Medical technology company Medibio Ltd [ASX:MEB] has seen a massive spike in their share price within the morning hours of trading. Shares were up 116.67% earlier today, reaching 2.6 cents apiece.
The surge is likely a result of Medibio signing a second commercial agreement with Compass Group — a world-leading food service company — for their health product ilumen™.
Investors have clearly seen this as a favourable move, causing the Medibio share price to double by midday.
A perfect match?
At first glance, it’s hard to see the benefits of pairing a medical tech company with a food service company.
Granted, snagging a partnership with two divisions of a company that has annual revenues $23.2 billion, operations in over 40 countries and around 600,000 employees — as is the case with Compass Group — has surface-level appeal for any small-cap like Medibio looking to break out into the mainstream.
But of particular relevance is Compass’ ‘Purpose’ strategy — which aims to have the company deliver ‘a safety culture built around caring for people combined with personal and food safety’.
One element of this strategy is Health and Wellbeing, which involves ‘various programs to support and improve the mental well-being and physical health’ of Compass clients.
And it’s this area of the Compass initiative where Ilumen™ fits so well. Ilumen™ is a mobile app designed for workplaces to give to employees as a means of making them aware of their mental wellbeing. As medibio states on the app’s website:
‘By providing those in your organisation with the tools to understand the difference between a bad mood and a potentially serious health threat, you strengthen and support, empowering greatness from within.
‘Help build the strength of your workforce bringing science, not stigma, to the conversation around mental well-being and improving the lives of all that work to make your organisation a success.’
An ideal product for a company looking to create a culture ‘built around caring for people’.
Indeed, as noted in the update:
‘Ilumen™ fits into this strategy by providing participants with early screening for symptoms of depression, anxiety and stress’.
What’s in store for Medibio?
In terms of what Medibio is seeking to deliver from their Corporate Health products — ‘mental health wellbeing solutions for businesses’ — teaming up with the widespread, revenue-banking Compass Group is certainly a step in the right direction.
At the same time, however, while ‘niche’ can be a spark word in terms of investment companies, successful niches are ones that gain in popularity, in that consumers see a purpose for them. In other words, it’s all about whether the niche ‘takes off’.
That said, Medibio announced a capital raising in the form of a share purchase plan last week, which is set to be approved in late August. While this is going to dilute the value of current shares, it would mean there will be stakes up for grabs at a 51.6% discount.
Definitely a company to keep your eye on.
For Money Morning
PS: For a prime example of niche to mainstream, check out how the ‘Hamburger Revolution’ has jumped on the growing vegan movement in this free report.