Medical Developments International Limited

MVP Details

Non-Executive Director Appointment: Medical Developments International Limited (ASX: MVP) manufactures and distributes pharmaceutical drugs and veterinary and medical equipments. It discovers new markets and uses for its leading brand Penthrox®. As of 23 June 2021, the market capitalisation of MVP stood at ~$334.23 million. On 7 June 2021, MVP announced that Director Robert Maxwell Johnston now holds 54,300 shares in the company via an on-market purchase. It recently announced that Mr Richard Betts had been appointed as the Non-Executive Director in the firm.  

Key Takeaways from 1HFY21: The company posted $12.78 million of revenue in 1HFY21, up by 14.3% YoY. It reported a net loss after tax of $1.13 million in 1HFY21 versus $240,000 NPAT in 1HFY20. MVP raised $24.9 million capital through an institutional investor placement and $11.8 million via a Share Purchase Plan (SPP) in December 2020 and January 2021, respectively. MVP’s in-market sales in the UK and the Republic of Ireland increased to 30% in 1HFY21. It held a cash and cash equivalents balance of $33.46 million, up by 44.6% YoY as of 31 December 2020.  

Revenue & NPAT Trend from FY17-FY20; (Analysis by Kalkine Group)

Key Risks: MVP faces the COVID-19 challenges in its operating markets and the impact of reduced people movement on its respiratory product sales. It also faces high regulatory risks and delays in seeking approvals for new product or market authorisations.  

Outlook: MVP plans to use the capital proceeds to fast track the commercialisation activities for Penthrox® in the EU, to increase its team size and complete clinical and other pivotal studies. MVP expects robust sales performance in 2HFY21 due to marketing approvals reclaimed in Europe; new agreements signed, on-boarding of personnel in France and Belgium, and field personnel placed in Australia. It is focused on launching the Penthrox® brand in Germany and Spain in later 2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MVP gave a negative return of 10.19% in the past three months and a negative return of 30.40% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level of $ 4.570-$7.790. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some premium than its peer average, considering its increase in revenue in 1HFY21, marketing approvals obtained for distribution in 27 EU nations and plans for launching its brand in EU. For this purpose, we have taken peers like Clinuvel Pharmaceuticals Limited (ASX: CUV), Starpharma Holdings Limited (ASX: SPL), Suda Pharmaceuticals Limited (ASX: SUD) and others. Considering the current trading levels, increase in revenue in 1HFY21, establishment of its initial sales and distribution network in the EU, launch plans in Germany and Spain in 2021, valuation, and associated risks of COVID-19 restrictions and approvals for new markets, we give a ‘Buy’ rating on the stock at the current market price of $4.670, down by 0.427% on 24 June 2021.

MVP Daily Technical Chart, Data Source: REFINITIV  

AVA Risk Group Limited

AVA Details

Business Trading Update: Ava Risk Group Limited (ASX: AVA) is a risk management and technologies service provider. It operates through Future Fibre Technologies (FFT), BQT Solutions (BQT) divisions with AVA Global DMCC as its overseas logistics services provider arm. It serves government, commercial, and industrial clients. As of 24 June 2021, the market capitalisation of AVA stood at ~$90.61 million. The Group reported $48.5 million of revenue for YTD21, up by 48.2% YoY. Its gross margins increased to 52% for YTD21 versus 49% for YTD20. The Group EBITDA was declared to be up by 138.3% YoY to $13.1 million for YTD21. AVA held a net cash balance of $11.7 million as of 31 March 2021. 

Revenue & NPAT Trend from FY17-FY20 (Analysis by Kalkine Group)

Key Risks: The company faces the challenges posed by COVID-19 restrictions on business travel, causing a delay in major security contracts. It is exposed to foreign exchange currency fluctuations which may impact its earnings.

Outlook: AVA expects the group revenue to be between of $60-64 million and group EBITDA between $13-15 million for FY21. Its Technology division has a robust pipeline of avenues totalling $6 million in deferred revenue and is well placed to cater to the pent-up demand for its products and services. In addition, due to the COVID-19 delays, AVA expects to deliver the Indian Ministry of Defence (IMoD) agreement in FY22. The Group is receiving considerable commercial interest in its new Aura IQ solution. It is running trials with bulk material handling facilities and mining houses. AVA expects to enter multi-year maintenance contracts to deliver annual recurring revenues.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of AVA gave a positive return of 15.16% in the past nine months and a positive return of 140.80% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.145 - $0.785. We have valued the stock using the Enterprise Value to EBITDA multiple based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount than its peer median, considering the fall in the gross profit, Group EBITDA and fall in revenue from Technology division in Q3FY21 and the risks related with the COVID-19 delaying delivery of purchase orders. For this purpose, we have taken peers like Hills Limited (ASX: HIL), Ambertech Limited (ASX: AMO), Cellnet Group Limited (ASX: CLT) under Technology Hardware & Equipment segment. Considering the current trading levels, increase in YTD21 revenue and EBITDA, pipeline of purchase orders for FY22 of technology division, given guidance for Group EBITDA and revenue for FY21, valuation, and associated risks of the COVID-19 causing delays on purchase order fulfilment, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.385, up by 2.666% on 24 June 2021.

AVA Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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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