Platinum Asset Management Limited

PTM Details

Change of Director’s Interest: Platinum Asset Management Limited (ASX: PTM) engages in hedge funds management, investments in the public equity market across the globe for its clients. The company's director, William Kerr Stephen Neilson (Kerr Neilson), has recently undergone a change of interest and disposed of Judith Neilson’s 126,037,421 ordinary shares.

FY21 Financial Performance:

• The company has recorded an increase in its total revenue and other income by 5.9% to $316.4 million in FY21, compared to $298.7 million in FY20. This reflects a significant increase in gains from Platinum’s seed investments, which was partially offset by a decrease in management and performance fee income.
• It has received total distributions and dividends of $3.43 million in FY21, up from $1.85 million in FY20, supported by PAI investments.
• Additionally, the company has incurred a profit of $163.25 million in FY21 against $155.61 million in FY20
• At the end of the period, the company’s cash position stood at $143.27 million as of 30 June 2021 vs $189.89 million as of 30 June 2020.

Net Income (Source: Analysis by Kalkine Group)

Key Risks:

• COVID-19 Uncertainties: The market is uncertain about investing in stock markets due to macro events and ongoing COVID-19 impact over businesses that could affect the company's profitability.
• Due Diligence Risk- The company is exposed to due diligence risk, which could impact its operations.

Outlook: The company expects an improvement in economic activities, which will provide opportunities to investors, and focuses on its well-positioned funds to take advantage in the near-term future. The company focuses on generating long term returns for its clients through a contrarian and index-agnostic approach to stock selection.

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: As at the 30 September 2021, the company had Fund Under Management (FUM) of $22,826 million vs $23,244 million in the previous month. The stock of PTM is trading below its average 52-weeks' levels of $3.020-$5.140. The stock of PTM gave a positive return of ~5.16% in the past one week and a negative return of ~22.53% in the past nine months. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the uncertainty of the COVID-19 pandemic and decrease in asset turnover ratio. For the purpose of valuation, peers such as Magellan Financial Group Ltd (ASX: MFG), Pendal Group Ltd (ASX: PDL), Computershare Ltd (ASX: CPU) and others have been considered. Considering the current trading levels, indicative upside in valuation, improvement in bottom-line performance, well-funded, optimistic outlook, and the key risks associated with the business, we recommend a 'Buy' rating on the stock at the current market price of $3.170, as on 13 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

PTM Daily Technical Chart, Data Source: REFINITIV

Next Science Limited

NXS Details

Business Update: Next Science Limited (ASX: NXS) research, manufactures, and commercialises medical technology to eradicate issues in human health caused by biofilms. Irrimax Corporation recently lodged a complaint against NXS, alleging common law unfair competition and false advertising regarding XPerience^TM. The company has denied the allegation and is now planning to defend itself.

Change in Substantial Holding- Dr Matthew Myntti, the substantial holder of the company, has decreased its holdings from 11.53% to 7.11%, in order to meet the financial obligations in relation to the matrimonial settlement with his former wife.

H1FY21 Financial Performance:

• The company has posted robust revenue of US$3.91 million in H1FY21, up by 271% from US$1.05 million in H1FY20, driven by increased demand of XPerience^TM in the market.
• It has reported a gross profit of US$3.07 million in H1FY21, up 234% on pcp.
• In addition, there is a substantial decrease in contract liabilities to US$91K as of 30 June 2021, down from US$1.90 million as of 31 December 2020.
• The company has recorded a decline in its net loss by 37% to US$4.19 million in H1FY21 against a loss of US$6.69 million in H1FY20. The US elective surgery market procedure levels returned to 2019 levels which have driven an improvement in bottom-line growth.
• At the end of the period, the company’s cash position stood at US$6.93 million as of 30 June 2021 vs $8.10 million as of 31 December 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Impact of COVID-19 pandemic- The company has a significant effect on elective medical procedures due to the COVID-19 shutdown in the USA that has impacted the company's operations.
• Litigation Risk- The company is exposed to litigation risk; any negative announcements could impact its goodwill.

