Atomo Diagnostics Limited

AT1 Details

Atomo Diagnostics Limited (ASX: AT1) is a medical device company headquartered in Sydney, Australia. It is establishing an in-house assembly and packing facility in South Africa, and has a commercial office in the UK. Its primary focus area is the expansion of global sales and continued development of its proprietary rapid test device technology that simplifies testing processes and reduce errors compared to more complex conventional blood-based rapid diagnostic testing (RDT) kits. It has a market capitalization of ~$116.56 million as on 29th April 2021.

Results Performance (Half-Year ended 31 December 2020)

For the first half ended 31 December 2020, the revenues of the company from ordinary activities for the interim period stood at $4.6 million, an increase of 388% on previous corresponding period (pcp). Further, the net Loss stood at $2.4 million, an increase of 3% on pcp. Net tangible assets per ordinary security stood at 5.38 cents, as compared to -3.08 cents in the pcp. No dividends were paid or proposed during the half-year ended 31 December 2020.

(Source: Company Reports)

Recent Update

As per the release dated 29 April 2021, the company and Viatris Inc has announced a multi-year agreement with global health agency Unitaid to increase access of HIV self-testing in low-and middle-income countries.

Outlook:

The company is riding on the continued demand for its kits due to COVID-19 related infections. Further, the company plans to expand its activities in the following key areas such as (1) To meet expected demand in the global HIV self-test market, (2) Investing in manufacturing capacity to support customers buying Atomo devices on an OEM basis, and (3) Continued R&D and investigation of new product and market opportunities.

Valuation Methodology: EV/Sales Based Relative Valuation (Illustrative)

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has been in a downtrend which gets reflected in the lower-high and lower-low chart pattern formed on the weekly chart. It made an all-time low of $0.205 and gave close at $0.210 for the ongoing week. The technical indicator RSI with a reading around 30 suggests that the stock is in the oversold zone thereby leaving limited scope for the stock to fall further.

Going forward, the stock may have resistance around a 23.6% retracement level of $0.263 whereas support could be around $0.195.

Stock Recommendation:

The company’s gross margin for H1FY21 stood at 55.1%, better than H1FY20 result of 42.0%. Its EBITDA margin and net margin though negative but improved from the previous corresponding period by huge basis points. Current ratio for H1FY21 stood at 16.39x, better than the industry median of 3.13x, implying that the company possess better capabilities to meet its short-term obligations than its peer group. Its Debt to Equity ratio for H1FY21 stood at nil, better than the industry median of 0.10x, depicting reasonable leverage position of the company.

The stock declined by ~44.5% in 9 months. It has made a 52-week low and high of $0.205 and $0.520, respectively and is trading towards the 52-week lower levels.

We have applied EV/Sales based relative valuation (on an illustrative basis) and the target price reflects a rise of low double-digit (in % terms). We have applied a slight premium to EV/Sales Multiple (NTM) (Peer Average) considering better liquidity position which could help the company to navigate tough conditions.

Considering the aforesaid facts, we give “Speculative Buy” recommendation on the stock at the current market price of $0.205 per share on 29th April 2021.

AT1 Daily Technical Chart (Source: Refinitiv (Thomson Reuters))

Osprey Medical Inc

OSP Details

Osprey Medical Inc (ASX: OSP) provides contrast reduction and monitoring technologies. Its proprietary dye reduction and monitoring technologies are designed to help physicians minimize dye usage and monitor the dose of dye in real time throughout the procedure. The Company’s DyeVert System reduces contrast while maintaining image quality in a self-adjusting easy-to-use design that monitors dye usage. It has a market capitalization of ~$43.61 million as on 29th April 2021.

Results Performance (Year ended 31 December 2020)

Revenue of the company from ordinary activities stood at US$1.7 million, a decline of 54.38% on previous year. Further, net loss after tax attributable to members stood at US$13.4 million, a decline of 25.99% on previous year. Besides this, net tangible asset per share of common stock stood at US$0.005, as compared to $0.037 in the previous year. No dividend was paid for the period.

(Source: Company Reports)

Recent Update:

In its Quarterly Cash Flow Report for the period ending 31 March 2021, OSP highlighted that its business remains well capitalized with a cash balance of US$13.6 million/A$17.7 million as on 31 March 2021. It maintained the positive momentum from the previous quarter as it continue to rebound from COVID, achieving double digit growth in units sold and revenues. In the US, it moved forward with its lean expansion strategy and successfully added 7 new ISAs in regions outside of its direct salesforce. It also received its first order from an ISA and it expects this to ramp up in the coming months, as it finalize onboarding and training the ISAs, which now comprises 8 ISAs covering 26 new states. Net revenue stood at ~US$586k (up 21% on the previous quarter).

(Source: Company Reports)

Outlook:

The company drives sales expansion with global giant such as GE Healthcare and selling Osprey’s product portfolio across Europe and parts of Asia. Further, the company has entered the ANZ market for the first time through Regional Health Care Group. Importantly, the company is involved into Cost-effective expansion across US with Independent Sales Agency (ISA) agreement with BioCore covering 8 new states, with more to be finalized in the near-term in addition to its direct coverage over existing states.

Technical Overview:

Weekly Chart –

Source: Refinitiv (Thomson Reuters)

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has been trading in a sideways fashion for several weeks. For the ongoing week, it has given a stronger close with a ‘Bullish Engulfing’ pattern formed on the weekly chart, demonstrating resilience for the stock. The technical indicator RSI with a reading around 45 and a curve at the end pointing up, suggests gaining of bullish momentum.

Going forward, the stock may have resistance around the upper Bollinger band of $0.023 whereas support could be around the lower Bollinger band of $0.016.

Stock Recommendation:

As the pandemic subsides and hospitals explore ways to improve coronary angiography patient outcomes and reduce costs, DyeVert provides the solution as it has been proven to reduce CI-AKI. Overall, Osprey faces a potential market opportunity of ~$1.1 billion and is committed to expand its reach globally to protect patients from CI-AKI. In 2020 the Company expanded its sales footprint with cost efficient ISAs and GE distribution outside of the US which provides the framework for sales growth over the course of CY2021 and beyond.

The stock rose by 58.33% in 1 year. It has made a 52-week low and high of $0.008 and $0.063, respectively and is trading towards the 52-week lower levels.

Considering the aforesaid facts, we give “Speculative Buy” recommendation on the stock at the current market price of $0.019 per share, up 11.764% as on 29th April 2021.

OSP Daily Technical Chart (Source: Refinitiv (Thomson Reuters))

Note: 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.

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