AdAlta Limited

1AD Details

Q4FY21 Performance Update: AdAlta Limited (ASX: 1AD) is a clinical-stage biotechnology company and is focused on creating novel therapies for high unmet medical conditions. The company has recently disclosed its quarterly performance for Q4FY21.

• The company has reported that its Phase I clinical and PET imaging programs have achieved their objectives, with several doses of AD-214 well tolerated in healthy volunteers.
• GE Healthcare has extended its research agreement with AdAlta, as there is a progression of a panel of granzyme B i-bodies into preclinical development.
• The company received an advance of $1.68 million in loan facility from Radium Capital.
• It received operating cash inflows of $211,121 in Q4FY21, compared to $111,257 in the prior quarter. The cash flows were aided by research fees from GE Healthcare and grants from BTB.
• The cash position of AD1 stood at $5.79 million at the end of the quarter.

Increasing Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company is a clinical-stage bio-technology company, and as such there is a high number of investments into its R&D. Therefore, there is a risk of profitability if the R&D investments do not fructify.

Outlook: The company has been entering into collaborative partnerships in order to advance the development of its i-body platform. In this regard, it has an agreement with GE Healthcare to co-develop i-bodies as diagnostic imaging agents against Granzyme B. Its focus is to maximise the products developed using its i-body platform.

Valuation Methodology: EV/Sales Flow 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, the company has updated about its plans to develop an inhaled version of its first in class anti-fibrotic, AD-214, for Idiopathic Pulmonary Fibrosis (IPF) and other Interstitial Lung Diseases (ILDs). As per ASX, the stock of 1AD is trading below its average 52-weeks’ levels of $0.082-$0.265. The stock of 1AD gave a negative return of ~31.34% in the past one year and a negative return of ~37.03% in the past six months. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at some discount to its peer median EV/Sales (NTM trading multiple), considering the subdued bottom-line performance and negative margin performance. For this purpose, we have taken peers such as TBG Diagnostics Ltd (ASX: TDL), Medlab Clinical Ltd (ASX: MDC), CSL Ltd (ASX: CSL), to name a few. Considering the current trading levels, indicative upside in valuation, positive Phase 1 results, strategic collaboration and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.085, down by ~3.41% as on 29 July 2021.

1AD Daily Technical Chart, Data Source: REFINITIV 

Cellmid Limited

CDY Details

Q4FY21 Business Update: Cellmid Limited (ASX: CDY) is engaged in the development of products to treat cancers and chronic inflammatory diseases. The company has recently reported its Q4FY21 results and has posted decent sales performance.

• TSV event on TV shopping channel QVC Japan has generated record sales of $1.38 million on 12 June 2021.
• CDY has invested $907k in inventory during the quarter, reflecting an increase of ~74% on the pcp.
• It ended the period with a cash balance of $6.97 million as of 30 June 2021.

Increasing Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business makes it prone to key financial risks, which include liquidity risk, credit risk and interest risk.

Outlook: As per the management, it is on track to achieve operational profitability in FY22, aided by revenue growth in ecommerce, new distribution channels to China, product launches and prudent cost measures.

Stock Recommendation:  The company has reported a surge in television shopping during the pandemic and updated that QVC Japan remains an important distribution channel for the company’s products. As per ASX, the stock of CDY is trading at its 52-weeks’ low levels of $0.055. The stock of CDY gave a negative return of ~19.11% in the past three months and a negative return of ~8.33% in the past one month. On a TTM basis, the stock of CDY is trading at an EV/Sales multiple of 1.2x, lower than the industry median (Healthcare) of 13.4x, implying undervaluation. Considering the current trading levels & valuation on TTM basis, increased traction in sales, expected operational profitability and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.055, down by ~3.509% as on 29 July 2021.

CDY 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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