Nanosonics Limited

Capacity Expansion & Adoption of Trophon 2 – Catalyst for Future Growth: Nanosonics Limited (ASX: NAN) had stated in the release that 236,982 Performance Rights have been granted under the Nanosonics Omnibus Equity Plan. Hence, now a total of 2,666,762 unlisted Options and Performance Rights are on the issue. As per the Annexure 3B, the company has mentioned the class of securities to be issued as “Fully paid ordinary shares” against the above-stated equity plan.
 
For the FY 2018, sales came in at $ 60.7 Mn, a fall of 10% on a Y-O-Y basis. This was due to the reduction in sales to GE Healthcare in North America which happened due to the recent changes in the GE’s inventory holding management system, & in the anticipation of the release of Trophon 2. This fall was partially offset by accelerated adoption of the Trophon in the UK. Moreover, it clocked a Gross profit of $45.3 Mn again resulting in a fall of 10% on a YoY basis. This was on the back of lower sales of base units partially offset by higher consumable sales. Going further for FY 2019, the firm expects an ongoing growth in its installed base capacity. This expectation is on the back of upgrades of Trophon EPR units. Importantly, the units which are more than 5 years old will start getting replaced from the FY 2019 itself. Also, adoption in Europe is going to rise driven by the MES program in the UK which may lead to a 100%-unit growth over FY 2018. Moreover, the new guidelines in Germany & France and adoption of Trophon2 will act as a catalyst to broader adoption. Considering these expansion programs, the OPEX for FY 2019 is anticipated to be around $53 Mn. Out of this $13 Mn would be allocated towards the R&D for new product development.
 
 

Financial Metrics (Source: Company Reports)

Meanwhile, the share price has fallen 10.66% in the past three months as at January 03, 2019 and is trading at higher PE multiple of 148.44x with beta of 1.68x as on 5-Year (monthly basis), showing overvalued position at the current juncture. Hence, we maintain our “Hold” recommendation on the stock at the current market price of $2.770, considering capacity expansion & adoption of Trophon 2 gaining traction in FY 2019.
 

Volpara Health Technologies Limited

 
Slated to make further losses even in 2H 2019: Volpara Health Technologies Limited (ASX: VHT) stated that it has issued 168,000 new fully paid ordinary shares as a result of the exercise options under the Company’s Employee Share Option Plan (ESOP). Moreover, the company announced its 1H FY2019 results with 99 SaaS customers and Annual Recurring Revenue (ARR) of NZ$4.8 million which was up by 35% on PCP. The Total Contract Value (TCV) was reported at NZ$6.5 million, up by 65% on PCP, with a very minute churn rate of less than 2%. The company has forecasted ARR for FY19 to be NZ$9 million of which it has achieved NZ$5.1 million as at the end of October 2018. As per the management, Q3, as well as Q4, is traditionally considered to be the biggest quarter for the company as they are now outside of the US summers and also due to the traction gained via the trade show held in Chicago. Going forward, the company will be continuing to focus and drive toward continued sales growth and an ever-expanding footprint mainly in the US markets. Moreover, the firm will continue to maintain its low churn rate that will help it in marketing purposes as well as to garner more licenses from the authorities. Apart from this, it will focus on the accretion of the ARPU’s via an organic growth in the realized price per patient with the help of advanced data analytics.


 
VHT’s FY 2018 Financial Highlights (Source: Company Reports)
 
On the analysis front, RoE has improved from the 2H FY2018, however it still remains to be in the negative and stood at -41.1% in 1HFY19. Current ratio substantially increased from 2.38x in 2HFY18 to 5.82x in 1HFY19 with debt-to-equity ratio of 0.02x. It represents decent liquidity position of the company. As per the management the group has recorded a net loss of $5,119 k as at 30 September 2018 and is expected to make further losses for the remainder of the year. Meanwhile, the stock has risen 40.25% in the past six months as on 3 January 2019 and is trading close to higher level. Hence, considering the accreting losses and expensive levels, we advise to investors that they should keep a watch on the stock and wait for the further developments in the company.  
 
 

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