Stocks’ Details

Paragon Care Limited

H1FY20 Gross Margin Stood at 38%:Paragon Care Limited (ASX: PGC) provides end to end healthcare solutions, which includes equipment and service solutions for acute, aged and primary care.

H1FY20 Operational Highlights for the Period ended 31 December 2019:PGC announced its half-yearly market update, wherein the company reported revenue at $120.7 million as compared to $119.4 million in H1FY19. The business reported a gross margin of 38% during the first half of FY20. The company reported normalised EBITDA at ~$12 million, which reflects a margin of 10%. The company reported a cash balance of ~$18 million as on 31^st December 2019. 

FY19 Financial Highlights for the Period ended 30 June 2019: In FY19, the company posted revenue of $236.094 million as compared to $117.200 million in FY18. Cost of sales stood higher at $140.992 million as compared to $69.024 million in the previous financial year. The company reported profit before income tax expense from continuing operations of $12.190 million, lower from $17.862 million, due to higher administration expenses of $70.19 million as compared to $28.78 million in FY18.


FY19 Financial Highlights (Source: Company Reports)

Stock Recommendation:The stock of PGC is trading at $0.340 with a market capitalization of $138.53 million. The stock made a 52-week low and high of $0.32 to $0.60 and is currently trading at the lower band of its 52-week trading range.The stock has delivered negative returns of 5.75% and 18% in the last three months and six months, respectively. The Management is integrally involved in the business, which supports the increased level of transparency and a specific target of keeping the solid organic revenue growth on track.The stock is available at an Enterprise Value to Sales multiple of 0.9x on trailing twelve months (TTM) basis as compared to the industry median (Healthcare Equipment & Supplies) of 7.9x. Considering the recent price correction, trading levels and operational performance, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.340, down 17.073% as on 03 February 2020, taking cues from the half-year market update.

Medical Developments International Limited

 
Robust Sales Growth of Penthrox® in Europe: Medical Developments International Limited (ASX: MVP) operates in the pharmaceutical drug business and medical and veterinary equipment business. Recently, the company reported the issuance of 75,000 share options for a consideration of $0.01.
 
FY19 Highlights for the Period ended 30 June 2019:MVP declared its full-year results, wherein the company reported net revenue from sale of goods and contracts of $20.876 million as compared to $17.46 million in FY18. The business reported gross profit at $14.18 million as compared to $12.36 million in FY18. Sale of Penthrox® within Europe grew by 401% on y-o-y basis while sales into the UK and Ireland went up by 68% on y-o-y basis. During the year, the company reported an addition of ~400 customers in Europe while the group reported addition of 1,058 customers. Sales of respiratory devices were down by 5% on y-o-y basis, on account of issues related to the UK. The business reported net profit after tax at $1.038 million as compared to $0.243 million in FY18.
 

FY19 Income Statements Highlights (Source: Company Reports)
 
Guidance: Over the next 12 months, the business is expected to complete its roll-out of Penthrox® across Mexico, Iran, Jordan, South Korea and Thailand and other European countries. The business is expected to submit a response to the FDA clinical hold and resubmit the IND for Penthrox® in the USA.
 
Valuation Methodology: Price to Book Multiple Approach
 

Price to Book Based Valuation(Source: Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation:The stock of MVP is trading at $10.820 with a market capitalization of $656.73 million. The stock made a 52-week low and high of $3.480 and $11.050, respectively, and is currently trading at the upper band of its 52-week trading range.The company intends to continue its clinical program to extend the indication for use of Penthrox® globally. The company is engaged in advance work on producing other analgesic and pharmaceutical products, by using its intellectual property. Over a period of 6 months, the stock gave returns of 75%. Considering the returns on the stock and current trading levels, we have valued the stock using one relative valuation method, i.e., Price to Book based multiple and arrived at a target price of lower double-digit downside. Hence, we give an “Expensive” rating on the stock at the current market price of $10.820, up 8.092% as on 3^rd February 2020.

Mesoblast Limited

Strategic Collaboration with Tasly Pharmaceuticals: Mesoblast Limited (ASX: MSB) is a biotechnology company, whichoperates in adult stem cell technology. On 3^rd February 2020, the company reported on the submission of Biologics License Application (BLA) to the United States Food and Drug Administration (US FDA). The above application is used for Ryoncil™ (remestemcel-L), the company’s leading allogeneic cell therapy used for the treatment of children with steroid-refractory acute graft versus host disease (SRaGVHD).

Q2FY20 Operational Highlights for the Period ended 31 December 2019: MSB announced its quarterly highlights, wherein the company reported cash receipts from operating activities at US$19.4 million, which includes US$17.5 million in upfront and milestone payments and US$1.9 million in royalties. Total cash payments for operating activities were down by 16% on pcp terms to US$4.0 million, due to lower spend of US$6.7 million on clinical programs. Cash on hand at the end of the quarter stood at US$81.3 million. During the quarter, the company reported continued progress in strategic partnerships with Tasly Pharmaceuticals for heart failure. The company reported Research and Development expenses of US$7.5 during the second quarter of FY20.


Q2FY20 Cash Flow Highlights (Source: Company Reports)

Stock Recommendation:The stock of MSB is trading at $2.960 with a market capitalization of $1.61 billion. The stock made a 52-week low and high of $1.135 and $3.21 and is currently trading at the upper band of its 52-week trading range.The company is pleased with its revenue growth from the allogeneic cell therapy product TEMCELL®1 HS Inj. The business considers Japan as one of the important markets and expects improved business prospects in the coming years. The stock has delivered stellar returns of 68.07% and 103.39% in the last three months and six months, respectively. The stock is available at a price to book of 2.3x on TTM basis as compared to the industry (Healthcare) average of 4.1x. Considering the trading levels, valuation and operational performance, we recommend a “Hold” rating on the stock at the current market price of $2.960, down 1.333% as on 03 February 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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