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Tekcapital PLC: DEEP DIVE

Tekcapital expects strategy to lead to improved profits and returns

Tekcapital expects “the quickening pace of innovation” in the portfolio companies to lead to higher service revenues in the future
OVERVIEW: TEK The Big Picture
Tekcapital provides unique technology investment opportunities, says finnCap
  • Tekcapital expects strategy to pay off 

  • Recent equity raise of US$1.1mln to fund development of technologies

  • Portfolio companies on track with innovations 


What Tekcapital does:

Tekcapital PLC (LON:TEK) is an intellectual property (IP) investment firm that helps commercialise innovations developed in universities around the world. It spins out the IP into separate companies and finds management to help capitalise on and commercialise the IP.

On the investment side, its current portfolio boasts firms that are at technology’s cutting edge.

TekCapital also has a services business that helps companies find, evaluate, and license technologies.

Portfolio companies:

The portfolio includes 97.5%-owned Salarius, which owns a patented manufacturing process for producing low-sodium salt, a market expected to be worth US$1.76bn by 2025.

It also includes wholly-owned Lucyd Ltd, which is developing smartglasses, a sector that is estimated to reach US$36.4bn by 2023.

Tekcapital has a 33% stake in Bellascura, which is developing a CURV portable oxygen concentrator (POC). The POC market is projected to reach US$1.7bbn by 2022.

Wholly-owned Guidant was established by Tekcapital to commercialise new technology to improve the safety and efficiency of autonomous driving. It has a exclusively licensed US patent that has the potential to enable the development of software apps for controlling autonomous vehicles such as cars, trucks and drones using artificial intelligence.

Other portfolio companies include touch-screen technology developer, e-Soma Ltd, and food preparation firm, Smart Food Tek.

Inflection points:

  • Tekcapital recently appointed Dr Mireya McKee as business development manager. She brings more than 17 years of research, technology transfer and innovation management experience, including as a senior consultant for Oxford University Innovation.
  • Tekcapital raised US$1.1mln through a share placing last October to fund the development and commercialisation of technologies in the company’s portfolio
  • In the first half of 2018, revenue from services increased by 29% to US$639,561 while the fair value of its portfolio companies saw a net increase of US$638,852. Net assets overall rose by 35% to US$10.7mln.
  • Lucyd has formed a reseller partnership with a Brazilian optical retailer and bagged its first order. The distributor has purchased an initial order for 100 pairs of Lucyd Loud Bluetooth, bone-conducting glasses, which they will be selling on their own online eyewear store, which will primarily serve Brazil, Mexico, Colombia and Chile
  • Belluscura and its research partner Separation Design Group have filed three patent applications and received a Notice of Allowance for a fourth application in the fields of respiratory, postoperative recovery, sleep monitoring and artificial intelligence.The new filings will take Belluscura’s total licenses in the fields to 15 patents and applications.

Blue Sky:

Tekcapital chairman Dr Clifford Gross has said the firm’s strategy would “likely to result in further increases in returns on invested capital, and profitability in the future”.

He added: "Because of the quickening pace of innovation, an increasing number of companies are making ever faster and more disruptive use of innovative ideas sourced exogenously. We believe this should result in increased service revenues in the future and enhancement of the combined value of our portfolio companies."

In a note to clients, finnCapp investors said: “The group provides access to intellectual property sourced from a global network of universities, providing unique technology investment opportunities to its customers and its own portfolio companies.

"At present, the stock sits at a 57% price to book discount to the average of its direct peer group, and applying that average to the company’s NAV implies a target price of 19p and potential share price upside of 124%.”

finnCap has set an initial price target of 19p based on its valuation versus its peer group.

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