AT1 - Atomo Diagnostics

Atomo Diagnostics is a medical device company headquartered in Sydney, Australia, and is establishing an in-house assembly and packing facility in South Africa, and has a commercial office in the UK.

Established in 2010, the Company's primary focus is the expansion of global sales and continued development of its proprietary rapid test device technologies that simplify testing processes and reduce errors compared to more complex conventional blood-based rapid diagnostic testing (RDT) kits.

Since commencing commercialisation in 2015, Atomo has sold over 550,000 Atomo HIV rapid test devices through distributors in Africa and Europe as well as direct to market in Australia. Atomo has sold a further 430,000 of its RDT devices to other manufacturers of rapid diagnostic tests for use as a sub-assembly in other clinical rapid testing applications.

It is anticipated that AT1 will list on the ASX during April 2020.

https://atomodiagnostics.com

A reflection on the current Covid situation, perhaps; AT1 has already closed its IPO on Wed 01 April, some 2 weeks early

Atomo Diagnostics AT1 is a specialist medical device design innovator and original equipment manufacturing (OEM) company whose unique proprietary technologies support usability, accuracy, and safety. Headquartered in Sydney, Australia, Atomo has emerged as a global leader in the development of point of care devices for rapid diagnostic testing (RDT).

Atomo’s operations are ISO 9001 and ISO 13485 certified for the design, development, and manufacture of in vitro diagnostic medical devices.

Designed for simplicity
Atomo’s device solutions address challenges associated with in-field deployment of standard RDT kits. The focus on usability and simplicity in design means Atomo’s integrated RDT platforms are easy to learn and teach, and suitable for use in a variety of real world settings, including doctor’s offices, pharmacies, point of care settings, community clinics, and the home.
AtomoRapid™ RDT platforms are customisable to suit a variety of blood-based lateral flow test assays and are appropriate for a range of applications, including screening for chronic conditions and detection of infectious diseases.

Click to expand...

Watch the FOMO drive this to ultra-stonk levels when it lists! There will be a near total disconnect between value and price. Good traders will have a field day on it.

Hey.

Inexperienced trader/investor here and my first buy was 1,000 AT1 shares the day it listed.

The price has dropped from .55 to .4 since.

I’m not concerned, yet, as I’m only investing money I was comfortable loosing while I learn the ropes.

My question is, if the price rises above my purchase price should I sell and reinvest elsewhere, or hold onto them as a long term investment?

jimborazza said:

Inexperienced trader/investor here

Click to expand...

I would say work out which one you are, trader or investor. What you do should be informed by who you are.

As I am not a trader I have no idea what a trader would do if they held AT1.

As an investor I would take the loss and try to stay away from speculative businesses that have just floated!

The goal is investing, although I’m keen to experience both and not afraid to loose a bit of cash in the early days while I find my feet.

I brought the shares before I knew the difference.

Probably a question for a different forum, however, what would I need to monitor to make an assessment on whether I might get my purchase price back by holding firm a little while?

Not looking for assurance, looking for learning opportunities through my initial experience.

In such a volatile market I think any forward looking estimates are likely uncertain.

Also, thats thinking like a speculator/gambler - you sound like you are asking, "is there a greater fool coming anytime soon?"

As an investor I would be looking at reverse engineering the current share price, and ask what sort of future earnings would the business need to make to justify its current price? My back of the envelope number would be $15m in earnings - that would require growth that I would need to suspend logic to believe achievable.

So for me, if I held I would be thinking I made a mistake in buying without researching, analysing and understanding the business and I would sell and book the loss as a cheap lesson!

Yes, and when the next set of results come out analyse them and learn about the business and learn from it.

I am always suss of businesses floating.g on a flavour of the moment issue, in this case coronavirus tests as it may just be people taking advantage.

Thanks guys, I appreciate the advice.

I did research them. Problem is being green I'm still learning what to pay attention to.

Admittedly I was drawn by the COVID factor, however it was reading about their 10 year history, being pioneers in HIV testing have sold 1.2 million test kits that sparked my attention. Also that they recently signed a supply agreement for 2.46 million test kits to be used for COVID testing.

I also read that the Gates Foundation are heavily invested in them and their 1H FY20 Revenue was almost double their FY19 revenue.

They didn't read to me like a company looking to take advantage of the COVID situation, however as confessed I'm green and looking to learn.

Thanks again.

No worries mate, just be careful of buying the narrative rather than the business, I saw the usual suspects pumping AT1 based on the narrative, the HIV testing, the potential COVID testing, the Bill Gates stuff etc. Thats all well and good, but you are not buying a story, otherwise you would be in the publishing business!

What are the financials? Whats the ROIIC? Whats the FCF? What growth does the business have to achieve to justify the current price? What are the incentives for management to act in shareholders interest? What is the history of capital allocation?

Even with revenue doubling you have to understand how the scaling works, how much flows to the bottom line, what will be the future R&D needs...

Also, many others will use different approaches to me, dont assume I know anything. My personal journey was developing a strategy that is consistent with my personality and psychology, and then applying that strategy consistently and gaining conviction in my process and actions. Its a work in progress and there are many more knowledgable and experienced investors than me on the forum. (like Knobby22)

jimborazza said:

Thanks guys, I appreciate the advice.

I did research them. Problem is being green I'm still learning what to pay attention to.

Admittedly I was drawn by the COVID factor, however it was reading about their 10 year history, being pioneers in HIV testing have sold 1.2 million test kits that sparked my attention. Also that they recently signed a supply agreement for 2.46 million test kits to be used for COVID testing.

