Stocks’ Details 

BPH Energy Limited

Grant of Patent to Cortical Dynamics Limited: BPH Energy Limited (ASX: BPH) has diversified investments in biotechnology firms, a medical cannabis firm, and oil and gas mining company. It holds 20% interest in Molecular Discovery Systems Limited, and 22.3% in Advent Energy Limited. As on 28^th January 2021, the market capitalisation of the company stood at ~$121.99 million. On 27^th January 2021, the company notified the market regarding the issue of 2.7 million fully paid ordinary shares via exercise of unquoted options without a disclosure document to investors. BPH recently announced grant of a European patent for neurodiagnostic monitoring and display system by its investee firm Cortical Dynamics Limited (CDL) in Belgium, France, Germany, and United Kingdom. The company has also appointed Jamie Stanistreet as one of the panellists on its Advisory Committee. On 7^th December 2020, CDL sought approval for sale of its Brain Anaesthesia Response Monitor (BARM™) from the Korean Ministry for Food and Drug Safety (KMFDS) besides available CE and TGA approvals.

Entered a Well Services Agreement: On 12^th January 2021, the company announced entering a Preliminary Well services contract through Asset Energy Pty Limited, a wholly owned subsidiary (WOS) of Advent Energy Limited (an investee company of BPH) and Add Energy. The companies have come together for the drilling of the Baleen drill target in PEP11 gas project for which Advent has filed an application to the National Offshore Petroleum Titles Administrator (NOPTA). Advent is the operator the permit and holds 85% interest whereas Bounty Oil and Gas holds the rest 15%. The companies are waiting for the permit for drilling on the application. For the aforesaid purpose, Advent Energy Limited is raising a maximum capital of $6.52 million. Granbridge has been appointed as the Underwriter to partially underwrite the offer up to $1,000k for 20 million underwritten shares. BPH in agreement with Grandbridge has agreed to sub-underwrite upto $1,000k of the offer and receive 3% of the sub-underwritten sum as the fee services.

A Look at the September 2020 Quarter Results: During Q1FY21, BPH finished 2 for 5 non-renounceable rights issue at $0.015 per share with 1 free option expiring on 29 July 2022 for every 2 shares subscribed. It raised cash of $1.92 million and $248k in in-extinguishment of payments owed to directors and their associated companies. It will further extinguish $202k owed to Directors and their companies by issue of 16 million shortfall shares and 8.05 attaching options under the non-renounceable rights issue post the shareholder approval at a meeting expected to be held in November 2020.

FY20 Results: The company reported NPAT of $1.21 million for FY20 as compared to net loss $3.01 million in FY19. It incurred cash outgoing for FY20 to the tune of $504k and held cash balance of $257k as on 30 June 2020. The company recorded a fall in revenue from $278k in FY19 to $240k in FY20 in BPH stock FY20 results.

FY20 Income Statement Highlights (Source: Company Reports)

Stock Recommendation: The stock of BPH gave a positive return of 445.45% in the past three months and a positive return of 888.28% in the past six months. The stock is currently trading higher than its 52-weeks’ average price level band of $0.005-$0.33. On the technical front, the stock of BPH has a support level of ~$0.231 and a resistance level of ~$0.26. On TTM basis, the stock is trading at a price to book value multiple of ~27.5x as compared to industry (Biotechnology & Medical Research) median of ~7.3x and is thus overvalued. Considering the current trading levels, significant returns in the past 3 months and 6 months, and valuation on TTM basis, we are of the view that most of the positives of the company are factored in. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating to the stock at the current market price of $0.240, up by 14.285% on 28^th January 2021.

PainChek Limited

December 2020 Quarter Results: PainChek Limited (ASX: PCK) is a developer of PainCheck®, a smartphone-based pain assessment application for patients suffering from speech issue. It uses AI to assess the micro-facial pain characteristics of aged people in residential care facilities. It is steadily planning initial foray into the home care, hospital, and disability markets. As on 28^th January 2021, the market capitalization of the company stood at ~$80 million. The company reported 9% YoY increase in ARR to $3.03 million for the December 2020 quarter. The residential aged care (RAC) facilities and approved beds under annual PainChek® license rose by 133% and 123% on YoY basis and earned 30% plus domestic market share for December 2020 quarter. The company recorded more than 260k clinical assessments from PainChek application, a 190% YoY growth on pcp basis. During the quarter, the company entered partnership agreements for wider distribution with Ward Medication Management in Australia, Medi-Care in the UK, and Medi-Map in New Zealand.