Outlook:

• The company's goal is to become standard of care in the prevention of surgical site infection and ensure to spread awareness about its product usage in the hospitals.
• The management expects reopening of wound care clinics and possibly could be back to 2019 volumes by the end of FY21
• It focuses on securing Value Assessment Committee approvals within US hospitals and facilitate commercial sales for XPerience No-Rinse Antimicrobial Solution.

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 NXS is trading below its average 52-weeks' levels of $1.100-$2.060. The stock of NXS gave a positive return of ~3.22% in the past one week and a negative return of ~26.38% in the past six months. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium to its peers, considering the economic recovery and a higher gross margin. For the purpose of valuation, peers such as Nanosonics Ltd (ASX: NAN), Polynovo Ltd (ASX: PNV), Resmed Inc (ASX: RMD) and others have been considered. Considering the current trading levels, indicative upside in valuation, robust topline growth, reopening of wound care clinics, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.20, as on 13 October 2021.

NXS Daily Technical Chart, Data Source: REFINITIV

Mach7 Technologies Limited

M7T Details

Change of Director’s interest- Mach7 Technologies Limited (ASX: M7T) provides an image management system that allows easy identify, connect, share a diagnostic image, interoperability for healthcare enterprises globally. The company’s director, David Chambers, has undergone a change of interest and acquired 21,000 ordinary shares at a considered price of $0.995 per share.

Board Changes- The company has appointed Ms Veronique Morgan Smith to serve as company secretary where Ms Jennifer Pilcher will resign, effective 1 October 2021.

FY21 Financial Performance:

• The company reported an improvement in gross margin by 12% to $18.44 million in FY21, compared to $16.45 million in FY20, driven by the elimination of reseller fees owing to Client Outlook.
• In FY21, the sales order jumped to $25.64 million, 95% growth over the prior year, demonstrates that the company is actively growing its recurring revenue base.
• However, it has reported a net loss of $9.35 million in FY21 against a profit of $169k on a pcp basis, impacted due to increased foreign exchange losses of $1.11 million during the year.
• The company’s cash position stood at $18.36 million as of 30 June 2021 vs $48.87 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Technology Risk- The company is exposed to technology risk and should invest in innovation to mitigate the risk of competition.
• Impact of COVID-19 pandemic- The company has significantly impacted its operations and the integration of the Client Outlook business due to travel restrictions across the globe.

Outlook:

• The management believes a strong year of sales order ahead and expects to generate revenues well in excess of its existing book of business valued at $23.1 million going forward.
• The company expects the margin to remain at more than 45% that indicates it will deliver strong earnings growth.
• It focuses on gaining market share in the enterprise imaging market in the target region of North America and Asia. Further, it will expand into the radiology PACS market with its full diagnostic PACS solution.
• The company continues to focus on achieving free cash flow breakeven to drive revenue growth in the near-term future.

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: As per the recent announcement, Trinity Health has offered a purchase order of Mach7’s PACS Solution for seven years that supports their Unified Clinical Imaging Platform (UCIP) strategy, and further, the total contract value of this initial order is $7.4 million. Additionally, the company has issued 488,333 ordinary shares under an employee incentive scheme.

The stock of M7T is trading below its average 52-weeks' levels of $0.875-$1.590. The stock of M7T gave a positive return of ~2.92% in the past one week and a negative return of ~20.36% in the past nine months. The stock has been valued using EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the uncertainty of the COVID-19 pandemic and a negative net margin. For the purpose of valuation, peers such as Immutep Ltd (ASX: IMM), CogState Ltd (ASX: CGS), Alcidion Group Ltd (ASX: ALC) and others have been considered. Considering the current trading levels, indicative upside in valuation, strong sales order, increase in gross margin, contract with Trinity, optimistic outlook and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $0.91, as on 13 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

M7T 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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