EKF Diagnostics has been a great performer for me and others over the last ten months, with a number of upgrades along the way driving the share price northwards.
Earlier this week the company delivered another extremely positive Trading Update to the market in relation to the conclusion of full year 2020, which was perhaps somewhat anticipated.
This not surprisingly has resulted in yet another upgrade from Broker N+1 Singer which has seen pre-tax profit forecasts lifted by £1m to £22.5m as EKF announced that the full year ending 31st December 2020 would be comfortably ahead of previously upgraded market consensus.
Arguably, more important within the update is the tone, that strong and positive momentum is continuing into the new financial year, which further underlines the prospects for the business moving forward.
Once more I have been able to speak with CEO Julian Baines for a few words on that update and as to how things are progressing.
As with other holders of EKF shares, I like to view the business in its entirety with all the moving parts and as a longer term investment, to that end I first enquire about the core business which early last year was impacted by the onset of Covid.
Baines says, “the core business was down around 10% due to Covid breaking out, as everything was locked down and doctors surgery’s not just here in the UK, but in the US and elsewhere were effectively shut. Since then, things have recovered and we are now back to the 2019 levels as testing has been able to resume. We have seen a month on month continued improvement with a really good January and continuing moving into February and that applies to all regions. This time round it is somewhat different as surgeries are open for testing, plus with the arrival of vaccines then that should continue”.
Whilst some taking a purely short term view on EKF as a pure PrimeStore play see the arrival of vaccines as potentially detrimental there doesn’t appear to be any sign of the demand abating.
Baines says that the momentum is continuing, where with the arrival of the new variant demand is increasing which in turn sees volumes continuing to rise and that includes the US and Europe. Additionally, he says that the cemented relationship with its industrial partner is becoming stronger.
Logistics within the manufacturing and delivery of PrimeStore is no easy task though as he explains. “We now have a new facility in Cardiff up and running from Monday and that has been achieved in just two and a half months which adds capacity. Our team at EKF have been absolutely awesome and we are so lucky on that front as they have been a big part of our expanding exponentially”.
Whilst progress over the last year has seen a number of upgrades from its broker Baines remains grounded and focused on the whole of the business and is clearly committed to quarterly updates that keeps both investors and the wider market tuned in to what is a continuing evolving picture.
There is clearly no over stating or blue sky promises here, rather a realistic and constant on the moving parts. Within that, we touch on the Kantaro quantative Covid antibody test which Baines says continues the runway.
Although there are lateral tests out on the market the Kantaro test is fully quantative and the CEO says he believes it could be prove to have more longevity than PrimeStore.
Although EKF can already sell the kits, it is, he says, close to providing a full service in relation to the test, although at this point in time he understandably couldn’t expand on that.
It is however worth noting that the most recent broker note does not, (quite rightly at this stage in my view) include any provision for further Primestore orders or for that matter the Kantaro antibody test.
To that end, further upgrades do look likely in my view and Baines is clearly right in taking the stance of quarterly updates to keep investors clearly in the picture.
The story, as regulars will know does not end there as EKF has other holdings that add further value including Trellus which is on course for an AIM listing.
News of the vaccine roll out is excellent news in order to get things back on track, but with new variants emerging and a need to monitor levels of levels of immunity as we move forward, suggests that testing and indeed quantitative testing isn’t going away anytime soon.