Why Novacyt is back in favour and AIM’s other big movers 

Investors react as the Covid testing firm continues to adapt to life after a vaccine.

A long list of research & development (R&D) projects today brought some relief for Novacyt (LSE:NCYT) investors after a 40% slide in the value of the AIM-traded diagnostics firm since late January.

The expansion of Novacyt's Covid-19 portfolio to include testing for new variants discovered in Bristol and California, helped to consolidate the share price at around 700p — up 2% — and served as a timely reminder of the company's rapid testing development capabilities.

Alongside these opportunities from Covid-19 testing, Novacyt said it will reveal how it plans to build a “sustainable long-term diagnostics business” by the second quarter of this year.

Numis Securities welcomed the update and said Novacyt's potential beyond the ongoing peak in Covid-19 testing was not being reflected in the current share price. Numis has a price target of 1,365p, whereas counterparts at SP Angel are even more optimistic at 1,433p.

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The rapid deployment of Covid-19 testing kits for use in the NHS and by health authorities worldwide meant revenues topped €300 million euros (£269 million) in 2020. That helped shares surge from 14p at the start of last year to 1,200p at one point in October.

They returned to near this level in late January, but with global vaccination programmes gathering momentum the stock has fallen sharply in recent weeks.

Novacyt: the future

Today's R&D update reminded the City about the broad range of opportunities that still exist in terms of Covid-19, including plans for the launch of high-throughput PCR test that is able to reduce processing time, cost and labour by up to 30%. Novacyt is also working on an antibody lateral flow test for professional use that takes between 10 and 20 minutes to provide a result.

The antibody test complements the group’s PCR-based offering and should help health officials to monitor the effectiveness of future vaccines. Novacyt said: “The company believes this exemplifies how it can extend the revenue horizon for Covid-19 as testing continues to evolve.”

The company also pointed to data from a year-long voluntary programme of PCR testing involving AstraZeneca staff in the UK and Sweden, where the preference for saliva testing over throat or nasal swabbing showed how PCR testing can be used for asymptomatic mass-testing. 

SP Angel added today: “Novacyt has a healthy pipeline of products focused on driving the opportunity for Covid-19 testing. These products should provide incremental revenues alongside its original clinical test kit.”

AIM’s other big share price movers

Today's other big moves on AIM included Best of the Best (LSE:BOTB) after the company called off a formal sale process because its current strategy is working well. The organiser of online competitions where the prizes include luxury cars held talks with a number of parties last summer, but said it was in the best interests of shareholders to focus on its existing business model.

It said: “This pure online strategy, with a focus on cash generation, enables a policy of consistent shareholder returns.” This has been highlighted by cash balances still in excess of £10 million, even after the payment of a special dividend totalling £3.75 million on 5 February.

BOTB shares were today 250p higher at 2,700p, having been 1,475p at the end of 2020.

Angling Direct (LSE:ANG) moved in the opposite direction, falling 6% despite revealing more strong sales on the back of the wellbeing benefits of fishing during the current lockdown.

The tackle and equipment retailer's online sales jumped 62% and the number of visitors to its UK website surged by 2.5 million to 7.4 million, resulting in revenues rising 27% to £67.6 million in the year to 31 January. Underlying earnings will be at least £3.8 million for the year, compared with a loss of £500,000 the year before.

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Shares still fell 4.5p to 74.5p after the Norfolk-based company declined to give guidance on the new financial year until lockdown restrictions affecting its 38-strong retail estate are lifted. It is also experiencing post-Brexit disruption to logistics and less predictable Far East supply.

N+1 analyst Matthew McEachran said ongoing strategic and operational enhancements should position the company for continued profitable growth once the restrictions end. On 11 times January 2023 earnings, he said the current valuation was undemanding.