Nanosonics Limited

NAN Details

A Quick Look at FY21 Key Results: Nanosonics Limited (ASX: NAN) operates in the manufacturing, commercialising, and distributing technologies to control infection and decontamination products globally.

• Decent Revenue Growth- The company has posted decent revenue growth of 3% to $103.1 million in FY21 compared with the pcp. In addition, the significant recovery in the market conditions has driven the H2FY21 total revenue up 39% compared toH1FY21.
• Decrease in Operating Profit- In FY21, the company has reported a decline in operating profit to $10.98 million against $12.45 million in FY20, impacted due to an increase in R&D expense during the year.
• Decline Bottom line Growth- The company has delivered profit after income after tax of $8.6 million in FY21, down 15% from $ 10.1 million in FY20, impacted due to increased investment in its strategic growth agenda and COVID-19 headwinds.
• Liquidity Position- The company's cash position stood at $96.02 million as of 30 June 2021 vs $91.78 million as of 30 June 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Liquidity Risk- The company requires sufficient liquidity to meet its financial obligations, invest in new technology, and mitigate the working capital risks.
• Impact of COVID-19 pandemic- The company has a significant effect on consumables sales and ultrasound procedure volumes during the COVID-19 pandemic and if the uncertainty prevails, it could affect the company’s earning.

Outlook:

• The company is optimistic about improving market conditions and expects double-digit growth in total revenue in FY22 due to an increase in installed base and usage of consumables globally.
• The company continues to invest in R&D, infrastructure and capabilities, which might drive global growth in FY22 and beyond.
• The company remains focused to launch AuditPro globally, and further increases its new source of revenue opportunities by launching new products.
• As per a recent announcement, the company will conduct a virtual Annual General Meeting on 19 November 2021
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of NAN is trading below its average 52-weeks' levels of $4.885-$8.250. The stock of NAN gave a positive return of ~5.88% in the past three months and a negative return of ~20.76% in the past nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight premium to its peers’ average EV/Sales multiple, considering the improvement in the global market, increased installed base globally and increased consumables usage, etc. For the purpose of valuation, peers such as Pro Medicus Ltd (ASX: PME), ImpediMed Ltd (ASX: IPD), Resmed Inc (ASX: RMD) and others have been considered. Considering the current trading levels, indicative upside in valuation, decent topline growth, expanding its footprint, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $5.555, as on 25 October 2021, 3:15 PM (GMT+10), Sydney, Eastern Australia.

NAN Daily Technical Chart, Data Source: REFINITIV 

PolyNovo Limited

PNV Details

Q1FY22 and FY21 Financial Performance: PolyNovo Limited (ASX: PNV) develops and commercialises medical devices that offer NovoSorb Biodegradable Temporising Matrix (BTM) and Syntrel hernia devices, etc. globally.

• Robust Sales Growth- The company has recorded a robust sales growth of 327% YOY in FY21, driven by relaxation in COVID-19 restrictions in UK and Irish hospitals.
• Decent EU Business Performance: The EU business performed well and increased a whopping 204% year over year in Q1FY22. The company expects to enter into additional distribution agreement in Q2, including Cyprus and the Czech Republic.
• Increase in Receipts from Customers- In FY21, the company has reported improved receipts from customers of $24.78 million, compared to $18.41 million on a pcp basis.
• Improvement in Direct Market- In Q1FY22, the company has reported that new accounts in the direct market (excluding distributor markets) were up by 56% from Q1FY21.
• Liquidity Position- The company’s cash position stood at $7.68 million as of 30 June 2021 vs $11.64 million as of 30 June 2020.

Revenue Highlight (Source: Analysis by Kalkine Group)

Key Risks: The company has a significant impact on its clinical trial and sales order, due to lockdown restrictions, and if uncertainty prevails might impact the company's financials. Further, the company requires certain approvals to commercialise its products. Therefore, any delays could impact its operations.

Outlook:

• The company expects an improvement in Australia and New Zealand results with the ease of COVID-19 restrictions in Q2FY22.
• The management focuses on expanding and signing new accounts. Also, with the improvement in patient access, it expects that the strategy might drive strong sales in the near term.
• It expects that order will commence soon to other distributors in Poland, Turkey, and Greece. Further, new 3PL distribution centres in Belgium are operational.
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of PNV is currently trading below its average 52-weeks' levels of $1.650-$4.080. The stock of PNV gave a negative return of ~19.16% in the past three months and a negative return of ~30.22% in the past nine months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ median EV/Sales multiple, considering the impact on clinical trials during the COVID-19 pandemic, competition risk and stringent regulatory approvals, etc. For the purpose of valuation, peers such as Pro Medicus Ltd (ASX: PME), ImpediMed Ltd (ASX: IPD), Resmed Inc (ASX: RMD) and others have been considered. Considering the current trading levels, indicative upside in valuation, increase in Q1FY22 sales, opening new 3PL distribution centre, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of 1.820, down ~1.356% as on 25 October 2021.

PNV Daily Technical Chart, Data Source: REFINITIV

Next Science Limited

NXS Details

H1FY21 Financial Highlights: Next Science Limited (ASX: NXS) is a medical technology company that research, develops and commercialises technologies to eradicate issues in human health caused by biofilms.

• Robust Revenue Growth- The company has posted robust revenue growth of 271% to US$3.91 million in H1FY21, compared to US$1.05 million on a pcp basis. This is reflected due to the increase in BlastX^TM
• Improved EBIT Performance- In H1FY21, the company has reported an improvement in EBIT loss by 38% to US$4.26 million vs negative EBIT of US$6.87 million in H1FY20.
• Increase in Net Loss- The company has delivered an increase in net loss after tax to US$4.44 million in H1FY21 against a loss of US$6.89 million in H1FY20.
• Liquidity Position- The company’s cash position stood at US$13.2 million as of 30 June 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• Litigation Risk- The company is exposed to litigation risk of unfair competition and false advertising regarding XPerience^TM No-Rinse Antimicrobial Solution; any negative update might have a negative impact on company’s financials.
• Foreign Currency Risk- The company’s operations are exposed to the global market, due to which the company could face the foreign currency risk.

Outlook:

• The company expects continues sales growth organically in BlastX^TM, which might support the business opportunity, going forward.
• The management anticipates an improved gross margin due to an increase in direct commercialisation of technology platforms, which might drive growth in the near-term.
• The company’s Bactisure^TM business expects continues growth with a product launch in Europe.
• The company has announced to release its Q3FY21 results on 28 October 2021.
  

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of NXS is trading below its average 52-weeks' levels of $1.100-$2.060. The stock of NXS gave a positive return of ~6.57% in the past nine months and a negative return of ~27.67% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers’ average EV/Sales multiple, considering the closure of outpatient wound care clinics and shutdown in the USA of elective medical procedures due to lockdown restrictions, etc. For the purpose of valuation, peers such as CSL Ltd (ASX: CSL), ImpediMed Ltd (ASX: IPD), Cleanspace Holdings Ltd (ASX: CSX) and others have been considered. Considering the current trading levels, indicative upside in valuation, robust topline growth, FDA approval of XPerience^TM, optimistic outlook, and the key risks associated with the business, we recommend a 'Speculative Buy' rating on the stock at the current market price of $1.215, down by ~0.817% as on 25 October 2021.

NXS Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.