Interactive Investor

Insider: buying at Novacyt but shopkeepers sell up

16th November 2020 10:44

Graeme Evans from interactive investor


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Despite high hopes for a Covid vaccine, Novacyt chiefs are buying, although retail chiefs are moving into cash.

Retail investors who piled back into virus testing firm Novacyt (LSE:NCYT) after last week's vaccine sell-off were given a boost when CEO Graham Mullis and two other directors joined them.

Wednesday's £500,000 purchase of shares by Mullis at 817p compares with Novacyt's 1,100p prior to Monday's news from Pfizer (NYSE:PFE) that its vaccine candidate with BioNTech (NASDAQ:BNTX) is 90% effective.

Novacyt shares fell as far as 565p after the Pfizer breakthrough poured cold water on a buying frenzy in which shares in the AIM-traded diagnostics firm had soared as much as 21,000% in a year.

The dotcom-style surge reflected expectations that revenues may top €300 million (£269 million) this year, compared with €13.1 million the year before, as the company meets demand from the NHS and other countries for its polymerase chain reaction testing kits.

The sales boom is expected to peak in the first half of 2021, but, given that future Covid-19 vaccines will need many months to roll out, there's no chance that demand will collapse overnight. In the meantime, Novacyt is using the cash flows generated from its Covid-19 testing kits to strengthen its position across the diagnostics market.

And judging by the reaction of interactive investor clients, who made Novacyt's shares the most bought on our platform last Monday, there's still plenty of support for the company.

Numis Securities has also left its 1,365p target price untouched for now, pointing out that Novacyt has a clear, deliverable strategy to emerge as a long-term winner in its sector.

With sentiment further boosted by Mullis topping up his holding, Novacyt shares closed at 897p on Friday. The CEO, who was the driving force behind the company securing early mover advantage on Covid-19 testing, also spent £30,000 on shares at a price of 310p in May.

Thanks to the pandemic, Novacyt has transformed its financial position and recently settled all outstanding debt after sales rose by 900% in the first half of the year.

A forecast cash position of more than 400 million euros (£358 million) by the end of 2022 should give it firepower to create further value, including on its longer-term ambitions to drive revenues and profitability through in vitro diagnostics involving samples of blood and tissue.

Prior to the vaccine announcement, analysts SP Angel initiated coverage on the stock with a price target of 1,463p and said the option for Department of Health and Social Care to take up to 700 additional PCR instruments could mean a further step change in revenues.

Also buying Novacyt stock last week were board directors Edwin Snape, who purchased £7,722 worth of shares at 715p on Tuesday, and Jean-Pierre Crinelli who picked up 15,000 euros worth of shares at 9.70 euros on Paris Euronext on Thursday.

Country’s biggest shopkeepers sell up

Two well-known names from the retail industry have pocketed a combined £24 million after selling shares in their respective companies last week.

Next (LSE:NXT) CEO Simon Wolfson generated £10.2 million while former ASOS (LSE:ASC) boss and current board member Nick Robertson picked up £13.6 million. Despite the share sales, the pair retain significant shareholdings in the companies.

Next shares were 2% lower on Friday after a regulatory filing the night before showed Lord Wolfson had offloaded 150,000 shares with the Next price at near to a pandemic-high of 6,787p.

A couple of weeks earlier, merchandise and operations director Richard Papp sold some of his shares in the fashion retailer, raising almost £800,000 at a price of 6,203p.

Shares have doubled in value since April, buoyed by Next increasing its projection for full-year profits three times this year on the back of strong online trading. Even so, the revised profits guidance of £365 million remains far from the previous year's number of £728 million and there's also huge uncertainty facing the retail estate ahead of the Christmas period.

Like Next, ASOS shares have been on a recovery path since April as the company successfully adapts to the staying-in fashion trends and shift towards casual wear.

The stock fell back in October, however, after CEO Nick Beighton highlighted fears about the pandemic's impact on the company's 20-something customer base.

Robertson sold 300,000 worth of ASOS shares in three separate transactions up to last Monday, the highest price being 4,723p. As we reported three weeks ago, fellow board member and Ocado Solutions CEO Luke Jensen bought £200,000 worth of ASOS shares at a price of 5,070p.

The stock plummeted to just above 1,000p in April before recovering to 5,438p in early October. Investec Securities has a price target of 7,520p, representing a return to levels seen two years ago, while Jefferies is at 5,900p based on ASOS trading on about 40 times 2022 sales.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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