1. PainChek Limited (Recommendation: Speculative Buy, Market Cap: ~$107.05 Mn)

PainChek® Adult App Receives Support from the Federal Government: PainChek Limited (ASX: PCK) is engaged in the development and commercialisation of mobile medical device applications, that automate intelligent pain assessment of individuals who are unable to communicate their pain with carers.

• During FY20, the company spent $2.27 million on research and development activities. The PainChek® Adult App received support from the Federal Government, which agreed to invest $5 million to enable the use of the app in Australian residential aged care centers (RAC’s). Notably, the company had 24,435 active licensed beds in RACs as at 30^th June 2020, as compared to 4,725 beds at 30 June 2019. The company has expanded its business internationally into the UK, New Zealand and Singapore. The company’s expansion into international markets is expected to provide accelerated growth in ARR. Subscription revenue for the year came in at $248,194, as compared to $135,017 in FY19.
• Debt Scenario: As on 30^th June 2020, the company had no debt, with a cash balance of $6.12 million.
• Overview of Financials/Fundamentals: In FY20, the company recorded a gross margin of 10.8%. Current ratio for the year stood at 2.97x and asset to equity ratio stood at 1.51x.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company corrected by 24% in the last 1 month and is currently inclined towards its 52-week low of $0.061.
• On the technical analysis front, the stock has a support level of ~$0.075 and a resistance level of ~$0.146.
• During FY20, the company expanded into international markets and is performing in line with its international markets expansion strategy to diversify revenues.
• Key Risks: COVID-19 Disruptions; Liquidity Risk; Foreign Currency Risk.
• Considering the support from the government, continued expansion into international markets, commencement of clinical study for the Children’s App, contracted ARR, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.095 on 11^th September 2020.

2. Botanix Pharmaceuticals Limited (Recommendation: Speculative Buy, Market Cap: ~$53.5 Mn)

Continued Progress on Clinical Programs: Botanix Pharmaceuticals Limited (ASX: BOT) is a clinical-stage synthetic cannabinoid pharmaceutical company with a targeted pipeline of dermatology and antimicrobial products.

• During FY20, the company increased its focus on the antimicrobial platform, with the recent initiation of a Phase 2a clinical study of BTX 1801 for the prevention of surgical site infections. In addition, the company progress on its key dermatology programs, including BTX 1503 (acne) and BTX 1702 (rosacea). The company spent $20 million on R&D activities in relation to the Botanix’s dermatology clinical programs (BTX 1503, BTX 1204 and BTX 1702) and pre-clinical development and clinical exploration of its antimicrobial platform (BTX 1801). BTX 1702 is being evaluated for the treatment of Rosacea, which represents a growing opportunity with the market projected to grow to US$2.6 Billion by 2025. FY20 loss after tax came in at $16.73 million, against the previous year’s loss of $17.08 million.
• Debt Scenario: As on 30^th June 2020, the company had cash and short-term investments amounting to $24.65 million and total debt of $0.42 million.
• Overview of Financials/Fundamentals: In FY20, the company’s current ratio stood at 17.98x, as compared to the industry median of 1.84x. Debt to Equity ratio for the year stood at 0.02x.

A Pictorial Presentation of Key Financials:

  

Stock Recommendation:

• The stock of the company gave positive returns of 17.02% in the last three months and is currently inclined towards its 52-week low of $0.023.
• On the technical analysis front, the stock has a support level of ~$0.03 and a resistance level of ~$0.066.
• On a TTM basis, the stock has an EV/Sales multiple of 9.9x, lower than the industry median of 11.0x.
• The company has made decent progress on its clinical programs and is investing continuously on the development of its product candidates.
• Key Risks: Foreign Currency Risk; Liquidity Risk; COVID-19 Impacts.
• Considering the decent cash position, continued progress on product development, valuation on TTM basis, current trading levels, and key risks exposure, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.054, down 1.818% on 11^th September 2020.

3. MMA Offshore Limited (Recommendation: Speculative Buy, Market Cap: ~$39.81 Mn)

Significant Increase in Underlying EBITDA: MMA Offshore Limited (ASX: MRM) is engaged in the provision of marine logistics and marine services to the offshore oil and gas industry.

• In FY20, the company’s underlying EBITDA stood at $48.9 million, up 76% on the previous year. The company continued to deliver cost savings in the wake of COVID-19 while maintaining production support services through a challenging period. The pandemic majorly impacted Q4 performance causing the demand for MRM’s assets and services to reduce, leading to a decline in FY20 net loss. Despite the above factors, the business depicts decent growth potential on the back of a strong cash position and long-term contracts.
• Debt Scenario: As on 30^th June 2020, the company had cash and short-term investments amounting to $86.6 million and total debt of $281.5 million.
• Overview of Financials/Fundamentals: In FY20, the company reported a gross margin of 19.6%, up on the previous year’s gross margin of 0.7%. Current ratio for the period stood at 2.40x, representing a decent liquidity position.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has corrected by 17.31% in the last one month and is currently inclined towards its 52-week low of $0.037.
• On the technical analysis front, the stock has a support level of ~$0.036 and a resistance level of ~$0.087.
• On a TTM basis, the stock has an EV/EBITDA multiple of 5.4x, lower than the industry median of 7.0x.
• During the year ended 30^th June 2020, the company delivered robust growth in underlying EBITDA and end the period with a strong cash position. Although the company expects COVID-19 to impact FY21 performance, it is targeting to report stronger revenue growth in FY22 and beyond.
• Key Risks: COVID-19 Uncertainties; Sector Performance (Oil and Gas); Foreign Exchange Risk.
• Considering the increase in FY20 revenue and earnings, vessel contracts in place, focus on cost savings, strong cash position, valuation on TTM basis, current trading levels, and key risks stated above, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.048, up 11.628% on 11^th September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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