1. Respiri Limited (Recommendation: Speculative Buy, Market Cap: ~$93.51 Million)

Progressing the Sales and Marketing of wheezo™ Devices: Respiri Limited (ASX: RSH) is an eHealth SaaS Company supporting respiratory health management.

During the September 2020 quarter, the company made progress in its clinical trials and signed several new partnerships. Notably, the company commenced manufacturing for the first batch of 2,000 wheezos, deliverable under the Exclusive, International Pharmacy Sales/Marketing, Distribution and Logistics Agreement with Cipla Australia. In October 2020, the company completed an oversubscribed $12.5 million share placement. On 16 December 2020, RSH announced a sales and marketing partnership with the Pharmacy 4 Less group of pharmacies for the sale of wheezo™ devices commencing in early 2021 across their pharmacy network.

Debt Scenario: As at 30 June 2020, the company had borrowings and lease liabilities of $717,144 and $47,693, respectively. Debt to equity multiple for FY20 stood at 0.36x, higher than the industry median of 0.12x.

Overview of Fundamentals: In FY20, the company had a current ratio of 2.2x as compared to the previous year ratio of 0.39x. The company’s liquidity was further enhanced by the capital raising of $12.5 million in October 2020. The funds from the capital raising will be used for market development activities for the US and European market launches, sales and marketing initiatives, product development and research activities and for general working capital requirement. Looking ahead, the company is focused on reducing wheezo manufacturing costs and is targeting 85% reduction in COGS than originally anticipated for 2021.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has corrected by 38.63% in the last three months.
• On the technical analysis front, the stock has a support level of ~$0.115 and a resistance level of ~$0.176.
• Looking ahead, the company is focused on lowering the overall input costs for wheezo manufacture at a higher scale. Further, it intends to continue its direct pharmacy sales and marketing activities.
• Key Risks Exposure: Regulatory Risks, Product Liability & Manufacturing Risks, Trade Secrets & Patents.
• Considering the recent launch of wheezo^TM, capital raising of $12.5 million, its partnership with the Pharmacy 4 Less group of pharmacies, current trading levels, and key risks exposure, we give a “Speculative Buy” recommendation on the stock at the current price of $0.140, up by 7.692% on 8 January 2021.

2. Uscom Limited (Recommendation: Speculative Buy, Market Cap: ~$25.37 Million)

Witnessing Growth in China: Uscom Limited (ASX: UCM) is an innovative medical technology company involved in the development and marketing of premium non-invasive cardiovascular and pulmonary medical devices.

• In the first 5 months of the H1FY21, the company earned sales of $2.01 million, up 196% on H1FY20. For the same period, the company reported revenue of $2.26 million, up 135% on H1FY20. Profit for the 5 months was $0.18 million, increased from a loss of $1.5 million. Recently, Uscom China was listed as National High Technology Enterprise by China, allowing the company to continue its record growth with the Chinese economy as it leads the world in recovery and expansion.
• Cash and Debt Scenario: As at 30 June 2020, the company had cash on hand of $1.92 million and debt of $187.3k in its balance sheet. The debt to equity multiple for FY20 stood at 0.47x, higher than the industry median of 0.12x. Further, the company’s current ratio stood at 3.68x, higher than the industry median of 2.52x, demonstrating that the company is well equipped to pay its short-term obligations. During the first five months of FY20, the company witnessed an operating cash inflow of $0.21 million.
• Overview of Fundamentals: In the past 8 years (2012 -2020), the company’s cash receipts have grown at a CAGR of 23%. During FY20, the company’s cash receipts and sales were up 36% and 29%, respectively on the previous year. Currently, China is the major Uscom market, and USCOM 1A is its lead product. Supported by the expanded distribution network, continuous clinical training and direct customer service, Uscom China has grown rapidly.

A Pictorial Presentation of Key Financials:

 SWOT Analysis:

Stock Recommendation:

• Over the last three months, the stock of UCM has corrected by 17.49% and is trading close to its 52-weeks' low price of $0.110, offering a decent opportunity for accumulation.
• On a TTM basis, the stock is trading at an EV/Sales multiple of 6.3x, lower than the industry median (Healthcare) of 15.7x.
• From the technical analysis front, the stock of UCM has a support level of ~$0.11 and a resistance level of ~$0.27.
• Looking ahead, the company is focused on continuing its record growth with the Chinese economy as it leads the world in recovery and expansion.
• Key Risks: Political Risk, Foreign Currency Exchange Risks, COVID-19 Uncertainties
• Considering the decent performance in H1FY21, expected regulatory approvals in the next 12 months, current trading levels and key risks exposure, we give a “Speculative Buy” recommendation on the stock at the current price of $0.165 on 8 January 2021.

3. PharmAust Limited (Recommendation: Speculative Buy, Market Cap: ~$34.84 Million)

Progressing the Trials on Humans and Animals: PharmAust Limited (ASX: PAA) is a clinical-stage oncology company involved in the development of novel targeted cancer therapeutics for both humans and animals.

• During the September 2020 quarter, the company received funding of $881,085 from FightMND for Phase I clinical trial in humans with Motor Neurone Disease. Over the quarter, PAA made a payment of $0.125 million for Research and Development, involving costs related to the development of the company’s primary drug candidate, Monepantel (MPL) and salary allocations of Dr Richard Mollard who is 100% focused on R&D activities. The company’s wholly-owned subsidiary - Epichem Pty Ltd reported revenues of $811k and a profit of $20,830 for the quarter. The company recently announced an agreed extension of work being conducted at the Olivia Newton-John Cancer Research Institute (ONJCRI) investigating the mechanism of action of monepantel (MPL) upon cancer cells.
• Debt Scenario: As at 30 June 2020, the company had total debt of $1.472 million, as compared to $0.325 million in FY19. Debt to equity multiple for FY20 stood at 0.17x, higher than the 0.04x in FY19.
• Key Fundamentals and Future Plans: The company plans to begin a small trial in Q1 2021 to optimise MPL dose for B-cell lymphoma in canines. It is also engaging with leading global pharmaceutical companies to commercially license MPL for anti-cancer treatments in pet animals. The company received approval to undertake a Phase IIb clinical trial in pet owners’ dogs with cancer using its newly formulated tablet. 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 1.78x. With a decent cash balance of $3.9 million as on 30 September, the company seems well placed to fund its current activities and will continue to demonstrate appropriate fiscal restraint.

A Pictorial Presentation of Key Financials:

SWOT Analysis:

Stock Recommendation:

• The stock of the company has corrected by 19.23% 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 ~$0.089 and a resistance level of ~$0.141.
• On a trailing twelve months (TTM) basis, the stock has an EV/Sales multiple of 8.1x, lower than the industry median (Healthcare) of 15.7x.
• 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; Foreign Currency Risk; COVID-19 Uncertainties
• Considering the grant received for Phase I trial, growth in gross margin, decent performance by Epichem Pty Ltd, current trading levels, and key risks exposure, we give a “Speculative Buy” recommendation on the stock at the current price of $0.110 on 08 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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