Stocks’ Details

Australian Pharmaceutical Industries Limited

 
Revenues up 2.8% Year Over Year in 1HFY20: Australian Pharmaceutical Industries Limited (ASX: API) is involved in the wholesale distribution of pharmaceutical products to pharmacies. Recently, the company announced that Mark Smith, a Director of the company, acquired 40,000 ordinary shares for a consideration of $41,550.
 
1HFY20 Key Highlights: During 1HFY20 for the period ended 29 February 2020, the company reported total revenues of $2,033.1 million, an increase of 2.8% year over year. The company’s financial position has improved owing to a reduction in net debt, and improved working capital and cash conversion days. The company is undergoing a restructuring program, with further cost control initiatives expected in 2HFY20. The company’s balance sheet depicts a strong financial position, with a reduction of 50% of net debt on a year over year basis and cash conversion days down by 7.3 days as compared to the prior corresponding period. During the period, API’s Pharmacy Distribution revenue was up 7.1% on the pcp.
 

Key Highlight (Source: Company Reports)
 
Future Growth Impetus: API remains on track to build a portfolio of complementary businesses, to develop a stronger pipeline through machine-driven in-store health checks, medicine managing apps, dose processing to offer strong health products. The group is also aiming to continue to enhance its Priceline Pharmacy network.
 
Risk Analysis: The company is exposed to various kinds of risks such as changes in government policies, structural reform, and regulations. The company also remains exposed to stiff competition in the Australian pharmacy, retail, and health market. Also, cybersecurity threat, failure to achieve success in its Priceline pharmacy franchise along with financial risks add to the woes.
 
Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of the company gave negative returns of 16.54% over a period of six months and is currently trading below the average of its 52-week low and high level of $0.995 and $1.520, respectively. The management of the company is focused on developing a pipeline of Priceline Pharmacies and Clear Skincare clinics which is experiencing huge demand as customers become more aware of result-driven skin treatments. We have valued the stock using a P/E multiple based illustrative relative valuation method and have arrived at a target price with lower double-digit upside (in percentage terms). For this purpose, we have taken peers such as Opthea Ltd (ASX: OPT), Integral Diagnostics Ltd (ASX: IDX) and Mayne Pharma Group Ltd (ASX: MYX), to name few. Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.12, down 1.322% on 29 June 2020.
 

Starpharma Holdings Limited

 
SPL Reveals Results of DEP irinotecan: Starpharma Holdings Limited (ASX: SPL) develops dendrimer products for life science, pharmaceutical, and other uses. Recently, the company stated the results of its DEP® irinotecan in combination with an immuno-oncology (IO) therapy. As per the results, the combination revealed a superior anti-tumour activity and substantial survival advantage, when compared to the IO therapy alone in two colorectal cancer (CRC) models. In another update, the company stated thatVivaGel® BV has been launched in the Central and Eastern European regions.
 
Other Recent Updates: On 14 May 2020, the company gave an update on the activities of its products. In May, Starpharma stated that it had completed the phase 1 component of its phase 1/2 trial for DEP® irinotecan. Earlier in February, VivaGel® BV was introduced in Asia under the brand name of BETADINE™ BV Gel. Starpharma’s study showed that the antiviral activity of SPL7013, the activeingredient in VivaGel®, has been approved and sold in products in Australia, Europe, and a few sections of Asia.
 
Q3 FY2020 for the Period Ended 31 March 2020: The company is placed in a strong position with cash of $36.1 million available as on 31 March 2020, an increase of $0.2 million from the previous quarter. Net operating cash outflows stood at $0.9 million and relate to expenditure for commercialisation, regulatory and manufacturing costs for VivaGel® BV products. Also, it includes R&D related costs, which involve three internal DEP® clinical programs of SPL.
 

Operating Cash Outflow (Source: Company Reports)
 
What to Expect: Starpharma Holdings Limited continues to progress its R&D and commercial activities in the prevailing environment of COVID-19 outbreak. Regarding the portfolio of VivaGel®, the company intends to commercially roll-out VivaGel® BV in Asia, Europe, and other markets and intends to obtain licence for Canada, India, and Israel.
 
Risks: Due to COVID-19, global healthcare resources have been directed for the treatment of COVID-19 patients, which is expected to have an industry-wide impact on the ability of clinical research sites to enroll new trial patients and can also impact the overall timing of SPL’s clinical programs. However, the company mentioned that given the design of its clinical programs, it does not anticipate an adverse effect on the trial results.
 
Valuation Methodology: Price to Sales Based Market Multiple Valuation (Illustrative)

P/S Based Market Multiple Valuation Approach (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters
 
Stock Recommendation: The stock of the company delivered a return of 48.41% in the past three months and is currently trading above the average of its 52-week low-high trading range of $0.615 - $1.445. The company is expanding its geographical coverage by applying for licenses and commercial roll-out of its products to other countries. We have valued the stock using Price/Sales based market multiple valuation method and arrived at a target price of high single-digit upside (in percentage terms). Therefore, considering the above factors and current trading levels, we give a ‘Hold’ recommendation on the stock at the current market price of $1.14, down by 2.146% on 29 June 2020.

Monash IVF Group Limited

 
COVID-19 Update:  Monash IVF Group Limited (ASX: MVF) is engaged in providing assisted reproductive services and ultrasound services. Recently, the company informed the market that Ms Christina (Christy) Boyce has resigned as a non-executive director of Monash IVF Group Limited.On 29 June 2020, the company informed the market that it has been witnessing early signs of recovery with pent up patient demand post the resumption of IVF treatments on 27 April 2020. The company also saw positive domestic stimulated cycle growth starting from 18 May to 30 June 2020. Notably, stimulated cycles went up ~25% on pcp. However, MVF remains vigilant of the unsure future impact of COVID-19 and the consequences on the macro-economic environment heading into FY2021. 
 
1HFY20 Key Highlights for the Period Ended 31st December 2019: MVF declared its half-yearly results, wherein the company reported revenues of $77 million, as compared to $77.2 million reported in the year-ago period. Adjusted EBITDA for the period came in at $16.8 million, down 13% year over year. Adjusted net profit for the period came in at $9.1 million, down 15.3% year over year.
 

1H20 Financial Highlights (Source: Company Reports)
 
FY20 Guidance: MVF expects adjusted NPAT to be $~4.6m in 2HFY20, down 55% on pcp, owing to disruption caused by COVID-19. For FY20, adjusted NPAT is expected to be around $14.0m. The company expects to report its FY20 full year results on 24 August 2020.
 
Risks: The company is exposed to various kinds of risks such as operational and financial risks. Further, there is always a risk that the Commonwealth government will change the funding it offers to ARS, including the Medicare Benefit Schedule and Extended Medicare Safety Net. This change might have an adverse impact on its business aspects.
 
Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative) 

P/CF Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of MVF made a 52-week low and high of $0.355 and $1.434, respectively, and is currently trading at the lower band of the range. The stock has corrected ~42.34% in the last six months. We have valued the stock using P/CF based illustrative relative valuation method and arrived at a target price with a limited upside (in percentage terms). For the purpose, we have taken the peer group - Virtus Health Ltd (ASX: VRT), Estia Health Ltd (ASX: EHE) and Japara Healthcare Ltd (ASX: JHC). Hence, considering the COVID-19 impact, uncertainty about the FY21 results and current trading levels, we have a watch stance on the stock at the current market price of $0.535 per share, down by 4.464% on 29 June 2020.

 
 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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