1. PharmAust Limited (Recommendation: Speculative Buy, Market Cap: ~$39.48 Million)

Significant Progress in Development Activities: PharmAust Limited (ASX: PAA) is primarily engaged in development of its own drug discovery intellectual property for the treatment of different types of cancers in human and animals. The company’s lead molecule for this purpose is monepantel (MPL).

• In FY20, the company signed an agreement with UNSW-NSI, the commercial arm of the University of NSW for acquiring all the rights to MPL, strengthening its position to license and co-develop MPL. The company also commenced and completed the PharmAust Phase II clinical trial for cancer in pet owners’ dogs and received an Advancing Finding Certificate from the Australian Tax Organisation for selected R&D activities conducted overseas. During the year, the company raised $2.4 million via placement of ~20 million fully paid ordinary shares. Revenue for the year amounted to $4.12 million, as compared to FY19 revenue of $4.36 million. Revenue from Australia amounted to $1.79 million, up from $1.43 million in FY19.
• Debt Scenario: As on 30 June 2020, the company had debt amounting to $1.47 million and a cash balance of $2.88 million.
• Overview of Financials/Fundamentals: In FY20, the company had a gross margin of 94%, up from the previous year margin of 92.4%. Current ratio for the year stood at 3.85x, as compared to the industry median of 1.83x.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company corrected by 34.21% in the last three months and is currently inclined towards its 52-week low of $0.057.
• On the technical analysis front, the stock has a support level of ~$0.088 and a resistance level of ~$0.151.
• On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 9.2x, lower than the industry median (Healthcare) of 12.1x.
• The company has reported positive evaluation results from various tests conducted on MPL and is currently undertaking several other studies to develop the product further.
• Key Risks: Success of Ongoing Trials; Liquidity Risk; Foreign Currency Risk.
• Considering the recent agreements, grant received for Phase I trial, growth in gross margin, current trading levels, and key risks exposure, we give a “Speculative Buy” recommendation on the stock at the current price of $0.130, up 4% on 09 October 2020.

2. SenSen Networks Limited (Recommendation: Speculative Buy, Market Cap: ~$37.85 Million)

Substantial Increase in Q4 Cash Receipts: SenSen Networks Limited (ASX: SNS) is primarily engaged in the development and sale of SenDISA platform-based products and services to two segments - Smart Cities and Retail & Leisure.

• In FY20, the company did not witness any material disruption due to COVID-19 and reported revenue amounting to $3.76 million, slightly up on FY19 revenue of $3.73 million. Net loss for the period improved by 30%. The company recorded its highest ever quarterly cash customer receipts on the June 2020 quarter, up 89% on the March quarter. The company has a growing annual recurring revenue profile, with FY21 ARR expected to grow ~75% on FY20. During the year, the company engaged in significant business development and marketing activities that resulted in a strong pipeline of prospects.
• Debt Scenario: As on 30 June 2020, the company had debt amounting to $1.74 million and a cash balance of $2.46 million.
• Overview of Financials/Fundamentals: In FY20, the company had a gross margin of 73.6%, up from the previous year margin of 44.4%. Current ratio for the year stood at 1.05x, as compared to the FY19 ratio of 0.98x.

 A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has provided a return of 40% in the last six months and is currently trading below the average of its 52-week low-high of $0.055 and $0.135, respectively.
• On the technical analysis front, the stock has a support level of ~$0.067 and a resistance level of ~$0.105.
• The company has an accelerating ARR profile and is signing up new customers, which will act as key catalysts for growth in FY21 and beyond.
• Key Risks: Foreign Currency Risk and Credit Risk.
• Considering the company’s growing ARR profile, contracted revenues for FY21, increase in cash receipts, decent pipeline of growth opportunities, and key risks, we give a “Speculative Buy” recommendation on the stock at the current price of $0.084 on 09 October 2020.

3. Angel Seafood Holdings Limited (Recommendation: Speculative Buy, Market Cap: ~$22.44 Million)

Record Sales in FY20: Angel Seafood Holdings Limited (ASX: AS1) is engaged in the production and sale of certified organic and sustainable oysters.

• In FY20, the company reported sales of 6.6 million oysters, that increased by 25% on the previous year. This growth came on the back of increased water holdings and strong stock profile. Statutory profit for the period stood at $252k. During the year, the company achieved a positive operating cash flow of $528k and ended in a strong stock position as on 30^th June 2020.
• Debt Scenario: As on 30 June 2020, the company had debt amounting to $7.93 million and a cash balance of $1.34 million.
• Overview of Financials/Fundamentals: The company’s gross margin in FY20 stood at 74.1%, higher than the industry median of 41.8%. Net margin for the year came in at 5.1%. Current ratio for FY20 stood at 1.86x, compared to the industry median of 1.64x.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has provided a return of 30.77% in the last three months.
• On the technical analysis front, the stock has a support level of ~$0.124 and a resistance level of ~$0.20.
• On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 6.7x, lower than the industry average (Food & Tobacco) of 9.0x.
• The company achieved record sales in FY20 despite challenging market conditions and retains a strong stock position to grow sales in the years ahead.
• Key Risks: Risk of Loss in Sales, COVID-19 Restrictions, Disease Risk.
• Considering the company’s performance in FY20, improvement in cash position, and growth prospects, we give a “Speculative Buy” recommendation on the stock at the current price of $0.170 on 09 October 2020.

 

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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