PolyNovo Limited

PNV Details
 
Chairman’s Address to Shareholders: PolyNovo Limited (ASX: PNV) develops and commercialises innovative medical devices by using its NovoSorb technology in the treatment of burns, surgical wounds and negative pressure wound therapy. The market capitalisation of the company stood at ~A$1.45 Bn as on 15^th November 2019. Chairman of the company, David Williams, addressed the shareholders and stated that the growth in PolyNovo has been extraordinary over the past years. He stated that the BTM sales in FY18 stood at $1.7 million. For the half-year ended 31 December 2018, BTM sales were reported at $3.7 million, that increased to $9.3 million by the end of the year. Moreover, FY19 has been a pivotal year for PNV with sales from NovoSorb BTM increasing to 435% against the previous year. It reported revenue amounting to $13.683 Mn, reflecting a rise of 128% from FY18 $5.989 Mn.

The following picture provides an overview of NovoSorb BTM USA sales:

NovoSorb BTM USA Sales (Source: Company Reports)

What to Expect: The company is well advanced in its Hernia repair device development and expects entry into the US market in early FY21. It added that FY20 is set to deliver increased sales via its existing markets and opening new global markets. It is also planning the expansion of sale territories in FY20.

Stock Recommendation: Gross margin of the company stood at 90.5% in FY19 as compared to the industry median of 70.8%. Moreover, PNV witnessed a decent improvement in net margin to -23.3% in FY19 as compared to -99.7% in FY18. On the stock’ s performance front, it witnessed a rise of 120.10% in the span of six months and 265.00% on YTD basis, which led the stock to trade closer to its 52-week higher levels. Therefore, considering the significant movement in stock price, decent FY19 results along with improvement in key margins, and current trading levels, we are of the view that most of the positives are factored in at the current juncture. Hence, we give a watch stance on the stock at the current market price of A$2.210 per share, up 0.913% on 15^th November 2019 and suggests investors to wait for further catalysts.

 
PNV Daily Technical Chart (Source: Thomson Reuters)

Pro Medicus Limited

PME Details
Agreement with OSUWMC: Pro Medicus Limited (ASX: PME) is engaged in the development and supply of IT solutions to the public and private health sectors. The company has a market capitalisation of ~A$2.67 Bn as on 15^th November 2019. PME recently announced that it has bought back 34,062 shares at the consideration of $842,972.03 pursuant to its daily share buy-back notice. In another update, the company announced that Visage Imaging, Inc its wholly-owned U.S. subsidiary has inked a 5-year contract with The Ohio State University Wexler Medical Center (OSUWMC). It added that the contract based on a transaction-based licensing model would see the company’s Visage 7 technology implemented throughout OSUWMC’s radiology departments spanning seven hospitals and outpatient clinics, as well as integrated to OSUWMC’s electronic health record. However, the implementation of the contract would commence in Q2 FY20 and will complete in mid-2020.

Revenue Split (Source: Company Reports)

Future Guidance: As per the 2019 Annual Report, PME would continue to direct resources into the development of new products. It is also committed to the continued development of its Visage RIS and Visage 7.0 product sets. The company expects that this strategy of continuing development would continue to place PME as a market leader as well as allow the Group to further leverage its expanded product portfolio and geographical spread.

Stock Recommendation: Net margin of the company stood at 38.0% in FY19, reflecting YoY growth of 8.6%. This implies that the company has improved its position to convert its top-line into the bottom- line. At the current market price of $26.420, the stock is trading at a price to earnings multiple of 138.920x. The stock of PME is trading above the average of its 52-week high and low of A$38.390-A$8.836. We would like to see the implication and development of the contract and how things pan out in the future from hereon. Hence, looking at the rise of 126.00% on YTD basis and 183.19% in the last one year, along with the recent business developments, we have a watch stance on the stock at the current market price of A$26.420 per share, up 2.802% on 15^th November 2019.

 
PME Daily Technical Chart (Source: Thomson Reuters)

OncoSil Medical Limited

OSL Details

Positive CE Mark: OncoSil Medical Limited (ASX: OSL) is involved in oncology research and development. The market capitalisation of the company stood at ~A$94.61 Mn as on 15^th November 2019. OSL recently announced that Bank of America Corporation and its related bodies corporate became a substantial holder with voting power of 5.63% on 12^th November 2019. OSL also received a positive CE Mark Status report from the British Standards Institute after Clinical Oversight Committee review meeting, which was held on 3^rd October. It added that the status report confirms that BSI has now wrapped up the analysis of data presented to the Clinical Oversight Committee (COC) as well as closed out all concerns with the external clinical and bio-statistical experts. The following picture provides an idea of cash flow for the quarter ended 31^st October 2019:


Cash Flows (Source: Company Reports)
 
Future Aspects: The company stated that it will continue to work on its manufacturing capabilities, supply chain, sales and marketing infrastructure to support planned commercial and clinical activities.

Stock Recommendation: On the valuation front, the stock of OSL has EV to sales multiple of 36.8x in comparison to the industry median (Biotechnology & Medical Research) of 20.8x on TTM basis. The stock of OSL is trading at a price to book multiple of 8.9x against the industry average (Biotechnology & Medical Research) of 6.3x on TTM basis. In the last one month and three months, it delivered returns of 78.57% and 134.38%, respectively. Hence, in view of aforesaid facts, stretched valuations and decent returns over the last few months, we advise investors to book profit and recommend a “Sell” rating on the stock at the current market price of A$0.180 per share, up 20% on 15^th November 2019.

 
OSL Daily Technical Chart (Source: Thomson Reuters)

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