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Hardman & Co

Omega Diagnostics Group Plc Diagnosing growth opportunities

Hardman & Co ReportOmega Diagnostics Group plc (LON:ODX) has an established core business providing high quality in vitro diagnostic tests within three core areas of competence – Food Intolerance, Allergy & Autoimmune, Infectious Disease – that are sold in over 100 countries. The group offers steady low single-digit growth which is profitable and cash generative. Investment in new products has seen the launch of a new panel of automated allergy tests and progress on Visitect for diagnosis of HIV. Given Omega’s established position, the Board sees opportunities for an accelerated growth strategy.

 

 

► Strategy: Omega’s established core business of providing over 100 in vitro diagnostic tests to over 100 countries provides a steady, profitable and cash generative business. Global healthcare demand for preventative measures is generating a number of high growth opportunities.

► New allergy tests: Following considerable investment, Omega recently received CE Mark and launched a new panel of tests for 41 of the most common allergens to be run on Immunodiagnostics’ IDS-iSYS platform. The first order has been received and plans are progressing to make these tests more widely available.

► Visitect® CD4: The cause of variability in the performance of the test appears to have been identified and corrected. The re-designed Visitect point-of-care HIV monitoring test has been re-validated in over 500 samples at 3 UK hospitals, with results comparable to the current gold-standard flow cytometry test.

► Valuation: Omega is being valued by the market as a steady low growth business. However, this does not reflect the potential that can be derived from the new products. The stock trades on an EV/sales of ca.1.2x which places it at the bottom end of a peer group. It also trades at a discount to NAV.

► Investment summary: Being an established player with a wide range of products available globally makes Omega Diagnostics Group plc an attractive company. Careful management and re-investment of resources is resulting in an exciting period of new product launches. However, the dilemma for management is deciding which opportunities for an accelerated growth strategy could be delivered from existing resources.