Tekcapital – Initiation of Coverage
Intellectual property investor with a unique business model, creating value from university IP
AIM listed Tekcapital is an international provider of technology and intellectual property investment services. The company’s objective is to create value from investing in new, university-developed intellectual properties and to produce returns through capital appreciation.
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Unique business model within the IP industry
Tekcapital’s approach to investing in IP is different to its competitors. Instead of being aligned to just one or a few universities it has access, via a proprietary discovery search engine, to 4,500+ universities in 160 countries around the world. This is supported by a network of over 60 scientific advisors who review and select the IP with the most commercial potential.
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Nine portfolio companies each with significant commercial potential
The current IP investment portfolio consists of nine companies operating across a range of industries. Tekcapital is now in the process of creating value from these investments, with the monetisation strategies including prototype development, out-licensing of IP to third-parties, trade sales or IPO.
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Complementary services business provides revenue stream and access to further IP investment opportunities
The core IP investment business is supported by an IP services offering which provides universities and companies with invention discovery reports, search tools, analytics and IP professional recruitment to help them create value from new discoveries. Revenue from services grew at a CAGR of 179% from 2013 to 2016.
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Shares trade at a modest discount to the average sector price-to-book value ratio, with significant long-term upside potential on offer
The current valuation of Tekcapital represents a discount to the average price-to-book value ratio of the wider UK IP sector and we also see significant longer term opportunities here for investors. We initiate coverage with a Speculative Buy stance.
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RISK WARNING & DISCLAIMER
Tekcapital is a research client of Align Research. For full disclaimer information please refer to the last page of the full document. This investment may not be suitable for your personal circumstances. If you are in any doubt as to its suitability you should seek professional advice. This note does not constitute advice and your capital is at risk. This is a marketing communication and cannot be considered independent research.
| Year to Nov | 2014A | 2015A | 2016A | 2017 H1A |
|---|---|---|---|---|
| Revenues ($m) | 0.21 | 0.41 | 0.76 | 3.81 |
| Pre-tax ($m) | (0.99) | (1.46) | (2.56) | 1.55 |
| EPS (c) | (5.0) | (4.9) | (6.3) | 4.4 |