Itaconix PLC- Transformation bearing results

Written by Ed Stacey

Itaconix's (LON:ITX) results for the year to December 2019 were in line with our expectations, with revenue of £0.7mln and year-end net cash of £2.1mln. Since the financial year end, Itaconix has announced a number of important developments:

  • Agreement with Nouryon for bio-based polymers for the detergent industry (January 2019)
  • Agreement with Nouryon for personal-care products (February 2019)
  • Completion of the restructuring programme for an annualised cost saving of more than £1mln (February 2019)
  • First European order for bio-based polymer for automatic dishwasher detergent (May 2019). First purchase order from Nouryon to supply its polymer for Nouryon’s new Amaze SP product in the personal care segment (May 2019)
  • Disposal of the residual holding in the Alkalon gum business (May 2019)

The company now has established routes to market in multiple product areas, and we believe this offers a compelling platform for revenue growth in 2019, 2020, 2021. We provide a reminder of the market opportunity and key partnerships, on p2.

For fiscal year (FY) 2019e, in spite of a delayed ramp-up of sales earlier in the year, we continue to forecast revenue to more than double. We are forecasting 2019e revenue of £1.5mln, with the underlying (LBITDA) loss narrowing to £1.5mln. We are forecasting a positive year-end net cash position, and we believe that cash resources are sufficient to fund the company's development through to profitability in 2021.

In our in-depth report - "Gaining global reach, March 2019" - we highlighted a number of global comparators, companies with similarly sized market opportunities, and similar or earlier-stage levels of development. Market valuations of these peers suggest 3-5x upside to the Itaconix share price. We believe that the valuation of Itaconix may be depressed due to the shares held by Woodford Investments, whose issues have been widely reported in the media. This overhang notwithstanding, we believe that the fundamental value proposition can drive a re-rating during the next 12 months.


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