I like to think of myself as a savvy investor. And for me, part of building a diverse portfolio involves looking for the next big thing on the FTSE AIM index.
Yourgene Health Plc (LSE:YGEN) is on my ‘ones to watch list’ list. It’s a genetic testing firm that produces non-invasive products for male fertility and prenatal screening for cystic fibrosis and other genetic disorders. In addition, YGEN is planning to expand into genetic testing for cancer detection and prevention. YGEN has also joined the Covid-19-related products market with its own testing solution.
FTSE AIM opportunity
YGEN has been listed on the FTSE AIM for six years and has been steadily increasing its footprint. It has established a commercial presence in the UK, Europe, the Middle East, Africa and Asia.
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YGEN does relies on commercial partnerships with bigger DNA testing firms out there but I do not see this as a drawback. Sometimes smaller companies will bring fresh ideas and proprietary knowledge to the table. Larger firms then utilise their own infrastructure and reach and both parties benefit.
I always take notice of companies who undergo acquisitions to grow, especially into new territories such as the US. Yourgene acquired Elucigene in April 2019 and launched its first oncology product. I believe this is a statement of ambition and will help it to reach new heights.
As I write this, shares in YGEN can be picked up for a very modest 17p per share. Just before the market crash that rocked the whole FTSE index, shares were trading very close to a similar level of 17p. The crash did cause a small dip in price and shares could be purchased at just 10p. Even at current prices, I consider this a bargain with very little risk involved.
Recent performance
On Monday, YGEN released a half-year trading update for the six months ending 30 September 2020. There were several positive takeaways from this report. Revenue increased 5% compared to the same period last year. The UK and Europe each saw a healthy increase of 40% and 80% respectively. This helped offset a reduction in revenue for the rest of the world. This was to be expected as many firms across the FTSE reported difficulties due to the market crash. YGEN also saw revenues for its Covid-19 testing solution begin to increase and the forecast for the second half of the year is positive.
In addition to the financials, YGEN raised £15m of funds to complete a new acquisition in the form of Canadian firm Coastal Genomics, which I believe will further its reach in the North American market.
My verdict
I really like the look of Yourgene even though it is just a £128m market cap business. It is making good headway with its footprint and is attempting to gain a share of a multi-billion pound industry. It is regularly acquiring smaller firms and amalgamating them into its operation to enhance its offering. Also, YGEN is showing growth in respect of revenue and has joined the potentially lucrative Covid-19 product market.
At its current price, I believe YGEN represents a bargain, albeit with a small amount of risk involved. I like picking up FTSE small-caps when they have potential such as this, as it helps diversify my portfolio.