I also read that the Gates Foundation are heavily invested in them and their 1H FY20 Revenue was almost double their FY19 revenue.

They didn't read to me like a company looking to take advantage of the COVID situation, however as confessed I'm green and looking to learn.

Thanks again.

Click to expand...

I have taken a quick look.
It looks pretty honest. They appear to be using most of the cash within the business and it is a real business with possibly patents? Do you know where I can read the IPO document?

Just because it's come back from the initial IPO surge doesn't mean it's a dud.
It all depends on getting orders. A lot of these investors of the float are just stags, out to make a quick buck.

I've read a few documents. This being one:

https://investors.atomodiagnostics....Ayh3eEeY7edB27lKLg/files/Atomo_Prospectus.pdf

Knobby22 said:

.............Do you know where I can read the IPO document?
Just because it's come back from the initial IPO surge doesn't mean it's a dud.
It all depends on getting orders. A lot of these investors of the float are just stags, out to make a quick buck.

Click to expand...

@Knobby22 you can find the prospectus here. and the recent Investor Presentation here.

@jimborazza appears to have done his homework and Knobby could be correct that it is not necessarily a dud. Let's face it, how many IPOs go gangbusters from the start, particularly in a market like we have now.

This is the Bill Gates bit.
The Global Health Investment Fund (GHIF) announced it has provided a $6 million loan to Atomo Diagnostics (Atomo) to support the scale-up of production operations and the expansion of commercial activities related to the award-winning AtomoRapid™ rapid diagnostic test (RDT) platform. Funds will also be used to commercialize a self-test solution for HIV and other infectious diseases.

GHIF is a private investment fund structured by JPMorgan Chase & Co. and the Bill & Melinda Gates Foundation.

The pumpers and rampers have been saying that Bill Gates is a major investor, that shows the danger with the narrative buying. An investment fund connected with the Gates Foundation, lending AT1 money is not quite the same thing!

For me the same question remains, is this an investible business? To conclude that it is I need to believe itt can scale up exponentially, very quickly, for a long time. That doesnt mean the share price wont go up in the short term though!

It's hard to price.

The tech is patented, the main owner/developer is experienced and worked at Resmed. They own a large chunk of the shares and a also will get options, so there is a clear alignment with them making this a success.

They already have CE certification so can sell into the EU but this is for AIDS. The technology is not year approved for Covid19. They are linking with partners to get this.

They only seem to be selling into France at present. They also have costs developing supply. Profitability is increasing but they are still making large losses.

In my view, they could make big money on the self diagnosis tests however I don't think Europe with free healthcare gives enough opportunity, they need to get into USA, Mexico, etc. where healthcare is costly. No mention of the USA, so a while off at best.

I like the fact that the IPO supported future growth, the buyers of the raising though only now own 26% of the business. They are not giving it away.

Can they get profitable quickly enough?
The cash raised gives them time to try to achieve this while being cash flow negative. They are ramping up sales, almost doubling in six months.

The devices can be used for testing antibodies for other diseases.

Overall, it's highly speculative at this stage.
I think they could be profitable in a years time. It's hard to see the company spinning off cash if a vaccine is found, but that's not guaranteed.

Personally I would hold on and see if further sales eventuate. I would buy in if say Germany signed a deal.

The startup founders seem to be very serious about being successful and becoming wealthy. The fact manufacturing is in South Africa shows this.

So, my thoughts are that there is risk but the technology is proven so the risk is more to do with competition. I would hold at least half the shares for now and pay very careful attention at the next annual meeting.

Overall I think the risk vs opportunity ratio is positive. Unfortunately you just have to have patience. I don't feel they were entirely forthright in the Prospectus possibly because they don't know how they will expand. They mention 3 other partners, will this happen?

I will be keeping one eye on the company.

I note offer price was 20c and now it's dropped to 40c, so looks a good win anyway.

Also point out, as they say, that there are a lot of well resourced competitors in this space. This is one reason they need the raising, to compete quickly while they have the advantage.

So in general why the raising? For Fundamental Investors this is very important.

You tend to have 4 different types:

Government e.g. CSL, Tabcorp, Telstra, - Government wants cash while making offer good enough to not lose votes. All the money goes to the Government.

Private Equity/ Merchant Bankers raising is selling an existing business that you have dressed up to make as much money as possible, e.g. Dick Smith, Myer etc. Usually the businesses are loaded up with debt and most of the money raised goes straight into the promoters pockets.

Smaller firms of chancers smelling an opportunity and getting the cash from the public. Mining explorers, biotech, sometimes dodgy brother type startups which are more about conning the punters.

Finally, real businesses being built up from foundation investors that go public to:
Get capital to enable faster expansion and allow the company to grow while cash flow negative, enable the founders to have a market to sell into once they have made their fortune (hopefully). e.g. Afterpay, Polynovo and this company.

If you look at an IPO and can't see the real reason for the float then stay away.

galumay said:

and there are many more knowledgable and experienced investors than me on the forum. (like Knobby22)

Click to expand...

See, I was right again!

(Great summary of your analysis and research Knobby22.)

Cheers guys. So much to learn.

Probably the very definition of emotional investing, however it was my first purchase so I'm holding on for the ride to see what happens.

Thanks again.

lol i'm with you @jimborazza lots to learn for me too. But first stock buy was AT1 for me as well haha.