Good time to mention Medica #MGP.
I think markets have it wrong right here: it's being hit by Corona but unlike others, it shouldn't be affected by what comes after. You're getting a lot for free here at an ex-cash PE of 12: the growth and a free call on it becoming a platform.
I think markets have it wrong right here: it's being hit by Corona but unlike others, it shouldn't be affected by what comes after. You're getting a lot for free here at an ex-cash PE of 12: the growth and a free call on it becoming a platform.
MGP does remote radiography: radiographers set up at home or at a centre and hospitals send them over scans.
They're being hit in 2 ways: lockdown means accident & emergency incidents are down and most operations are being postposed due to corona.
They're being hit in 2 ways: lockdown means accident & emergency incidents are down and most operations are being postposed due to corona.
Basically, business here will be back in full swing shortly after Corona.
I want to do some quick and dirty numbers and make some draconian assumptions to show that this business is rather cheap even if you pull together an impossible chain of events.
I want to do some quick and dirty numbers and make some draconian assumptions to show that this business is rather cheap even if you pull together an impossible chain of events.
Balance sheet first.
Their clients are NHS trusts aka the government; they're good for the money - therefore cash after payables: £22M
I'll ignore the headroom on the facility here. Debt is due in 2 years but net of that, we're at just under £10M
Their clients are NHS trusts aka the government; they're good for the money - therefore cash after payables: £22M
I'll ignore the headroom on the facility here. Debt is due in 2 years but net of that, we're at just under £10M
Company states that 2/3rds of the cost base is variable - no scans, no pay.
£36M of costs, of which £25M are cost of goods. Let's zero the revenue, zero the COGS, assume zero govt furlough support, zero cost cuts and cash costs for a year are then £9.2M.
£36M of costs, of which £25M are cost of goods. Let's zero the revenue, zero the COGS, assume zero govt furlough support, zero cost cuts and cash costs for a year are then £9.2M.
That gives us one year of runway if we pay the debt today, two if we wait until maturity - come what may with lockdowns and the virus, the NHS *cannot* shut out non-Corona medicine for 2 years.
At that point you would have a company with zero cash, £12M debt, a cap of £114M and a deferred capex plan to double revenues within 5 years to mid £90M at an operating margin of 20% - and it's healthcare, why would growth stop there? And then lastly, there's the call option.
Growth here is two-sided: NHS sends out more work and more medics, including abroad, come to work remotely with them. It's already establishing a two-sided market in the UK. Time differences and staff shortages lend themselves towards the model crossing borders and time zones.
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