MIDAS SHARE TIPS: Tech firm BATM, dubbed Batman, gets lift fighting Covid


MIDAS SHARE TIPS: Holy Covid tests! Israeli technology and diagnostics company BATM, dubbed Batman, gets a lift by fighting coronavirus

Investors with long memories may shudder at the name BATM. The Israeli technology and diagnostics company was once a £1billion dotcom darling, affectionately known as Batman, before crashing further than a DC villain at the end of an epic final battle. 

In 2000, shares in the company were worth just over £70, but by 2002 they had collapsed to just over 7p. But everyone knows that good superheroes never die. Last week’s interim results showed that BATM is riding high again, and it might be worth hitching a ride in the Batmobile. 

The company currently has two divisions: networking and cyber, and biomedical solutions. Between them, they put BATM neatly at the heart of two major preoccupations of our current age: our own defences against disease and computer defences against hacking. 

Returning hero: BATM will be rolling out new virus testing kits and has developed a rapid test for tuberculosis

The biomedical solutions business has done well through the pandemic. First it provided ventilators, and then turned its hand to Covid testing, producing both saliva-based test kits and the more familiar nasal-swab versions. 

Revenue for the division increased by 10 per cent in the most recent interim results, even though the comparators were tough due to a surge in ventilator production the previous year. The company has high hopes for its new diagnostic kits, which test for a number of respiratory viruses at once and are expected to be rolled out by anxious public health agencies across the world this winter. It has also developed a rapid test for tuberculosis. 

In the networking and cyber division, numbers look gloomier, partly due to the divestment of a non-core subsidiary. Revenues are down slightly year-on-year, even within continuing operations. 

However, chief executive Dr Zvi Marom, who has been with BATM through thick and thin, is hopeful for the new Edgility networking product, which protects small offices and home workers, as well as a new $10million (£7.28million) cybersecurity project for a government defence department. 

Marom said when presenting interim results that he expected full-year revenue to be ahead of expectations and EBITDA (earnings with costs stripped out) to be up 40 per cent year-on-year. The shares rose on the news, and now sit at 93p. 

Financial analyst Shore Capital has upgraded its forecasts on the stock and now expects £23million of pretax profits on revenue of £138million for the full year. That is a five per cent increase in revenue expectations. 

Shore Capital’s Robin Speakman points to the firm’s strong balance sheet, strengthening order book and potential for additional investor interest to support fast topline growth as positives for the business. 

Early BATM fans might be forgiven for thinking this is a tediously familiar storyline. Since its dotcom darling days, BATM has given us a number of false dawns, notably in 2010, when mobile business Nokia slashed its trade with the business, causing revenue, profits and shares to tank. In addition to this, the current valuation of 29 times forward earnings does not look especially cheap. 

Nonetheless, with Shore indicating that it expects further earnings upgrades in future, and the company’s products in a sweet spot, there may be something worth looking at in this Batman reboot.

Midas Verdict: Midas last looked at BATM back in 2011, advising a buy when the shares were 24p. If you’ve held on for a decade, you’ve done pretty well and there’s no harm in locking in some profits, but there could be more excitement to come. As a cash-generative, forward-thinking business run by a technological whizzkid, there’s a lot to like about the current iteration of BATM. It could be just the superhero your portfolio needs. Buy.

Traded on: Main market Ticker: BVC Contact: +972 9 8662525 or batm.com 

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