MENU

Bionomics pops 12 per cent on brokerage recommendation

Bionomics Ltd (ASX:BNO) popped 12 per cent on Thursday 17th November after Bell Potter published a bullish speculative buy recommendation.

Bionomics closed the day at $0.42 up from $0.375. Speculative investors are no doubt hoping for a repeat of the spectacular 42% three day jump in Bionomics share price that occurred back in April, when Bell Potter initiated coverage. That jump from $0.50 to $0.72 was followed by an incredibly volatile 3.5 months. The volatility finally  gave way to the slow downward spiral of the last 3.5 months.

The Bell Potter report spans 38 pages, though we suspect most investors didn’t look any further than this overly optimistic valuation.

We value Bionomics on a probability-weighted DCF basis at $1.41 base case and $2.51 optimistic case. Our $1.50 price target sits at the low point of this range.

We made similar calculations on the back of an envelope and can now unreliably inform the entire Australian biotech industry is around 70-80% undervalued.

The most important sentence in the entire overly optimistic recommendation is the very final one. Sadly few investors ever read that or realise what it means.

Bell Potter Limited, its employees, consultants and its associates within the meaning of Chapter 7 of the Corporations Law may receive commissions, underwriting and management fees from transactions involving securities referred to in this document (which its representatives may directly share) and may from time to time hold interests in the securities referred to in this document.

On past form we would be surprised if Bell Potter did not receive  commissions, underwriting or fees for what can be best described as marketing. As the following three year chart shows the only thing making rapid progress at Bionomics is its losses.

We’d suggest there might be safer ways to make a buck than a highly speculative investment in Bionomics. Buyer beware.

Are you worried about the situation in Europe? Read This Before The Next Market Crash is The Motley Fool’s free report. Be prepared. Click here to request your free copy, before it’s too late.

Article authorised by Bruce Jackson. No contributors to this article owned shares in any companies mentioned. The Motley Fool has a de-risked disclosure policy.

The 5 mining stocks we’re recommending in 2019…

For decades, Australian mining companies have minted money for individual investors like you and me. But if you believe the pundits and talking heads on TV, those days are long gone. Finito! Behind us forever…

We say nothing could be further from the truth. To earn the really massive returns, you’ve got to fish where others aren’t fishing—and the mining sector could be primed for a resurgence. That’s why top Motley Fool analysts just revealed their exciting new research on 5 ASX miners they believe could help you profit in 2019 and beyond…

Including:

The best way we see to play the global zinc shortage… Our #1 favourite large-cap miner (hint: it’s not BHP)… one early-stage gold miner we think could hit the motherlode… Plus two more surprising companies you probably haven’t heard of yet!

For free access to our brand-new research, simply click here or the link below. But be warned, this research is available free for a limited time only, and we reserve the right to withdraw it at any time.

Click here for your FREE report!