ImpediMed Limited

IPD Details

SOZO Version 4.0 Introduced: ImpediMed Limited (ASX: IPD) develops, manufactures, and sells bioimpedance instruments and consumables. It also markets electronic test and measurement devices in the growing markets of heart failure, oncology, and renal failure. The market capitalisation of IPD stood at ~$156.62 million as of 23 June 2021. On 21 June 2021, IPD notified 275,000 performance rights (IPDAA) and 675,000 options (IPDAAB) issued on 18 June 2021. On 25 May 2021, IPD announced a software Version 4.0 release for its SOZO® Digital Health Platform with usability improvements and new features. The company has started witnessing customers upgrading to Version 4.0 few hours after launch.

Key Takeaways from March Quarter (Q3FY21): The company reported $2.3 million of revenue in Q3FY21, up by 35% YoY.  It recorded a 50% YoY increase in SaaS revenue to $2.1 million and a 49% YoY increase in annual recurring revenue (ARR) to $8.2 million for Q3FY21. IPD registered a 58% YoY rise in the patient tests over 32,000 in the quarter. It generated cash receipts of $2.1 million from customers in Q3FY21. It held a cash balance of $23.9 million as of 31 March 2021.

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

Key Risks: IPD faces the risk of technological advancements in the industry, possibly disrupting its health platform. In addition, it risks delays in regulatory approvals and COVID-19 disruptions, causing restricted patient testing and limited use of its devices in trials and the healthcare industry.

Outlook: IPD will continue to deploy SOZO devices for AstraZeneca’s second Phase II trial in the USA and overseas. The trial is expected to be conducted for 18 months and require ~200 devices in 24 countries. It is expected to garner revenue of over $2 million. In total, AstraZeneca trials are estimated to require ~375 SOZO devices and expected to contribute revenue over $4.5 million. IPD has started the development of SOZO II, focusing on heart and renal failure markets.

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 IPD gave a positive return of 56.25% in the past nine months and a positive return of 47.05% in the past year. The stock is currently trading lower than the 52-weeks’ average price level of $0.060-$0.185. 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 a slight discount than its peer mean, considering its net operating cash outflows in Q3FY21, net loss in 1HFY21, and the risks of the COVID-19 on the restricted hospital access and limited testing of patients for trials. For this purpose, we have taken peers like Nanosonics Limited (ASX: NAN), Next Science Limited (ASX: NXS), to a name few. Considering the current trading levels, record revenue and SOZO revenue, ARR growth and improved cash outgoings from operating activities in Q3FY21, and release of Version 4.0, and expected revenue from the sale of devices to AstraZeneca, valuation, current trading levels and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.100, down by ~4.762% on 23 June 2021.

IPD Daily Technical Chart, Data Source: REFINITIV  

Compumedics Limited

CMP Details

Key Takeaway from 1HFY21 Results: Compumedics Limited (ASX: CMP) manufactures and develops medical devices for diagnosing sleep and neurological disorders and blood flow monitoring in the brain. As of 23 June 2021, the market capitalisation of CMP stood at ~$68.20 million. CMP reported $18 million of revenue in 1HFY21, down by 1% on 1HFY20 due to the COVID-19 related new order shipment delays. Its’ new sales order book was up by 13% YoY in 1HFY21. EBITDA improved to $1.9 million in 1HFY21 versus $1.2 million in 1HFY20 due to expense curtailment and better margins. It registered an increased NPAT of $1.3 million during 1HFY21. CMP held a cash balance of $5.6 million and a debt balance of $3.7 million as of 31 December 2020.

Revenue & Net Profit after Tax from FY17-FY20; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of delayed shipment of its devices and instruments due to the pandemic environment. On the flip side, the company is exposed to risk of regulatory approval, stiff competition from peers, COVID-19 led uncertainties and the global threat environment.

Outlook: For FY21, revenues and underlying earnings are estimated to be higher than FY20. CMP will release new core products by the end of CY21. For its MEG (magnetoencephalography) brain scanner division, CMP will deliver the phase II and final phase installation of the Orion MEG system to the US-based Barrow Neurological Institute (BNI) in CY21. It will continue to identify other short-term Orion MEG opportunities. For its Nexus 360 sleep diagnostic platform, CMP will continue to add sites in the US and overseas. It is also advancing on talks with interested partners to commercialise its Somfit® consumer sleep device.

Stock Recommendation: The stock of CMP gave a negative return of 6.97% in the past three months and a negative return of 17.52% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.355- $0.580On a TTM basis, the stock of CMP is trading at an EV/Sales multiple of 1.9x, lower than the industry median (Healthcare Equipment & Supplies) of 11.2x and thus seems undervalued. Considering the current trading levels, increased order book in 1HFY21, improved EBITDA and NPAT in 1HFY21, valuation, and associated risks of delayed shipments due to COVID-19, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.400, up by ~3.896% on 23 June 2021.

CMP 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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