The biotechnology sector has long been a happy hunting ground for investors focused on AIM-listed companies with strong growth potential, but the Covid-19 pandemic has given the sector rocket boosters. Braveheart Investment Group (LON:BRH) is a good example: its share price surged 221.2% in 11 days to 128.50p (22/2/21) after issuing a stock market update on its work to develop Covid-19 tests.
Similarly, Scancell Holdings (LSE:SCLP) saw its share price soar 100% over a week in February after press comment about its Covidity programme, while in January Novacyt (LSE:NCYT) jumped 43% on similar speculation. Braveheart is currently trading at 84.00p (1/3/21), up 784% year to date.
Braveheart Investment Group is a diversified venture capital portfolio
Braveheart, though a financial services company, is a pure play on the technology sector. It is a venture capital-type of company, with a high-conviction strategy of investing in a small number of promising tech stocks offering the prospect of higher returns than would a properly diversified portfolio with more modest returns. Braveheart holds just five companies in its Strategic Investments portfolio, companies that it either controls or owns outright, and a portfolio of 12 other tech stocks.
The sudden surge in Braveheart Investment Group’s share price followed news that Paraytec, one of its key investments, is developing a Covid rapid testing kit that promises to deliver a result in five minutes. Its latest market update, issued this morning (1/3/21), confirms that the testing programme is on track, and ready to move on to the next trials stage.
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The technology will also enable multiple simultaneous testing for public events, such as sports festivals and stadiums. As Braveheart CEO Trevor Brown said, “these latest laboratory results make clear that the Paraytec technology is capable of being market leading. Our attention will now turn towards quickly commencing the final clinical trial and commercialising our product either ourselves or with a partner.”
Behind the numbers at Braveheart
Braveheart owns Paraytec outright, which means Paraytec’s company accounts – and its profits – are consolidated into Braveheart’s group accounts. Braveheart said it made a profit of £402,000 in the six months to end September 2020, against a loss of £122,000 in 2019, on revenues of £895,000 (2019: £250,000). The estimated value of the group’s strategic portfolio rose to £2.61m (2019: £1.1m) over the six months period. Group cash held for the period was up to £660,000, against liabilities of £281,000.
Braveheart’s bet is that its Strategic Investment portfolio companies will be the ones to drive growth in shareholder value. In November, Braveheart sold its stake in Remote Monitored Systems for £17.4m, allocating much of the cash to increase its stake in one of its key investments, Phase Focus Ltd, which develops computational imaging techniques. The sale also allowed Braveheart to pay a special dividend of 42.75p per share, worth more than the share price at the time of 35.5p, worth £15.5m in total, as part of its policy of returning excess cash to investors ‘wherever practicable’.
The outlook for Braveheart Investment Group is positive. The continued emergence of new strains of the virus means that the Covid-19 virus will most likely be with us for years. This means a lot of value is now being placed on companies, like Paraytec, Scancell and Novacyt, that can meet the demand for treatments and the technology needed to manage Covid-19.
The demand for rapid tests for the early detection of the virus is already strong and can only increase, with every demand from communities and the wider economy for a return to normality.