Stocks’ Details

ResMed Inc

Declaration of Quarterly Cash Dividend: ResMed Inc(ASX: RMD, NYSE: RMD) is a global leader in medical devices with cloud-based software applications. The management recently announced results for the third quarter of FY19 and declared a quarterly cash dividend of $0.37 per share which would be paid on June 13, 2019.

Financial Performance in 3QFY19: Revenue in the U.S., Canada, and Latin America, excluding Software as a Service, recorded a growth of 10% as compared to the prior year period, primarily supported by strong sales across mask and device product portfolios. Revenue from Combined Europe, Asia and other markets posted a growth of 6% (constant currency basis) as compared to the same period of the prior year. Device sales in France and Japan were impacted as customers completed their connected device upgrade programs, however, device sales performed well excluding France and Japan.

Revenue from SaaS (Software as a Service) grew 101% as Brightree service offerings continued to grow well and the acquisition of MatrixCare and HEALTHCAREfirst also contributed towards this higher growth.


Revenue Break-up (Source: Company Reports)
 
Gross margin at 59.2% in 3QFY19 expanded by 100 basis points over 3QFY18, primarily due to higher margin contribution from MatrixCare. Net income saw a pcp de-growth of 4% due to the impact of recent acquisitions, higher interest burden and income tax expense. Non-GAAP net income declined 3% compared to the prior year period. GAAP diluted earnings per share fell by 4%, primarily because of the impact of recent acquisitions, higher interest and income tax expense as compared to the prior year quarter.


Financial Results and Operating Metrics (source: Company Reports)
 
On the front of other Business and operational highlights, the company informed that it has completed the acquisition of Propeller Health, a digital therapeutics company, for $225.0 million. The company expanded the mask portfolio by introducing AirFit N30i, ResMed’s first top-of-head CPAP mask. Agreement to settle outstanding patent infringement disputes with Fisher & Paykel Healthcare was also announced in the quarter. To expand its leading role in Korea’s CPAP and respiratory care market, RMD announced the acquisition of HB Healthcare.
 
Outlook and Stock Recommendation: At the current market price of $16.220, the stock is trading at price to earnings multiple of 36.650x. Currently, the stock is trading close to its 52-week high of $16.570. The stock has appreciated 13.61% in the last 1-month. Organic growth through various acquisitions made in recent times, healthy revenue growth and gross margin and historical price appreciation in 1-year, lead us to give a “Hold” recommendation on the stock at the current market price of $16.220 per share (up, 0.185% on 16 May 2019).
 

Bionomics Limited

Results of the PTSD Trial and Exposure To Be Presented: Bionomics Limited (ASX: BNO) is a global, clinical stage biopharmaceutical company. The company recently announced that expanded data from the Phase 2 Post Traumatic Stress Disorder (PTSD) Clinical Trial using BNC210 will be presented in the SOBP meeting which is being held on 16–18 May 2019.

The company recently released Appendix 4C - Quarterly Cashflow Report for March 2019 quarter. Cash balance at 31 March 2019 stood at $22.1 million as compared to $27.35 million in December 31, 2018.

Net operating cash outflow during the quarter ended 31 March 2019 came in at $3.32 million. After completion of the BNC210 Phase 2 Clinical Trial in PTSD, R&D (Research & development) costs reduced by 62% as compared to the previous quarter.
 
Financial Performance in 1H FY19: Revenue in 1H FY19 stood at $5,293,303 as compared to $7,168,539 for the period to 31 December 2017. Operating loss after tax in 1H FY19 of $11,187,487 was higher as compared to $8,846,833 in 1H FY18 primarily driven by continued investment in its R&D programs.

1HFY19 Key Highlights (Source: Company Reports)
 
Major achievements during the first half of FY19 were the completion of Phase II clinical trial of BNC210 in patients with PTSD (Post Traumatic Stress Disorder), recapitalisation by BVF Partners L.P., additional funding from licence revenue and R&D tax refund.
 
Upcoming Milestones: The management expects an announcement on the outcome of the Strategic Review led by Greenhill & Co in the 2nd quarter of CY19. The management also plans to announce the results of BNC210 Phase 2 clinical trial for the treatment of Agitation in the Elderly in the 2Q CY19.
 
Stock Recommendation: Going forward, the management will continue to assess its strategic options for sharing hands and portfolio prioritisation whilst conserving cash. At the current market price of $0.125, the market capitalization for the stock comes in at $70.81 million. On a YTD basis, the stock has risen 20.93%. Price to book value for the stock at 4.2x is significantly lower as compared to 77.4x of industry median. Several ongoing drug discovery program, trial results, strong cash position etc drive us to give a “Speculative Buy” recommendation on the stock at the current market price of $0.125 per share (down 3.846% on 16 May 2019).
 

Ramsay Health Care Limited

 
Strong Balance Sheet to Support Further Expansion: Ramsay Health Care Limited (ASX: RHC) owns and operates private hospitals; and manages public hospitals through “private/public collaborations”. The company recently announced dividend/distribution amount per security of AUD2.29310000 for RHCPA - TRANS PREF 6-BBSW+ 4.85% PERP SUB RED T-10-10 with set record date and payment date of October 3, 2019 and October 21, 2019, respectively.
 
Financial Performance in 1H FY19: RHC announced a Core NPAT (Net Profit After Tax) of $290.8 million in 1H FY19, 1% higher on pcp. Core NPAT (Excl. the Capio acquisition) increased by 1.8% to $293.2 million in 1H FY19. The company enjoys a strong balance sheet with the financial flexibility to continue to fund the pipeline of brownfield capacity expansion and future acquisitions. Consolidated balance sheet leverage ratio at 3.2x or Wholly Owned Funding Group’s leverage ratio at 2.1x provides significant capacity for future growth.


Leverage and Cash Management (Source: Company Reports)
 
What to Expect: The management believes that the company is on track to deliver on its guidance for FY19 after experiencing a decent 1HFY19 performance. Australian operations posted an EBITDA growth of 5.7% in 1H FY19 on the back of higher volumes and focus on operational efficiencies. UK business, after facing challenges in 1Q, impacted the overall earnings for first half of 2019. It experienced good signs of recovery in NHS volume growth in the second quarter.
 
Stock Recommendation: The acquisition of Capio has witnessed a strong contribution towards revenue and EBITDAR of RGdS (Ramsay Générale de Santé). Going forward, we expect the momentum will continue and growth in top-line and bottom-line is likely to be supported with the acquisition synergies.

At the current market price of $64.180, the stock is available at the price to earnings multiple of 32.420x. Considering the above mentioned factors and price movement (9.97% gain in the last 3-months), we give a “Hold” recommendation on the stock at the current market price of $64.180 per share (down 0.326% on 16 May 2019).
 

Comparative Price Chart (Source: Thomson Reuters)  

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