly growth path for Diasource :
- Before moving on I would like to make some comments on the contract awarded with the Egyptian gov for a value of $2.36m AUD over the next 12 months : Going back to the last quarterly report we were told :
"Vitamin D business growth was supported by presentations at scientific and commercial congresses and events in the Middle East and the US, as well as holding webinars.
New distributors were engaged in Switzerland and the UAE, and additional OEM arrangements were discussed with local companies in India. The latter will be concluded in the coming months and contribute to growth"
So my thoughts on the above are that Diasource is growing their revenues and are yet to see the real benefit of the Vitamin D growth - as per the slide below from a presentation Vitamin D sales have contributed around 20% of sales for Diasource :
$2.77m EUD in calendar year 2014
2015 saw revenue for Diasource of $14.1m EUR so 20% would have been $2.82m - The opportunity I see here is that Diasource has the patent and has licensed the rights to many of the major Vitamin D companies for them to produce - The key for growth in revenue over the next 6-12 months is that these Vitamin D sales are only just about to get started - Comment from this last quarterly :
"Third party manufacturing of Vitamin D assays is increasingly an important part of our Vitamin D revenue stream. These partnerships will become more important during the second half of 2016 when our partners receive registration of the product in different countries outside Europe"
My thoughts on this are a solid opportunity for revenue growth is about to kick into gear for Diasource in the second half of 2016 - Firstly with the contract with the Egyptian Government and secondly with the growth of Vitamin D outside of Europe. As a personal estimate I would say Vitamin D sales would close to double from current levels over the next 6-12 months and see a solid uplift for the Diasource/Anteo business.
If Diasource grew Vitamin D sales to say $4m EUD ($5.8m AUD) and lets assume the percentage of total revenue remained at 20% then total revenue for Diasource would be around $29m AUD.
The Egyptian contract doesn't look like the only one in the pipeline for Diasource as mentioned above with the OEM arrangements in India.
So a solid base for continued revenue growth along with streamlined reductions in operating expenditures.
- Back to the quarterly :
The record quarterly revenue for the quarterly was $6.178m - the 4C shows receipts of $5.76m so still some of this quarterly revenue to flow through.
Moving on to the progress with Anteo Energy...
- Anteo travelled to Asia and met with some of the world's largest manufacturers and component suppliers of Lithium Batteries in May.
- Responses from these companies highly encouraging and there is strong interest in working with Anteo.
- The companies and organisations see the Anteo technology as a novel approach and has the potential to deliver significant improvements to Lithium-Ion battery performance.
- Improved battery performance combined with the drop-in nature (that will not require re-engineering of current processes) of the Anteo coating technology is considered significant and attractive.
- Anteo’s unique nano-chemistry enables improvement in both anode and cathode performance in Lithium-ion batteries. These batteries will be able to store more energy and will last longer (without an increase in the amount of Lithium used).
- Anteo is well placed to benefit from the growth in the lithium market, through provision of a technology which will reduce the high demand for lithium raw materials in the future.
- The positive feedback during the trip and subsequent interactions confirm that Anteo coating technology has a variety of commercially desirable attributes that are highly sought after by those striving to bring Lithium-ion battery performance to a level that enhances the utility of electric cars and provide cost effective storage for domestic renewable energy generation.
- Our patent attorney advised that the Examiner considered all the claims of the application to be both novel and inventive. Further, the Examiner found that no objections needed to be addressed.
- Anteo is mapping the work required to meet the customer requirements for our coatings. At the same time planning and positioning has started to define how and when to partner with the different organisations with whom Anteo is interacting to maximise shareholder value.
Thoughts on above :
Good progress with Battery patents and interest from some of the biggest global companies - At least one company must have shown significant interest with the use of "customer requirements" showing perhaps the demand for a custom coating product for them?
We have seen how much interest there has been in lithium companies - Anteo retains this battery as potential blue sky investment while the core diagnostics business of Diasource and the growing adoption of Anteo's products into POC provide a company with defensive earnings with strong growth opportunity through Vitamin D and also awaiting future news from Anteo on other POC deals as well as the Medical Device work with Cook medical.
All in all a turning point for the new Anteo with growing revenues and with careful management should see a profitable group entity over the next 6-12 months with many potential growth opportunities.
Current share price of 4 cents and a market cap just a bit over $40m reflects the lack of commitment regarding how the financing was executed. This quarterly report in my opinion is very solid and although still burning cash and with around 6 months of cash at current burn rate anything could happen eg. Diasource vendors take shares and con notes are gone or we see a large upfront investment partnership for medical devices or in the battery area through a JV or something similar.
Anyhow that's enough thoughts for now. Keep an eye out for a change in behaviour in volume as technically we approach the break of the long term downtrend line of resistance.
At current run rate Diasource alone is on track for $24m AUD for 2016 calendar year - Quarterly burn for this 4C was $1.8m AUD (Net operating cashflow was negative $1.4m) - This was on receipts of $5.76m if you add in the full reported revenue for Dia which was $6.178m - Lets assume around another $500k for Anteo technologies quarterly contracting and AMG sales would give another $900k AUD so true cash burn is down to around (my guesses) $900k per quarter - With added Vitamin D sales this half as well as the Egyptian government contract for 12 months of $2.36m AUD the Anteo Group IMO looks set for potential cashflow+ with multiple blue sky opportunites added in (Batteries, Medical Devices, etc)
DISCLOSURE : THE AUTHOR HOLDS SHARES IN THIS COMPANY. THIS RESEARCH IS NOT A RECOMMENDATION TO BUY OR SELL SHARES IN THIS COMPANY. THE AUTHOR MAY AT ANY TIME BUY OR SELL SHARES WITHOUT NOTICE. PLEASE DO YOUR OWN RESEARCH