Company Overview: IDT Australia Limited (ASX: IDT) was founded in 1975 and is headquartered in Melbourne, Australia. It is engaged in the supply of products, research, and development in the pharmaceutical space, including medicinal cannabis. The company specialises in high energy manufacture of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF), clinical packaging, microbiological and analytical testing. The company started trading on ASX in February 1991.
IDT Details
Unique Selling Point (USP): The Company specializes in the manufacturing of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF). It is advancing towards its developments, along with flagship sterile license.
Fundamental Upbringings:
- Manufacturing License: During the period, the company has successfully executed the letter of agreement with the Australian Government, Department of Health to bring Sterile manufacturing facility into a running state (its flagship sterile license). The license is secured by TGA (Therapeutic Goods Administration).
- Australia’s First cGMP mRNA Drug Products: By leveraging its sterile manufacturing facility, IDT was successful in manufacturing of locally developed by Monash University/Doherty Institute - cGMP mRNA COVID-19 vaccine candidate.
- Cannabis Manufacturing Plan: The company plans to expand the stability data for its flower-in-bottle and oil-in-bottle products, and at the same time working on a pipeline for new products development.
- Other Initiatives: While the company remained unsuccessful (along with all ATM respondents) for its submission to the Australian Government’s Approach to Market (ATM) – Onshore mRNA Manufacturing capability. On the other hand, its Modern Manufacturing Initiative (Collaboration and Translation Stream) funding opportunities stand live.
1HFY22 Financial Highlights:
- Revenue: With a successful hike of ~74% Y-o-Y from 1HFY21 to 1HFY22 in its Revenue, the company amazingly reported its revenue as ~$8.56 million for half-yearly ending 31st December 2021.
- Profitability: By achieving ~$1.97 million EBITDA, IDT remains on a path of sustainable profitability and earned an ~8% growth in its NPAT to ~$1.21 million in 1HFY22, leading to same EPS (basic) as last 1HFY21.
- Cash Position: With ~$13.64 million cash receipts from customers, its net cash inflow increased from ~$0.46 million in 1HFY21 to ~$6.39 million in 1HFY22. Half-yearly accounts were closed with the cash balance at the end of 31st December 2021 as ~$13.31 million versus ~$6.93 million at the end of 30th June 2021.
FY21 in a Gist: With a decent increase in its revenue, the company converted its net losses of ~$1.92 million in NPAT of ~$2.10 million in FY21 and had ~$6.93 million as its cash balance ending 30th June 2021
FY21 & FY20 in a Snapshot (Source: Analysis by Kalkine Group)
Top 10 Shareholders: The top 10 shareholders together form around 49.89% of the total shareholding, while the top 4 constitute the maximum holding. Sandon Capital Pty Ltd and Regal Funds Management Pty. Ltd. are holding a maximum stake in the company at 11.18% and 11.01%, respectively, as also highlighted in the chart below:
Top 10 Shareholders (Source: Analysis by Kalkine Group)
Key Metrics: IDT turned around its negative margins from 2018 to 2021 by recording a substantial improvement in Net Margins from -127.7% in FY18 to a positive ~12.4% in FY21. In addition, its ROE also turned positive ~8.3% in FY21 from -41.7% in FY18.
Profitability Profile and Returns (Source: Analysis by Kalkine Group)
Key Risks:
- Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in the same could lead the business to fines, penalties, etc.
- Clinical Trials: Healthcare and pharmaceutical companies run in an environment full of uncertainties where years might be taken for its clinical trials and ultimate disapproval, or failure might leave company might suffer from opportunity cost.
- COVID-19: Travel restrictions and lockdowns due to COVID-19 might hold down its operations and thereby affecting its earnings, cash flow and financial position.
Outlook: IDT has following plans related to its products:
- Leverage its flagship sterile facilities and efficiently slip in playing a role in Australia’s mRNA manufacturing ecosystem and provide other fee-for-service sterile manufacturing services.
- In the cannabis market, the company plans to vertically expand in products locally and internationally. On the other hand, it is facilitating the current cannabis customers with contract development and manufacturing services.
Future Schedules: Company’s undrawn NAB commercial loan and overdraft facilities of ~$2.50 million are scheduled for renewal in July 2022. Its first cGMP mRNA COVID-19 vaccine candidate is destined for clinical trials in 2022.
Technical Commentary: IDT stock prices are trading near its 52-week low at ~$0.17, and taking support of downward sloping trendline further indicates the stock might rebound from lower levels. The RSI (14-period) has also come down to mid-range from overbought region at ~43.541 level on the monthly chart and ~33.57 level on a daily chart that indicates that bears are losing grip from the stock. Its immediate support levels are AUD 0.170 and AUD 0.150, while immediate resistance levels are AUD 0.250 and AUD 0.290.
Stock Recommendation: The stock of IDT has corrected ~74.49% and ~2.56% in the past six months and one month, respectively. Its current market price is trading near its 52-week low of ~$0.170, indicating a good opportunity to enter. Moreover, the stock is trading at a P/BV multiple of 1.6x as compared to the industry average (Biotechnology & Medical Research) of 3.7x on a TTM basis. With the flagship sterile license, increasing half-yearly revenues, cash inflows, and NPAT (1HFY22), indicative valuation on a TTM basis, minimal debt levels, decent liquidity position, turnaround financial position in FY21, appealing lower trading levels on technical analysis grounds, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current price of $0.190 as on 25th February 2022.
Caution: 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.
IDT Daily Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV
Note 2: Investment decisions 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.
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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