Johan Widmark | 2022-03-01 08:00
Orders year to date amounting to half of sales in 2021
The two fucoxanthin orders in Q1’22 with a total value of 3 MSEK, corresponds to roughly half of the company’s total sales in 2021 at 6.1 MSEK, of which 4.5 MSEK also was fucoxanthin. This clearly illustrates not only that this has now become Simris’ by far most lucrative business, it also shows that the B2B-segment is the right strategic path for Simris and that the company is now on track to capitalise on the growing demand from the nutritional, cosmeceutical and pharma industries.
As for the omega-3 vertical, Simris has decided to withdraw its EFSA Novel Food application, partly because Simris will most likely use a higher yielding stem for its omega-3 product, but also because of Simris’ change in business focus to the considerably more valuable fucoxantin.
International micro algae space gaining momentum
In a global perspective, the micro algae industry has attracted considerable VC financing in the past five years, which along with the M&A-activity ranges into several hundreds of million USD. At the same time, the whole microalgae market can still be considered to be in its infancy, as various market research firms estimate the total global market (excluding biofuels) to be less than 1 BN USD. By 2028, market research firm Meticulous Research, expect the global microalgae market to amount to 1,8 BN USD, representing a 10.8% CAGR in 2021-2028.
In terms of peers, Paris listed Fermentalg is valued at 105 MEUR, supported by sales of 5.6 MEUR. While that is next level compared to Simris, the 18.8x sales multiple clearly illustrate the premium multiples international investors are willing to pay for exposure to the emerging micro algae industry.
Time to capitalise on unique micro algae platform
We have long argued that Simris has a unique micro algae platform that offers considerable opportunities in an international perspective and that the announcement of new B2B deals is the key to unlocking this potential. Unfortunately, the share still suffers from a crisis of confidence stemming from previous management and an historic overemphasis on the short-term sales development of the omega-3 product line. With sales in 2021 at 6.1 MSEK, Simris managed to surpass our previous sales expectation at 4 MSEK. With the orders to date we have updated our revenue expectations for 2022 from 12 MSEK to 15 MSEK, which also includes our lowered expectations for the omega-3. Chairman Steven Schapera has also communicated considerable cost cutting measures, but we expect that a scale-up is associated with increased sales, marketing and R&D spend, meaning that we still do not expect Simris to show profit in 2022-2024.
While the two fucoxanthin orders to date will be delivered from existing inventory, the liquidity situation can be described as tight, with cash at 31 Dec 2021 below 1 MSEK, and we expect some sort of capital raise in the near future. This will probably be communicated in conjunction with the appointment of a new CEO, which remains one of last key pieces of the puzzle.
So all in all, we continue to see a significant revaluation potential in Simris, and that the triggers are now starting to line up. We apply a 6x sales multiple to our forecast for 2023 (derived from a third of the sales multipe of Fermentalg) to arrive at a 150 MSEK or 1,9 SEK per share fair value in 2023, but stress that this is before adjusting for any dillution in an expected capital raise.
Read more about Simris Alg here
M&A-activity in the accelerating microalgae space reveal tenbagger revaluation potential for Simris
Public and investor interest in the microalgae space has surged in the last decade, now registering all-time highs. With its vertically integrated, microalgae platform and a new CEO
GENERAL DISCLAIMER AND COPYRIGHT
This commissioned research report is for informational purposes only and is to be considered marketing communication. This research does not constitute investment advice and is not a solicitation to buy shares. Information provided here or on Emergers' website emergers.se is not intended to be financial advice. This research shall not be construed as a recommendation or solicitation to invest in the companies described. Emergers cannot be held liable for either direct or indirect damages caused by decisions made on the basis of information in this analysis. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
This material is not intended to be financial advice. This material has been commissioned by the Company in question and prepared and issued by Emergers, in consideration of a fee payable by the Company. Emergers charges a standard fee for the production and broad dissemination of a detailed note following by regular update notes. Fees are paid upfront in cash without recourse. Emergers may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.
Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained herein represent those of the research analyst at Emergers at the time of publication. The company has been given the opportunity to influence factual statements before publication, but forecasts, conclusions and valuation reasoning are Emergers’ own. Forward-looking information or statements contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.
Exclusion of Liability: To the fullest extent allowed by law, Emergers shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained in this material.
No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Emergers’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in this material may not be eligible for sale in all jurisdictions or to certain categories of investors. Investors are encouraged to seek additional information as well as consult a financial advisor prior to any investment decision.
Investment in securities mentioned: Emergers has a restrictive policy relating to personal dealing and conflicts of interest. Emergers does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Emergers may have a position in any or related securities mentioned in this report, subject to Emergers' policies on personal dealing and conflicts of interest.
Copyright: Copyright 2021 Incirrata AB (Emergers)
This document is prepared and provided by Emergers for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.
This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.
Emergers relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Emergers does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.