Mayne Pharma Group Limited

Mayne Pharma Group Limited (ASX: MYX) with a market cap of $1.65bn has recently acquired Halobetasol foam and related assets for an investment of approximately $32m. Halobetasol foam is a highly complementary dermatology product used for the treatment of plaque psoriasis.

Weaker Financial metrics driven by a number of factors: MYX reported a drop in the FY18 revenues to $530 million while total operating expenses grew to $697.1 m from $456.7m in FY17. Net loss after tax was at $134m, and total debt increased to $374.1m from $327.1m in FY17, giving a rise in terms of debt to equity ratio in FY18 from FY17 levels. Adjusted EBITDA margins dropped from 35.5% in FY17 to 31% in FY18. Weak performance was impacted by varied factors such as impairment of intangible assets, abnormal Doryx returns, income tax expenses, and restructuring expenses to reduce the cost base.

Technically on a 3 month chart with daily candle interval, the scrip has remained a downtrend from October 4, 2018, with slight pull backs. The scrip is trading below the 50-day EMA (Exponential moving average). Formation of negative divergence on Relative Strength index along with the lower low on the price charts signals an underperformance in the stock.

MYX with beta greater than 1x has dropped approximately 14% in last one month as on November 19, 2018 and is facing tough pressure on account of weaker financial performance and increasing debt levels along with overall downtrend. We give a “Sell” on MYX at the current price levels of $1.035.
 

Afterpay Touch Group Limited

Afterpay Touch Group Limited (ASX: APT) with a market cap of $2.7bn has recently made an announcement regarding the sale deed agreement with Nelumbo Limited. Under this agreement, APT will sell its European e-services business for approximately $7.5 million which will be payable in two tranches, $4 million will be payable at the time of the completion of the agreement which is expected by December 2, 2018 and the remaining amount of $3.5 million within a period of six months after completion.

Increased debt levels to impact future performance:APT posted strong financial metrics with revenue and other income recorded at 390% up from FY17 with major revenue of approximately 82% contributed by Afterpay now and growth in other income supported by the 289% growth in underlying sales of over $2.18b and a stable merchant margin and growth across all major demand drivers. 380% growth in EBITDA of $27.7m in FY18 was recorded. Debt levels increased from $46.7m in FY17 to $161.6m in FY18 increasing the overall leverage position of the company, and lower free cash flow was recorded posing overall weak growth for the next quarter.

Technically on a 3 month chart with daily candle interval, the scrip has remained a downtrend from the month of August with slight pull back on November 8, 2018. The scrip is trading below the 50-day EMA (Exponential moving average). Formation of negative divergence on Relative Strength index along with the lower low on the price charts and MACD (moving average and convergence indicator) in negative territory are noted.

APT with a beta greater than 1x has dropped approximately 33% in three months as on November 19, 2018, and high level of debt along with free cash flow scenario indicate for a “Sell” recommendation at the current price levels of $11.20, down 4.8% on November 20, 2018.