Analyst Comment on Belluscura

Paul Hill
Vox Newswire
11:17, 13th May 2022

Despite capital almost drying up across the IPO/secondary market, the very best investment opportunities still attract money.

Take Belluscura (BELL Follow | BELL) - a next generation medical devices firm specialising in portable & light weight oxygen concentrators (POCs) - used to treat patients with severe respiratory conditions, such as COPD (chronic obstructive pulmonary disease), pneumonia & potentially long COVID too.

Today #BELL successfully raised £6m (net £5.7m) in an over-subscribed placing at 85p/share (15% discount to yesterday’s close) in order to accelerate its global expansion plans.

The proceeds will be largely used to fund the startup & commercialisation costs related to its “transformational” manufacturing agreement (MSA) with InnoMax Medical Technology (signed 30th Mar'22) to manufacture POCs in China (1st sales expected in Asia by Q1’23).

This is hugely significant for a number of reasons.

Not only vastly improving unit economics thanks to the extra scale - ie driving down production costs & lifting gross margins.

But also because the deal acts as another marvellous endorsement of #BELL’s technology - this time by a world-class, blue-chip partner. With InnoMax being a JV between the Chinese government (NMED) & MaxNerva – itself an affiliate of one of the world’s largest contract manufacturers (re Foxconn – LinkedIn).

Plus the TAM is enormous & growing strongly.
For instance, there are 1bn people worldwide who suffer from chronic respiratory issues (Source WHO). With the global POC market set to expand at a 14% CAGR between 2021-26 to $2.76bn by 2026.

In fact nearly 100m people in China alone have COPD (400% higher than the US), on top of anther 50m in India and 5m people in Japan.

More specifically the cash will be spent on raw material inventory, engineering (eg POC tooling) and commercialisation/distribution expenses.

In terms of the numbers, house broker Dowgate Capital Limited were forecasting (ie prior to today's placing) that #BELL will be profit neutral in 2023, cashflow positive by 2024 and deliver 2025 normalised EPS of 23.7c on revenues of $111m.

Ok, so how much is the stock worth?

Well I would value the business on a 2025 15x-20x EV/EBIT multiple, which - discounting back at 12% and adjusting for $15.6m of net cash - generates a theoretical valuation of $320m-$420m, or 180p-240p per fully diluted share (135m) vs Dowgate Capital Limited at 180p B4.

Plus, with many of #BELL's larger rivals either selling technically inferior products &/or struggling with acute supply chain issues, then there’s an enormous runway ahead.

CEO Bob Rauker commenting: "These new funds will support our recently announced global manufacturing agreement with InnoMax Medical, more than doubling our manufacturing capacity for X-PLO2R portable oxygen concentrator range and accelerating our international expansion, particularly in Asia."

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Disclaimer & Declaration of Interest

The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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