In the investment world, it's 'better to be lucky than smart'.
Fortunately in this case - since highlighting neonatal care specialist Inspiration Healthcare (IHC) as a possible turnaround idea at Mello on Monday - I've been the former.
Indeed, today IHC announced that it had signed a much delayed $4.3m Middle Eastern contract for SLE6000 neonatal ventilators, First Breath Humidification and associated accessories.
So what does this mean?
Well, together with the recent £3m top-up placing at 14p/share - this deal for me is a major step forward, taking the business out of intensive care and back onto the hospital wards in order to further progress its turnaround plan under industry veteran and exec chairman Roy Davis (ex Medica and Optos).
Next steps are to obtain a Bank guaranteed 'letter of credit' for this export order, ship the products sometime over next 6 months, and hopefully agree a longer-term relationship with the customer.
Sure, IHC is not totally out the woods, albeit the $4.3m of cash (once received) should bolster the balance sheet (ie reduce inventory) and allow the Board breathing space in terms of reducing gearing levels (est proforma net debt of £7m).
Regarding numbers, house broker Panmure Liberum has a 40p/share price target, based on Jan FY'25 turnover, adjusted EBITDA, and EPS of £40.9m, £2.0m and -0.9p/share - climbing to £50m, £6.8m, and 3.5p respectively by Jan FY'27. Putting the stock on a modest 12x EV/EBITDA, this would equate a theoretical intrinsic worth of 90p/share, assuming the turnaround is successful of course.
That said, IHC remains high risk and certainly not for the faint-hearted.
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