A slew of small cap companies have multiplied their value this year because some aspect of their business was directly linked to fighting the coronavirus or responded to the new stay-at-home tech requirement. However, to lump into that group Remote Monitored Systems PLC ( LON: RMS), a company that specialised in drone operations that survey industrial structures for maintenance purposes, would be a stretch. At least until the firm acquired protective facial mask maker Pharm2Farm. Then shares rose more than 10-fold.
Yesterday shares dropped 12%, followed by another 12% decline this morning, and all of this after a week when the company was the most bought and sold share in London. A small chronology may help understand what actually happened:
2019-2020: The company focuses exclusively on drone operations and software in industrial use and keeps raising small sums from the market to expand its core business. Share price lingers mostly between 0.20-0.25 pence
January 2020: Enter Covid. Core business slows down.
17 July 2020: RMS raises £0.27 million by selling 106 million shares at 0.25p to investors. Braveheart Investment Group buys 80 million shares for £0.2 million. Shares at 0.28.
24 Aug 2020: RMS buys Pharm2Farm, a protective face mask maker in the process of working on a mask that can kill Covid on impact. Shares at 0.38.
From here on shares continue rising to 4.45 on 2 Nov.
05 Nov 2020: Pharm2Farm acquisition finalised. Braveheart Investment Group and RMS’s non-executive chairman Paul Ryan, a former Vodafone director, start selling their stakes. Shares at 2.65.
17 -18 Nov 2020: Braveheart and Ryan finalise the sale of their stakes. Braveheart sells 510 million shares for £17.16m, Paul Ryan sells a total of 70.7m shares for £2.93m.
What does this all mean for investors in RMS?
This share is likely to remain very active in the short term. Now that the big stake holders have wound down their positions a lot of smaller shareholders are also pulling out, in part assuming that the recent progress with vaccines will quell the demand for protective face masks. But Pharm2Farm is expecting significant production news over the next one to two weeks which is likely to tip the down trend into the opposite direction.
Pharm2Farm is working on an exceptional protective surgical mask which goes beyond just stopping viruses entering the nose and mouth but can actually kill both flu and coronaviruses. Whereas normal surgical masks typically consist of three paper-based layers Pharm2Farm’s mask has five layers of which the middle one is covered with copper nano-particles that destroy viruses.
Live virus tests carried out in two UK laboratories in September and October have confirmed that the mask is more than 90% efficient for at least seven hours – and the time span here is only because that was the maximum duration of the test.
The Nottingham-based firm is now awaiting the delivery of an automated face mask production line which is due by the end of this month. The line has the capacity to produce 5 million masks per month, giving Pharm2Farm a lot of room for growth as the demand in the UK alone is 2 million masks per day. Even when corona is put back in its box the antiviral capability and the durability of the mask will still make it exceptionally interesting for professional medical use, not only in the UK but globally.
Beyond immediate plans with face masks the question remains what does the company plan to do with its actual core business of areal surveillance and data gathering for maintenance purposes? The concept here is a very valid one, wind power farms but also numerous other industries like oil platforms or rigs need that kind of surveillance and data gathering in order to help them better plan when they have to do maintenance work on their industrial structures and when some part of their production may be in danger of damage or breakage.
The company’s core business has been generating a loss over a number of years, even before Remote Monitored Systems changed its name from Strat Aero in 2018 but over the last few years that loss has been gradually decreasing. The firm has yet to, financially speaking, stand on its own two feet and Pharm2Farm may buy them the time they need to achieve that. Maybe. Share shenanigans notwithstanding.