Maiden pre-tax profit

TRX is focused on the development and commercialisation of two proprietary processing technologies for the repair of soft tissue (dCELL®) and bone (BioRinse®). It has a broad portfolio of products used in biosurgery, orthopaedics and dental markets. Investment in tissue processing, manufacturing capacity and strong commercial partners, together with its “4S” strategy, has generated seven consecutive reporting periods of strong growth, with TRX becoming profitable in 1H’24. TRX is about to invest in Phase 2 of its capacity expansion programme, which has the potential to take group sales up to $100m. TRX deserves to be re-rated, in our view.

• Strategy: TRX is building a global regenerative medicine business around its proprietary technology platforms, underpinned by compelling clinical outcomes. Phase 1 of its investment programme has grown sales to a point where TRX is cash-generative, which is being used to expand capacity further with Phase 2.
• Interims: In 1H’24, TRX reported double-digit (16.3%) sales growth for the seventh consecutive reporting period, generating sales of $16.4m ($14.1m). Growth was observed in all three divisions. EBITDA increased more than three-fold to $1.15m ($0.35m) and TRX generated its maiden PBT of $0.13m.
• Phase 2 capacity investment: TRX has started Phase 2 of its capacity expansion programme to significantly increase the number of clean rooms, providing greater flexibility to satisfy changing demand and take group sales up to $100m. This programme is fully funded and expected to be completed by the end of 2025.
• Forecasts: TRX has a diverse set of products, which are sold directly or through strong partners. Unexpected headwinds affected the BioRinse range (+12% in 1H’24), but its processing flexibility was switched to dCELL (+34%). Higher gross margins in 1H’24 have been carried through to the full year, and 2025.
• Investment summary: 2023 was a milestone year when TRX was fully EDITDA-positive and cash-generative in 2H’23. Further growth in 1H’24 has seen the group become EBIT- and PBT-profitable. Cash generation is being used to expand processing and manufacturing further through Phase 2 of its capacity investment programme in 2025. This is a quality operation with very strong partners. An EV/sales multiple of 4x 2025E sales generates a valuation of $159m/£120m.