ResMed Inc.
RMD Details
Latest Updates: ResMed Inc (ASX: RMD) develops, manufactures, and distributes medical devices and cloud-based software applications to diagnose respiratory disorders. Recently, RMD reported ~407.76 million CDIs (chess depository interests) and ~1,054.91 million shares listed on ASX at the end of March 2022. The conversion ratio between CDI and ordinary share was 10:1 based on an incentive award plan and employee stock purchase plan.
1HFY22 (Ended 31 December 2021) Financial Highlights:
- RMD reported ~16% Y-o-Y increase in net revenue from ~US$1,552.0 million in 1HFY21 to ~US$1,798.9 million in 1HFY22 with the maximum revenue contributed from the US, Canada, and Latin America followed by Europe and other markets.
- Though gross profit increased from ~US$901.1 million in 1HFY21 to ~US$1,010.6 million in 1HFY22 (up ~12% Y-o-Y), gross margins declined from ~58.1% in 1HFY21 to ~56.2% in 1HFY22 due to increased logistics and manufacturing costs and fall in average selling prices.
Key Financials; (Analysis by Kalkine Group)
Key Risks: The company faces industry competition, forex rate changes, supply chain issues, new markets expansion, and weak demand due to COVID-19, restricted hospital access.
Outlook: RMD is investing in the R&D of medical devices and digital health innovation to deliver value across the healthcare system. It believes to be well placed for future growth on the back of rising demand for medical devices and masks, and home medical equipment (HME) category. The company plans to release its financial results for Q3FY22 on 28 April 2022.
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of RMD gave a negative return of ~8.96% in the past three months and a negative return of ~10.15% in the past six months. The stock is currently trading slightly lower than its 52-weeks’ average price level band of $24.310 - $40.790. The stock has been valued using the P/E based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average P/E multiple, considering the supply chain risks, increased freight and manufacturing costs. For this purpose of valuation, a few peers like Integral Diagnostics Ltd (ASX: IDX), Fisher & Paykel Healthcare Corporation Ltd (ASX: FPH), Capitol Health Ltd (ASX: CAJ), and others have been considered. Considering the current trading levels, rise in top-line across geographies, rising demand for devices and masks, an indicative upside in valuation, decent long-term outlook, we give a ‘Buy’ rating on the stock at the closing market price of $31.590, down by ~0.064% as of 19 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
RMD Daily Technical Chart, Data Source: REFINITIV
MedAdvsior Limited
MDR Details
Latest Updates: MedAdvisor Limited (ASX: MDR) is a developer and seller of software for personal medication management through its MedAdvisor App and PlusOne pharmacy platform.
- Recently the company announced the issuance of ~40,952 shares on 19 April 2022 for ~A$10,647.52 upon the exercise of employee incentive options at nil cost.
- The company has notified that Robert Read plans to retire from his current role as the MD & CEO and cannot shift to the US. Hence, MDR intends to hire a new US-based CEO for the Group as, post the Adheris acquisition, it earns ~80% revenue from the US and plans to fuel future growth avenues.
Results Overview of 1HFY22 (Ended 31 December 2021):
- AU Platform Growth: The number of patients using MDR’s platform in Australia (AU) grew from ~1.8 million in 1HFY21 to ~2.4 million in 1HFY22, depicting a rise of 36% on pcp basis.
- Rise in ARR: Annual Recurring Revenue (ARR) increased by ~30% Y-o-Y in 1HFY22 from Australian business due to high uptake of MDR’s premium offering, low pharmacy churn, and new pharmacy sign ups.
US Revenue Growth; Highlights (Analysis by Kalkine Group
Key Risks: The company faces challenges due to accelerated digital transformation, acquisition risk, geographical expansion, regulatory bottlenecks, and supply chain issues.
Outlook:
- MDR plans to launch a full suite of adherence solutions (including digital, in-pharmacy print and direct mail) for Walmart customers in 2HFY22 based on its recent contract and expand in the US.
- With plans to develop ‘Thriv’ (an intelligent digital solution) as one of the most prominent product lines, MDR expects to roll out continuous improvements over the remainder of CY22.
- MDR estimates to generate ~$72 - ~$74 million in revenue with a gross margin of ~53 – ~54% in FY22.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: The stock of MDR gave a negative return of ~29.72% in the past three months and a negative return of ~17.46% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of 0.230 - $0.415. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ mean EV/Sales multiple, considering its negative net margin, negative ROE, and negative operating cashflows. For this purpose of valuation, a few peers like Doctor Care Anywhere Group PLC (ASX: DOC), ImExHS Ltd (ASX: IME), Sonic Healthcare Ltd (ASX: SHL), and others have been considered. Considering the current trading levels, growth in AU business (pharmacy & patients), rise in the US revenue, plans for digital solution launch in 2022, new contract signs, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.260, as of 19 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
MDR Daily Technical Chart, Data Source: REFINITIV
Bionomics Limited
BNO Details
Clinical Trial Expansion in the US: Bionomics Limited (ASX: BNO) is engaged in developing and commercialising new drug candidates for the treatment of CNS (central nervous system) disorders.
- BNO reported an increase in net loss after tax from ~$12,735 in 1HFY21 to ~$13.05 million in 1HFY22 due to reduction in R&D incentive, rise in R&D expenditure, and administration expenses, etc.
- R&D expenses increased from ~$2.05 million in 1HFY21 to ~$6.95 million in 1HFY22 due to the commencement and expansion of the ATTUNE study (Phase 2b clinical trials) for PTSD (post-traumatic stress disorder) in the US.
Improved Liquidity Debt Position; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of clinical trial expansion, desired outcomes from the trials, successful commercialisation of the lead candidates, and regulatory delays.
Outlook:
- BNO continues to progress the development of its lead product candidate, BNC210, in the treatment of Post-Traumatic Stress Disorder (PTSD) and SAD (Social Anxiety Disorder).
- BNO expects to receive the top-line results of the phase 2 Prevail study by the end of 2022.
Stock Recommendation: The stock of BNO gave a positive return of ~4.47% in the past month and a negative return of ~36.36% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.059 - $0.265. On a TTM basis, the stock of BNO is trading at a price to book value multiple of ~1.6x versus industry (Biotechnology & Medical Research) median of ~3.9x, and thus seems undervalued. Considering the current trading levels, low debt levels, funds raising in the US, progress on the phase 2 trials of the prevail study, valuation on a TTM basis, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.070, as of 19 April 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
BNO Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined: -
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.
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