Next Science Limited

NXS Details

Q2FY21 and H1FY21 Financial Performance:  Next Science Limited (ASX: NXS) is a medical technology company that designs, commercialises its nontoxic Xbio technology, used to treat biofilm-based infections in Australia and the US.

• The company recorded a hike in its (unaudited) revenue growth of 271% year over year to US$3.9 million in 1HFY21, driven by sales from our existing products.
• The company has recorded a cash receipt of US$1.28 million in Q2FY21 and reported US$4.64 million in H1FY21.
• NXS remained on track to expand its market opportunity and launched Bactisure^TM in Europe, and the UK and BlastX^TM were approved by the TGA for sale in Australia.
• The cash position of the company stood at US$13.2 million as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Technology Risk- To be competitive in the market, the company should invest in R&D to offer updated technology to the customers.
• Regulatory Risk- To commercialise its product, the company requires certain approvals, and any delays could impact its financial operations.

Outlook:

• The company is focused on achieving VAC approvals to facilitate commercial sales across US hospitals. In addition, NXS has made 123 VAC submissions covering 211 hospitals and received 20 approvals.
• NXS has entered into a supply chain agreement with Cardinal and Owens and Minor channel for distribution logistics.
• The company is set to report its half-year report for FY21 on 30 August 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: As per a recent announcement, Zimmer has filed a complaint about having global commercialise rights over XPerience^TM in the United States District Court, which the company denied. The stock of NXS is trading below its average 52-weeks' levels of $1.100-$2.060. The stock of NXS gave a positive return of ~16.66% in the past six months and a negative return of ~13.81% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at some premium to its peers’ average EV/Sales (NTM trading multiple), considering the economic recovery and lower debt-to-equity ratio. For the purpose of valuation, peers such as Polynovo Ltd (ASX: PNV), Nanosonics Ltd (ASX: NAN), Cochlear Ltd (ASX: COH), have been considered. Considering the current trading levels, indicative upside in the valuation, decent balance sheet, VAC received approvals, supply chain agreement, strategic expansion of its market and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.415, as on 20 August 2021, 11:01 AM (GMT+10), Sydney, Eastern Australia.

NXS Daily Technical Chart, Data Source: REFINITIV

Whispir Limited

WSP Details

Q4FY21 and FY21 Financial Performance: Whispir Limited (ASX: WSP) is a software-as-a-service (SaaS) company that provides communication management systems through a cloud-based platform that automates interactions between businesses and people.

• The company has delivered year-over-year growth in Annualised Recurring Revenue (ARR) by 28.5% to $53.6 million in FY21, driven by increasing usage of company’s platform by existing customers and a rise in new customers.
• WSP has received a cash receipt from a customer of $13.46 million in Q4FY21.
• The company has reported its continued customer growth with 51 net new customers onboarded in Q4 FY21, a total of 801 customers, which increased by 27% on a pcp basis.
• The company's cash position stood at $49.2 million as of 30 June 2021, that will be utilised to accelerate growth.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.
• Impact of COVID-19 pandemic- The COVID-19 pandemic has delayed new customer activations in Asian market that impacted the company’s financials, and still, the uncertainty prevails.

Outlook:

• The company is expecting an increase in FY21 revenue by 22% to circa $47.7 million and EBITDA of circa ~$6.1 million over a pcp basis.
• The company is confident to drive a strong sale from the Asian market and expects it to materialise in the first half of FY22.
• The company has advised to release its full-year result for FY21 on 25 August 2021.

Stock Recommendation: As per a recent update, the company is investing in artificial intelligence and machine learning and accelerating its data-led product roadmap to increase usage across the company’s existing customer base. The stock of WSP is trading below its average 52-weeks' levels of $2.12-$5.17. The stock of WSP gave a positive return of ~0.44% in the past one week and a negative return of ~45.16% in the past one year. On a TTM basis, the stock of WSP is trading at an EV/Sales multiple of 4.1x, lower than the industry median (Software & IT Services) of 5.9x, thus seems undervalued. Considering the current trading levels, valuation on a TTM basis, decent balance sheet, VAC received approvals, economic recovery, supply chain agreement, strategic expansion of its market and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $2.170, down by ~5.241% as on 20 August 2021.

WSP 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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