Tekcapital – some of the world’s finest minds used in the growth of this totally undervalued group
Valued in the market at just £50m, this innovation investment company shares are significantly undervalued at the current 33p.
A very basic value for its shares is 44p, while market sources suggest that closer to 55p is where they could be headed in the short-term.
What is more, if a number of fresh developments come to fruition, even that figure could be underplaying the sum of its parts.
Commercialising research to create real value
Did you know that each year universities across the world pump hundreds of billions of pounds into research?
Some 100,000 patent applications are filed worldwide each year by leading universities and research institutions.
This company’s strategy is to help to transform university discoveries into valuable products.
Working across several technology sectors it looks to capture innovation developed by some of the world’s finest minds.
From its network of over 4,500 research institutions, across some 162 countries world-wide, Tekcapital (LON:TEK) evaluates invention reports with the aim of subsequently acquiring and investing in those situations that the company considers that could present substantial uplift in value.
Founded in Oxford in June 2012 by Dr Clifford Gross and colleagues, the company developed its Invention Discovery Network to effectively rationalise the never-ending supply of university intellectual capital that might be available for its clients for immediate acquisition or licensing.
The company believes that its IDN clients need actionable information, not just data.
It prepares a monthly advisory report for each discovery client which identifies the top technology acquisition candidates available for immediate licensing.
It is able to provide its retained clients with a complete turnkey solution to locate, screen and acquire technologies available for acquisition or licence from some of the world’s leading universities and research institutions.
Once a suitable technology acquisition opportunity has been identified, the Company can evaluate the IP through its expert Science Advisory Board, as appropriate, and can then, if required, act as an intermediary between the client and the university or research institution with a view to the acquisition or licensing of the specific technology.
The company also provides a suite of technology transfer services for the universities to commercialise upon their various innovations.
It has developed its own Portfolio
The company is also developing its own portfolio, whose common theme across the current companies is that they have proprietary intellectual property, capable management, and if successful, can improve the quality of life for the customers they serve.
Currently it has four main portfolio constituents that are very worthy of note –Belluscura, Guident, Lucyd and MicroSalt.
Belluscura Plc – is already a quoted business, of which Tekcapital owns 14.1%.
Some 250m individuals suffer from chronic obstructive pulmonary disease. Many of those patients require supplemental oxygen.
As there is no cure for COPD over time patients require greater amounts of oxygen, and if they use a portable oxygen concentrator, this means that as their disease progresses they must replace their devices with ones with greater capacity.
With Belluscura’s new patented device, users will be able to swap out the filter cartridges to enable higher capacity oxygen flow without having to change the device they are using. Just like upgrading memory on a laptop or mobile phone.
The result is the potential for significantly more affordable oxygen therapy for the life of the patient.
Belluscura, working with its research and development partner, Separation Design, is designing and developing next generation, cost-effective, portable extracorporeal membrane oxygenation technology, which is similar to the heart-lung by-pass machine used in open-heart surgery, to treat acute respiratory distress syndrome patients.
Belluscura announced the receipt of Clearance from the US Food and Drug Administration for its X-PLO2R™ on 8 March 2021. Belluscura started sales in 2021.
Two months later in May 2021, Belluscura plc commenced trading on the AIM market.
It has developed an improved portable oxygen concentrator to provide on-the-go supplemental oxygen.
Their device is smaller, lighter and quieter than most competitive products and has a replaceable filter cartridge that will allow the user to upgrade the unit as their disease progresses.
As a result of the global prevalence of chronic obstructive pulmonary disease, the medical portable oxygen market is expected to grow to $5bn by 2030.
It is thought that this large, anticipated growth could well have a very positive impact on portfolio company Belluscura.
This portfolio constituent recently announced the launch of its Bluetooth enabled, next generation XPLOR portable oxygen concentrator, which provides more oxygen by weight than any portable oxygen concentrator in its class and with its new Nomad Health App, patients can connect other Bluetooth devices such as their iPhone or Android phone, Nonin or Masimo pulse oximeters, and Fitbit wearables.
Current Book Value of £15.7m or 10p per TEK share.
Guident Limited, which is wholly owned by Tekcapital.
