How should investors value disruptors like Micro-X, Reva, Visioneering and PainChek?
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Its shares are trading at 36c, but if you listen to X-ray innovator Micro-X, it reckons a valuation of closer to $4.86 is what they’re really worth — even after taking future capital raisings into account.
Micro-X (ASX:MX1) has its foot on promising new generation X-ray technology. Its first product – a compact mobile X-ray unit – is now on the market.
Micro-X reckons if you consider its applications in medicine (such as brain and breast scans), safety and military (such as airport security and bomb disposal), the net present value of multiple year cashflows from these products (using a 15 per cent discount) gives it a sky-high valuation.
That’s forming the basis of partnership talks as it seeks access to fresh capital.
But like all good stories, ambition doesn’t boost the bank balance — and keeping enough cash in the tank to achieve its dreams is the challenge.
Talks for a new backer will not be concluded until next month at the earliest, for example.
And it is a similar story for other “disruptors”.
Take Reva Medical, which has developed a new generation medical ‘stent’ for insertion in blocked blood vessels.
It boasts a highly ‘disruptive’ new product which is superior to existing stents. The difficulty is that rising risks associated with stents marketed by industry majors such as Abbott has weighed on end-market demand just as Reva is beginning to sell its product.
So the roll-out of the disruptive Reva product has itself been disrupted by market uncertainty caused by industry majors which has raised a question mark over the future for all companies servicing the medical stent market.
As a result, even with $US11 million in cash in hand at the middle of the year, it will likely run out of money by early 2019.
In a statement to investors this week, Reva said it has multiple options to pursue to raise fresh capital, as it looks to ramp up sales in the coming months.
Ditto for Visioneering Technology, a US company listed on the ASX which has a novel contact lens for treating near-sightedness, along with progressive near-sightedness which occurs with children.
Sales are running at around an annualised $US2.5 million, and it is working to boost sales through its existing network, rather than adding to its sales team which would weigh on near term costs.
“You can expect the next few quarters we will have to raise cash, and the board is reviewing those options.”
It is a similar story with PainChek which has a software application it reckons can help assess the level of pain suffered in patients.
It is rolling out its product, but with high spending to finesse its product while pursuing sales, it may be forced back to the market to raise more cash within a year or so.
Its shares were down 0.1c at 5.3c Tuesday, on its latest quarterly report.