SINGAPORE (June 28): NRA Capital is reiterating its “overweight” recommendation on Trendlines Group with a fair value estimate of 22.5 cents.
The group organised a “meet the senior management” session yesterday at the JTC Launchpad, which saw over 70 people participating, including individual and institutional investors.
At the event, the group CEOs and six key executives, including the CEOs of Trendlines Incubators Israel and Trendlines Labs and the group’s VP of business development, answered questions fielded by investors and shareholders in a panel discussion.
The session also focused on the group’s experience in incubating start-ups and how it creates portfolio value.
See: Southeast Asia's largest medical device maker ready to fund 'category disruptor' start-ups
Every year, the group will select 1% out of hundreds of leads to be a portfolio company. An interesting revelation is that it sources for investments from not just Israel, but also Singapore, Malaysia, Australia and Thailand.
During the event, two portfolio companies Zygofix and InterVaal also presented about their innovations.
The group has taken initiative to stay committed to its shareholders by taking the opportunity to meet with its stakeholders when it was invited to Singapore to run a course to a healthcare group.
The group has demonstrated its commitment to shareholders during the past year. This can be seen when it announced in Oct 2017 its plan to reduce FY18 operating expenses by US$1.3 million ($1.77 million), and also in April this year when the group’s CEO won approval from shareholders to tie their 2018 bonuses to defined targets and stipulated limits.
In a Thursday report, analyst Liu Jinshu says, “Soon, we will hear about the launch of B. Braun’s new ostomy product licensed from Portfolio Company Stimatix GI (also known as Most Valuable Portfolio Company).”
Stimatix’s products are targeted at patients who have undergone stoma surgery, allowing them to relieve themselves at their convenience, rather than carry a visible external stoma bag.
The analyst reckons that royalties from the sale of this product will supplement the group’s operating cash flows.
Some of the other portfolio companies also saw good momentum in 2018. BioFishency recorded sales of US$0.8 million in 1Q18 from US$0.55 million in 2017, while EdenShield is targeting sales of US$2.5 million for 2018, compared to sales of US$0.45 million in 2017.
“Exponential growth among portfolio companies supports expectations of future exits,” says Liu.
Currently, the stock is trading at 0.59 times FY18 book value. It has a market capitalisation of $72.4 million and is backed by cash net current assets of US$12.4 million with a portfolio value of US$97.4 million.
“In this update, we reiterate that Trendlines remains undervalued and rate Trendlines ‘overweight’ with a high-average return and average risk view,” adds Liu.
As at 12.30pm, shares in Trendlines are trading at 12 cents.