Guident, which owns some 91% of shares in Guident Corp., its US operating subsidiary, was established to commercialise new technology to enhance the utility and safety of autonomous vehicles ("AVs") and ground-based autonomous delivery devices.
Using its proprietary intellectual property, this company seeks to improve the safety and efficiency of autonomous vehicles and land-based delivery drones with a software platform for remote monitoring and control.
Guident is developing software apps that allow operators of AV's to remotely monitor and control their vehicles.
Remote monitoring and control is a legal requirement for AV operation in the State of Florida and many other jurisdictions.
Tekcapital believes that in the future, most territories with AV's will require remote monitoring and control.
The autonomous vehicle market is expected to reach $65.3bn by 2027.
Vehicles of all types are rapidly becoming electric and autonomous. While AV’s are projected to be significantly safer than traditional vehicles, there will still be mishaps and in many instances there will be no vehicle operator present to help resolve those problems.
Guident’s remote monitoring and control centre will monitor vehicles and, if necessary, provide additional support such as call a first responder, take over control of the vehicle to move it out of harm’s way and provide real-time communication with passengers or pedestrians.
With a portfolio of seven patents and its world-class team, Guident delivers competitive advantages for AV fleet operators by providing real-time, passenger & delivery vehicle monitoring and control, for the public and private mobility markets.
Guidents initial goal is to build and operate the first Remote Monitoring and Control Centre for ground-based delivery drones and AVs in the State of Florida. Recent state law requires back-up, human remote monitoring for AVs when a safety driver is not present in the vehicle. This is a critical path to enable the commercial introduction of AVs in Florida and is likely to be required in other jurisdictions.
Guident also offers an additional patented technology enabling OEM’s to cost-effectively increase the range of their electric vehicles with electromagnetic regenerative shock absorbers. This technology received the ‘R&D 100 Award’ by R&D Magazine, for one of the 100 most significant technology innovations of the year from around the world.
Current Book Value of £15.0m or 10p per TEK share.
Lucyd Limited, which is wholly owned by Tekcapital, sells innovative Bluetooth enabled glasses, through its US subsidiary Innovative Eyewear, Inc. (81% ownership).
This company has a unique strategy of seeking to upgrade eyewear by producing designer eyewear with smart features.
Way back in 2018 it was the first company to deliver prescription glasses with hands-free Bluetooth technology.
It is reckoned that every seven minutes a pedestrian is struck by a car, pedestrial fatalities have increased very significantly in recent years, due primarily to drivers and pedestrians alike being distracted by using their smartphones.
It is assessed that two-thirds of the population wear corrective lenses.
Bluetooth technology has evolved, enabling it to be incorporated into traditionally sized designer eyewear.
Innovative Eyewear Inc. launched its first commercial product in January 2021 after test marketing several prototypes.
The company owns 41 pending and granted, design and utility patents for its Bluetooth enabled sound glasses.
These advances enable the eyeglass wearer to remain connected to their digital lives, such as when taking calls or listening to music, while maintaining situational awareness.
Individuals can keep their phones in their pocket and no ear buds are required, as the eyeglass frames contain miniature speakers and microphones.
With Lucyd frames, the wearer can stay focused on the world while making calls, listening to music and using voice assistants.
Sitting at the intersection of the Hearables, Digital Assistances and Online Eyewear markets, Lucyd is positioned to become a major player in eyewear by offering the only low-profile smart frame, with Rx lenses, at an unbeatable price.
To provide a unique, new wearable experience, Lucyd is also developing a voice-based social media app called Vyrb, with features for verbal posting and hashtagging.
Lucyd has a pending patent on several features of Vyrb, two utility patents regarding wearable technology, one of which has received a notice of allowance and 28 design patents.
The US eyewear market is projected to reach $29.4bn in 2022.
Current Book Value of £27.1m or 15p per TEK share.
MicroSalt Limited, of which Tekcapital owns 97.2%, owns approximately 73% of MicroSalt Inc., its US operating subsidiary,
The MicroSalt goal is to make snack foods healthier.
Cardiovascular disease is the world’s leading health problem causing 17.6m deaths annually and is related to high sodium consumption, especially in snack foods.
According to the FDA, reducing daily sodium intake from 3,400 mg to 2,300 mg per day will reduce approximately 28,000 – 50,000 premature deaths per year in the US alone.
