Is Serstech facing a revaluation in 2023?

Ett bolag som under pandemin drabbades hårt eftersom det var svårt för säljarna att träffa kunder var Serstech. Inte bara gjorde pandemin det svårt för bolaget att träffa sina kunder eller potentiella köpare, det minskade även behovet av bolagets produkter då en stor del av kunderna är bland annat tullmyndigheter. Många av de potentiella kunderna valde dessutom att byta fokus mot covid-relaterad utrustning istället för att identifiera farliga kemikalier, sprängmedel och narkotika.

One company that was hit hard during the pandemic because it was difficult for salespeople to meet customers was Serstech. Not only did the pandemic make it difficult for the company to meet with its customers or potential buyers, it also reduced the need for the company’s products as a large part of its customers include customs authorities. Moreover, many of the potential customers chose to switch their focus to COVID-related equipment instead of identifying dangerous chemicals, explosives and narcotics.

However, this changed in the second half of 2022 when Serstech’s management started to see the light at the end of the tunnel. The hope that it wouldn’t be a train seems to be coming true, and the company’s sales people expect to deliver large volume orders this year.

Full cash position after oversubscribed rights issue

Serstech is a growth company, approaching profitability. The company would probably be profitable now if the pandemic hadn’t knocked the legs out from under Serstech. For this reason, Serstech has had to carry out several share issues since it was first listed. Hopefully this will not have to happen in the future, but it cannot be ruled out, although the hope is that if it does, it will be offensive emissions. We would prefer not to see any of these happening at all.

The issue in December, which was 152 percent subscribed, provided Serstech with SEK 25 million. Both the amount and the high subscription rate were high, something that not all companies have achieved in the past year, and it should be seen as a high rating for the company’s management, which together with the board subscribed for 12.5 percent of the new issue. CEO Stefan Sandor contributed SEK 1.34 million of the issue, corresponding to 6.7 million shares.

Several orders that may be followed by more orders

In December, Serstech received a SEK 10 million order from its partner Kaiser-SGI in Singapore. The order was for the latest generation of Serstech Arx, the patented SERS kit and Serstech ChemDash software. The order will be delivered and invoiced in the first quarter of 2023, which means that it will be visible in the company’s Q1 report.

In August 2022, a reference order is received from the Indian National Security Guard (NSG), an elite counter-terrorism force. The order was the first for Serstech in India since the beginning of the pandemic and is for Serstech’s solution for rapid identification of bombs and hazardous materials in the field. The order value was SEK 1.2 million.

In May 2022, Serstech received a SEK 7.8 million order from its US partner Field Forensics, the first major order in this market. The order, which was for both hardware and software products, was to be delivered and invoiced in the second quarter, the company said in a press release. Normally delivery is not so fast, which can be interpreted as a strong interest or need from the unnamed final customer. Field Forensics typically works with Homeland Security, the US military and a variety of law enforcement agencies.

Previous customers include the UN, several customs organizations, the US Coast Guard, the Indonesian police and the Australian Coast Guard.

An increased need

High demand for Serstech products start to increase sharply from business opportunities of SEK 150m in 2020/2021 to SEK 450m in November 2022. There is also a pent-up demand after a nearly three-year hiatus. Add in drug problems and an increased risk of chemical weapons with the war in Ukraine and there is potential for further momentum. Serstech has already delivered some Raman spectrometers to Ukraine.

One of Serstech’s more important products is the company’s handheld Raman spectrometer Arx, which is the smallest Raman spectrometer in the world, weighing only 0.5 kg compared to competitors’ products that weigh an average of 2.5 kg. That Serstech managed to create such a high-tech, small and compact Raman spectrometer is a major commercial advantage.

Arx will greatly facilitate and streamline the work of police officers, border guards, military personnel as this small spectrometer is incredibly powerful. Arx can identify over 17,000 dangerous chemicals in very small quantities: bombs, drugs, chemical warfare agents.

So the question is whether Serstech is facing a revaluation in 2023? We do not know, but I have bought some shares because the company feels forgotten, and historically has seen large price increases in connection with Serstech taking new orders. Whether it takes a week or a year, I don’t know, but there will probably be several orders. Do your own homework and don’t buy the stock on this text alone. Also remember never to risk money that you cannot afford to lose.

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