Stocks’ Details

Healius Limited

Organisational and Management Update:Healius Limited (ASX: HLS) provides services for medical, para-medical and related services. The market capitalisation of the company stood at ~A$1.82 Bn as on 30^th July 2019. Recently, the company, via a release dated 29^th July 2019 announced that it is undertaking organisational re-design for simplifying its management structure, improve divisional agility and autonomy. The company further stated that CFO of the company, Mr Malcolm Ashcroft would be leaving HLS post completion of FY19 financial results. Additionally, Wes Lawrence would also be leaving the company, who is the most recently Chief Executive Officer (CEO) of the Pathology division. In another update, the company via a release announced that National Australia Bank Limited and its associated entities have ceased to be a substantial holder in the company from 22^nd July 2019.

The company reported underlying revenue of $870.6 Mn in 1H FY19 in comparison to $ 832.7 Mn. In 1H FY19, it declared an interim dividend (fully franked) of 3.8 cents per share, which represent 60% of the underlying net profit after tax.


Group Results (Source: Company Reports)

What to Expect:The company is anticipating underlying net profit after tax to be in the ambit of $93 Mn and $98Mn for FY19. The company mentioned that trends in population growth and ageing, advancements in health technology as well as cancer survival rates, and rising patient expectations are supporting the long-term market growth.

Stock Recommendation:The company reported a gross margin and EBITDA margin of 88.8% and 12.6% against the industry median of 22.3% and 7.5%, respectively. It posted a net margin of 2.4% in 1H FY19 in comparison to the industry median of 2.2%. The current ratio of Healius Limited stood at 0.84x in 1H FY19, reflecting YoY growth of 2.6%. This indicates that Healius Limited has improved its position to address its short-term obligations. Coming to the stock’s past performance, it produced negative returns of 2.99% and 7.30% in the time span of one month and three months, respectively. Currently, the stock is trading slightly above the average of 52 week high and low prices of around $2.81 with a PE multiple of 292.0x. Hence, considering the above-stated facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$2.940 per share (up 0.685% on 30^th July 2019). 
 

Volpara Health Technologies Limited

A Look at First Quarter Results:Volpara Health Technologies Limited (ASX: VHT) is involved in the selling of comprehensive cloud-based breast imaging analytics platform, VolparaEnterprise. The market capitalisation of the company stood at ~$335.25 Mn as on 30^th July 2019. Recently, the company, with the help of release provides an update to market regarding the performance of Q1 FY20. The company reported Annual Recurring Revenue amounting to NZ$14.6 Mn at the end Q1 FY20. During the same period, Volpara raised A$55 million and acquired MRS Systems Inc. of Seattle.Volpara and MRS would be having much greater presence throughout the country, with significant cross-selling opportunities. The company witnessed cash receipts from customers amounting to NZ$2.3 Mn.


Cash Flow Statement (Source: Company Reports)

Future Aspects:The company is constantly looking to improve people, processes, business models and products. The company stated that Acquisition of MRS was a part of a long-term strategy for predictive healthcare. The company has key strengths like it can make things work on any x-ray system anywhere in the world. Other key strengths of the company include its intellectual property, clinical validation, etc.

Stock Recommendation:  The company’s ARR is covering around 25% of the United States. The company’s gross margin stood at 82.6% in FY19, reflecting YoY growth of 5.6%. VHT’s current ratio stood at 3.69x in FY19, reflecting YoY growth of 52.1%. This indicates that the company has improved its position to meet its short-term obligations. On the stock’s performance front, it generated returns of -8.85% and -20.02% in the time span of one month and three months, respectively. However, in the time period of six months, it produced returns of 38.27%. Currently, the stock is trading at slightly towards its 52 weeks high level of $1.932, which increases the probability for a correction in the near term. Hence, considering the aforesaid factors and current trading level, we have a wait and watch stance on the stock at the current market price of $1.640 per share (up 6.149% on July 30, 2019, owing to the release of Q1FY20 quarterly cash flow report).
 

Paradigm Biopharmaceuticals Limited

Focus towards value creating commercial opportunities:Paradigm Biopharmaceuticals Limited (ASX: PAR) is involved in the developing and researching of therapeutic products for human use. The market capitalisation of the company stood at ~A$302.73 Mn as on 30^th July 2019. Recently, the company announced that Paul Rennie had made a change to his substantial holding in the company with the voting power of 12.18% in comparison to the previous voting power of 16.68%. In other updates, the company stated that it met Primary end point in Paradigm’s Phase 2a randomised, double-blinded placebo-controlled clinical trial in participants with Ross River virus. It further added that RRV clinical data would support discussions with the US Department of Defense and pharmaceutical companies with tropical disease programs. The following picture provides a view of the net cash used in operating activities:


Net Cash Used in Operating Activities (Source: Company Reports)

Future Prospects:The company is focusing on value creating commercial opportunities that would either generate potential revenue from early sales of the finished product or via partnering/commercial transactions. PAR anticipates to file initial submission for Provisional Approval with the Australian TGA. If it gets approved, then it will provide potential first revenue and sales in Australia.

Stock Recommendation:The company reported a current ratio of 9.20x in 1H FY19 against the industry median of 4.55x. This showcases that PAR is in a decent position to meet its short-term obligations in comparison to the broader industry. Additionally, it can be said that the company’s respectable liquidity position might help it in making deployments towards the key business activities which can provide long-term growth to the company. With respect to the stock’s past performance, it generated returns of 14.96% and 0.64% in the time span of one month and three months, respectively. As per ASX, the stock is presently trading slightly below the average of 52 week high and low prices of $1.421. Hence, considering the aforesaid facts and current trading levels, we give a “Speculative Buy” recommendation on the stock at the current market price of A$1.535 per share (down 2.54% on 30^th July 2019).
 
 
Comparative Price Chart (Source: Thomson Reuters) 

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.