1. Resonance Health Limited (Recommendation: Speculative Buy, Market Cap: ~$62.13 Million)

Developing New AI Algorithm for Assessment of Lung disease: Resonance Health Limited (ASX: RHT) is an Australian healthcare company involved in the development and commercialisation of medical imaging-related technologies and analysis services. The company recently entered into a licence agreement with the Telethon Kids Institute and Erasmus University Medical Centre for the use of computed tomography to develop new artificial intelligence (“AI”) algorithm for the automated assessment of lung disease progression in patients with cystic fibrosis.

• Rise in Cash Balance: For FY20, the company reported revenue of $3.66 million, up 1% on the previous year. Over the year, the company won several contracts to provide services to sponsor for their clinical trials. Including the non-cash share-based payment expenses, the company’s net loss after tax stood at $715,076 in FY20, mainly due to a non-cash share-based payment expense of employee options of $140,324, director options expense of $1,695,899 and related payroll tax expenses of $27,060. During the year, the company received R&D tax incentive refund of $240K and completed a capital raising of $2.75 million via the utilisation of a Controlled Placement Agreement (“CPA”), causing the cash balance to increase to $6.97 million in FY20, compared to $3.08 million in the previous year.
• Debt Scenario: As on 30 June 2020, the company had debt amounting to $0.12 million and a cash balance of $6.97 million.
• Overview of Financials/Fundamentals: For FY20, the company’s debt to equity multiple stood at 0.01x, in-line with the industry median. The current ratio of the company stood at 14.65x and asset/equity ratio came in at 1.06x.

A Pictoral Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has provided a return of 47.37% in the last six months and is currently inclined towards its 52-week low of $0.092.
• On the technical analysis front, the stock has a support level of $0.11 and a resistance level of $0.16.
• On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 11.8x, lower than the industry median of 16.5x.
• The company is planning to grow its commercial sales by utilising third-party distribution and servicing platforms.
• Key Risks: COVID-19 Disruptions; Foreign Currency Risk
• Considering the company’s current trading levels, its decent cash balance, and growth strategy, we give a “Speculative Buy” recommendation on the stock at the current price of $0.135, down 3.571% on 25 September 2020.

2. Cellmid Limited (Recommendation: Speculative Buy, Market Cap: ~$11.9 Million)

Growth Through New Distribution Channels: Cellmid Limited (ASX: CDY) develops solutions for conditions associated with aging, through its subsidiaries, Advangen Limited and Lyramid Limited. Advangen Limited develops, manufactures and markets innovative products for hair treatment and Lyramid Limited is developing treatments for inflammatory and autoimmune conditions.

• During the year ended 30^th June 2020, the company generated stable consumer health revenues, which stood at $7.44 million. Switch to ecommerce led to a greater portion of online sales in total consumer health sales, owing to sales through websites, online retail partner websites and social commerce. Despite COVID-19, Q4 saw a record high revenue of $3.06 million. There were no significant supply chain disruptions over the period. New distribution channels and investment in marketing continued to drive growth in the business.
• Debt Scenario: As on 30^th June 2020, the company had a cash balance of $6.97 million and total debt of $1.96 million.
• Overview of Financials/Fundamentals: In FY20, the company’s current ratio stood at 3.34x, as compared to previous year ratio of 2.49x. Debt to Equity ratio for the year stood at 0.20x.

A Pictoral Presentation of Key Financials:

 

SWOT Analysis:

Stock Recommendation:

• The stock of the company corrected by 13.64% in the last one month and is currently inclined towards its 52-week low of $0.083.
• On the technical analysis front, the stock has a support level of ~$0.08 and a resistance level of ~$0.15.
• The company reported record revenue in Q4 and is expecting an increase in sales in the year ahead, on the back of a strengthened balance sheet, its e-commerce infrastructure, and investments in marketing.
• Key Risks: Competition Risk; Foreign Currency Risk; COVID-19 Impacts.
• Considering the performance in FY20, modest outlook, a geographically diverse business, resilient nature of business, and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.096, up 1.053% on 25^th September 2020.

3. Uscom Limited (Recommendation: Speculative Buy, Market Cap: ~$25.59 Million)

Record Cash Receipts from Customers: Uscom Limited (ASX: UCM) is engaged in the development, design, manufacture and marketing of premium non-invasive cardiovascular and pulmonary medical devices.

• FY20 proved to be a period of remarkable results, with revenue, sales, cash receipts, and net cash flow standing at record levels. Cash receipts for the period increased by 36% to $4.6 million. Annual net cash flow amounted to $2.07 million. The second half was the first profitable and cash flow positive half for UCM. Profit for the second half stood at $0.14 million. Sales for the year amounted to $3.65 million, up 29% in previous year sales of $2.84 million.
• Debt Scenario: As on 30^th June 2020, the company had a cash balance of $1.92 million and total debt of $1.62 million.
• Overview of Financials/Fundamentals: In FY20, the company reported a gross margin of 89.1%, up on the previous year’s gross margin of 80.9%. Current ratio for the period stood at 3.68x, as compared to the industry median of 2.77x.

A Pictoral Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has corrected by 10.53% in the last one month.
• On the technical analysis front, the stock has a support level of ~$0.150 and a resistance level of ~$0.221.
• On a TTM basis, the stock has a price to book value multiple of 3.7x, lower than the industry median of 7.5x.
• Key Risks: Slow Economic Recovery; Travel Restrictions; Foreign Exchange Risk
• Considering the increase in FY20 revenue, sales and cash receipts, profitable position in the second half, increase in net cash flow, current trading levels, and key risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.170, on 25^th September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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