Buying Universal Biosensors, Inc. (ASX:UBI)

I bought Universal Biosensors, Inc. (ASX:UBI) recently. The company has $52 million in cash and a market capitalisation of $36m. It also makes blood coagulation test strips on behalf of Siemens. Revenue from these was $800 thousand last quarter, up from $450 thousand in the same quarter last year. Meanwhile, cost of sales rose by just $50 thousand to $500 thousand so incremental gross margins are high. Cash expenditure next quarter is forecast to be $3.2 million excluding product manufacturing so there is a significant risk that the cash balance is whittled away. UBI is currently renegotiating its commercial relationship with Siemens and we will know the outcome by 8 June. I am betting on a favourable outcome, as it seems are Jencay Capital and CVC Limited who have both increased their stakes in UBI in recent months.

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