Stocks’ Details
 

Pro Medicus Limited

Decent Set of Results for FY19: Pro Medicus Limited (ASX: PME) is involved in the supply of healthcare imaging software and services to hospitals, diagnostic imaging groups and other health related entities in Australia, North America and Europe. The company recently announced about sale of shares by Founders (1 Mn shares each) in order to improve the liquidity in the company’s shares. Following which, Sam Hupert and Anthony Hall now have holdings of ~27.03% and 26.99% of the issued share capital of the company.

The Board has also been advised that the founders do not intend to sell any further shares in the company before the trading period which follows its half year results in February 2020 and may not do so at that time.
FY19 Key Highlights:Company reported a record after-tax profit of $19.1 Mn, an increase of 91.9% on year-on-year basis. Revenue for the period was reported at $50.1 Mn, a rise of 47.9% on year-on-year basis. The decent growth was led by the expansion seen in revenue from all key jurisdictions, such as 42.2% in North America, 102.3% in Europe and 30.2% in Australia. Company’s cash reserves as on June 30, 2019 was reported at $32.3 Mn with no debt. The company announced a final dividend of 4.5 cents per share fully franked, with record date and payment date on September 13, 2019 and October 4, 2019, respectively. Total dividend for the year increased by 75% to 10.5 cents per share.

During the year, PME entered the S&P/ASX 200 index, which is based on the 200 largest ASX listed companies.

FY19 Key Metrics (Source: Company Reports)

What to Expect:As per the FY19 report, the company’s pipeline was growing and would continue to actively pursue opportunities in the large enterprise, academic, corporate and private imaging centre markets. Its North American pipeline continues to be strong both in terms of quantity and quality of prospects. The company is also seeing a greater impact from the network effect of its growing base of Tier 1 academic clients which it believes to provide them with a strategic advantage in the emerging fields of Enterprise Imaging and Artificial Intelligence.

Stock Recommendation:PME’s share generated a positive YTD return of 155.20%. Its EBITDA margin and net margin for FY19 stood at 63.2% and 38.0%, better than FY18 of 58.3% and 29.4%, respectively. Its ROE for FY19 stood at 45.3%, better than 28.5% in FY18 which implies that the company generated better return for its shareholders in FY19 than the previous year. Its current ratio for FY19 stood at 3.77x, better than FY18 at 3.48x, indicating the company’s better liquidity position in FY19 than previous year. However, looking at the valuations on TTM basis, EV/Sales multiple at 58.6x against the industry median of 10x indicates the stretched valuation at current juncture. Hence, considering the aforesaid facts and current trading levels, we recommend an “Expensive” rating on the stock at the current market price of $29.020, up 0.974% on September 20, 2019.
 

Healius Limited

FY19 Underlying NPAT Increased By 6.5% to $93.2 Mn:Healius Limited (ASX: HLS) is involved in three principal continuing activities such as pathology, medical centres and imaging, and three emerging businesses such as dental, IVF and day hospitals. The company recently announced a change in directors’ interest where Sally Evans acquired 15,000 shares for the value of $3.259993 per share, taking the final holdings to 15,000 ordinary shares, effective from September 13, 2019. In another update, National Australia Bank Limited and its associated entities, became a substantial holder in the company with stake of 5.418%, effective from August 22, 2019.

FY19 Key Highlights:Underlying NPAT increased by 6.5% to $93.2 Mn and reported NPAT stood at $55.9 Mn as compared to $4.1 Mn in FY18. Underlying EBIT was reported at $167.3 Mn, reflecting an increasing positive momentum for all the three divisions (Pathology, Medical Centres and Imaging). The Board of Directors declared a fully franked final dividend of 3.4 cents per share, taking the full dividend to 7.2 cents per share (including interim dividend of 3.8 cents per share). 


FY19 Key Metrics (Source: Company Reports)

What to Expect:The long-term drivers for healthcare remain positive, with strong underlying demand for healthcare in Australia, underpinned by a growing and ageing population, increasing number of people living for longer for chronic illness, rising patient expectations and expanding wealth per capita. The drivers of price, convenience and technology are shifting consumer demands for better ways to access care. The company believes that a well-funded frontline health system is key in delivering efficient and effective healthcare. Underlying NPAT for FY20 is expected to be higher than FY19, subject to market conditions and any changes occurring from the implementation of AASB 16 on leases.
Stock Recommendation:HLS’s share generated a positive YTD return of 32.79%. Its gross margin for FY19 stood at 88.6%, better than the industry median of 37.2%. Its net margin improved from 0.2% in FY18 to 3.1% in FY19. Its ROE improved from 0.2% in FY18 to 2.9% in FY19. Its current ratio improved from 0.77x in FY18 to 0.88x in FY19. Its debt to equity ratio decreased from 0.47x in FY18 to 0.39x in FY19. On valuation front, its EV/Sales (on TTM basis) stood at 1.5x, higher than the industry median of 10x, indicating under-valued position at the current juncture. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating on the stock at the current market price of $3.240, up 0.935% on September 20, 2019.
 

Paradigm Biopharmaceuticals Limited

PAR’s FY19 Revenue up 18.61%:Paradigm Biopharmaceuticals Limited (ASX: PAR) is involved in researching and developing therapeutic products for human use. It is a drug repurposing company which seeks to find new uses for old drugs, thereby reducing the cost and time to bring therapeutics to market. The company recently announced issuance of 150,000 fully paid ordinary shares in the company by exercising 150,000 options at an exercise price of $0.40 per option expiring January 19, 2020.

In another update, the company announced that its first investigational new drug application (filed on August 7, 2019) has been cleared by the US FDA within the 30-day review period. FDA clearance means validation of company’s safety data, the finished product’s quality and confirmation of an unmet medical need.

FY19 Key Highlights:Revenue from continuing activities for the period was reported at $3,245,628, an increase of 18.61% on previous year. Loss from the continuing activities after tax attributable to members for the period was reported at $15,627,544, an increase of 152.45% on previous year.


FY19 Income Statement (Source: Company Reports)

What to Expect:As per the release, company’s absolute focus is on the clinical development and commercialization of iPPS (Injectable Pentosan Polysulfate Sodium) for the indications of osteoarthritis, the orphan indication of MPS (Mucopolysaccharidosis) and Alphavirus infections such as RRV (Ross River virus) and CHIKV (Chikungunya). With this developmental success, the company is expected to deliver sustainable return for its shareholders in the coming times.
Stock Recommendation:PAR’s share generated a positive YTD return of 131.02%. Its current ratio for FY19 stood at 30.51x, better than the industry median of 4.43x, implying that the company is in a better position to address its short-term obligations than its peer group. The stock is currently trading close to its 52-week high. With paradigm team, the company has consolidated and strengthened its expertise to drive the success of clinical programs to date and is well-positioned to execute clinical development strategy moving forward. Hence, considering the aforesaid facts, we recommend a “Hold” rating on the stock at the current market price of $2.290, up 9.048% on September 20, 2019.

 
 Comparative Price Chart (Source: Thomson Reuters)

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