The snack food industry is focused on developing and providing better products that taste good but provide reduced sodium consumption. The reason for this is that excess sodium consumption contributes to cardiovascular disease, a leading cause of premature death globally.
To address this problem, MicroSalt has developed a patented process for producing micron-sized salt crystals that provide all of the flavour of salt with roughly half of the sodium for topical food applications, and yet provide the same level of salty flavour found in traditional snacks.
The global sodium reduction ingredient sector is currently estimated to have a market value of $5.5bn and is estimated to show an approximate compound annual growth rate of 5.8%, reaching a market value of $9.6bn by 2032.
MicroSalt uses nano-sized sodium chloride crystals that dissolve faster, that are all natural, non-GMO, kosher and do not contain any of the additives found in other sodium reduction products.
Recently Microsalt secured two food brokers and the leading U.S. natural food distributor for its product in the US and in Mexico.
It has also placed its SaltMe brand of low-sodium potato chips into over 3,000 retail stores nationwide in the U.S., as well as beginning test marketing the first MicroSalt saltshakers for food service, restaurants and for retail sale.
The global Sodium Reduction Ingredients Market is expected to reach $1.62bn by 2024.
Current Book Value of £5.8m or 4.0p per TEK share.
The Group also has another Portfolio constituent, Smart Food Tek Limited, which is wholly owned by Tekcapital.
As the name of the company suggests, it provides new and smart technology for preparing food. It owns the exclusive rights to a food preparation technology focused on reducing fat in fried foods.
Specifically, its technology is able to make any protein look and taste fried with a steam baking process. This has the nutritional benefit of reducing the fat content in the batter and breading coating by approximately 60% whilst still retaining the look and taste of a fried product.
Current Book Value is just $43,161 and that value has not changed during the last year or so. Therefore, for valuation purposes, it is considered of no importance to such computations.
The Professional Services side has a Book Value of £4.9m or 3.3p per TEK share.
The group raised £2.0m of fresh funds in late May this year, through a Placing of 8m new shares @ 25p each, to be used to accelerate portfolio growth and as additional working capital.
Dr Clifford Gross, Chairman and CEO, holds 5.79% of the group’s equity.
Fellow shareholder is the serial investor Nigel Wray, with 4.94%, he is also a holder of 11.5% of the Belluscura equity.
Other holders include Walker Crips Investment Management with 4.30%, James Knight controls 3.85%, and Paul Coburn has 3.10% of the group’s 149.6m issued shares.
Edale Capital, which is an absolute return asset manager that operates primarily in European quoted equity markets, holds 3.9m shares, representing 2.61% of the company’s capital.
At the current market price of 33p the Group has a market capitalisation of £50m.
Recent Trading Update
In late July the Group reported its interims to end May 2022.
In the first half of 2022, its key portfolio companies made significant progress and as a result, its net assets and net assets per share ended the period at record levels.
They showed that net assets had improved by 13% to $76.9m, giving a 6% increase in its net asset value per share to $0.51c.
The portfolio valuation was up 16% at $74.3m, while total income was $8.0m.
Profits after tax were $6.7m for the first half.
With that Update Dr Clifford M. Gross, Chairman stated that:
"We are glad to report solid half-year performance for the Group.
Our key portfolio companies are all revenue generating, progressing well, have capable management, and should reach significant additional milestones by the end of 2022.
We are excited about what we have achieved in the first half of 2022 and about our potential near-term growth and performance."
Note of Caution
As a very sensible note of caution to its investors the Group stated in its Update, that whilst it was clear that the company is progressing very well, its net asset values and revenues will fluctuate from period to period due to individual portfolio company performance, valuations and changes in market conditions and macro-economic financial conditions including the recent Coronavirus pandemic and the Russian invasion of Ukraine.
Tekcapital brings innovations from laboratory to market and has now demonstrated over five years of consistent growth of its net assets.
The Group’s NOMAD and Broker currently has a valuation out on its shares of around 44p each.
However, taking into account the Target Price of the broker to Bellascura, valuing that company at 200p a share, compared to its current 90p in the market, this shows a substantial potential undervalue.
With Tekcapital’s shares currently trading at only 33p, they are well under the company’s net asset value and take little account of the Group’s performance to date.