Contracted ARR Dec19-Dec20 (Source: Company Reports)

Outlook: PCK has a robust pipeline of aged care beds to support business growth in FY21. The company is exploring market expansion avenues through market entry plans in home care & disabilities market, hospitals and launch of newly developed and tested PainChek Universal application in Q1CY21. PCK plans to launch PainChek Infants in Europe and Australia and progressing well for CE mark and TGA clearance in Q2FY21. It also plans to roll out PainChek in Home Care market in Australia, Canada in FY21.

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

EV/Sales 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 PCK gave a negative return of 22.22% in the past three months and a negative return of 41.67% in the past six months. The stock is currently inclined towards its low level of $0.061. On the technical front, the stock of PCK has a support level of ~$0.063 and a resistance level of ~$0.094. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Resapp Health Limited (ASX: RAP), PKS Holdings Limited (ASX: PKS), Integral Diagnostics Limited (ASX: IDX) and others. Considering the decent performance in December 2020 quarter, recent partnerships, decent outlook, current trading levels, and valuation, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $0.070, down by 1.409% on 28^th January 2021.

ResApp Health Limited

Launch of SleepCheck: Resapp Health Limited (ASX: RAP) is a health technology developer of smartphones applications for the detection and management of respiratory infections. The company has developed 2 key applications- ResAppDx and SleepCheck and is focussed to grow and market them rapidly. As on 28^th January 2021, the market capitalisation of the company stood at ~$59.89 million. On 28^th January 2021, RAP notified the market of its plan to release of Q2FY21 results tomorrow on 29^th January 2021 via a conference call hosted by the management. The company recently appointed Mr. Mike Connell as the Vice President for its global commercial operations.

Activities Update: During Q2FY21, the company announced the launch of SleepCheck, an app for tracking sleep apnoea on selected Android devices such as Samsung Galaxy S9, S9+, S10, S10+ and S20 mobiles. SleepCheck has 3,946 downloads till the close of Q2FY21 and has been released in 36 markets. During the same month, the company rolled out latest version 2.3 of its ResAppDx mobile app on the Apple App Store and Google Play Store. Version 2.3 is advanced with App Clip (iOS) and Instant App (Android) capabilities and can also detect chronic obstructive pulmonary disease (COPD).

A Sneak-Peak at Q1FY21 Results: During September 2020 quarter, the company entered a 2-year contract with Coviu, a telehealth provider to market ResAppDx app to Coviu’s customers. During the quarter, it rolled out the app on Phenix Health’s telehealth application also for a license fee ($5-$10) per test. The company has tied up with a Kenyian company, Ilara and has started evaluating ResAppDx on patients. The company received cash receipts of $3,000 only for SleepCheck downloads for June-July. It deployed $1.44 million cash in operating activities and $1.48 million in financing activities. RAP held cash balance of $5.8 million at the end of September 2020 quarter.

Cash Flows from Financing Activities, Q1FY21 (Source: Company Reports)

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

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

Outlook: The company plans to launch SleepCheck gradually on more devices in the short-term. For ResAppDx, the company is working with USFDA authorities for rolling out the application in the US in Q3FY21. The company is also working with other telehealth firms (such as Medgate) for roll out of ResAppDx through their platforms in early 2021.

Stock Recommendation: The stock of RAP gave a negative return of 29.09 in the past three months and a negative return of 44.28% in the past six months. The stock is currently inclined towards its 52-weeks’ low level of $0.055. On the technical front, the stock of RAP has a support level of ~$0.71 and a resistance level of ~$0.98. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like PKS Holdings Limited (ASX: PKS), Volpara Health Technologies Limited (ASX: VHT), PainChek Limited (ASX: PCK) and others. Considering the current trading levels, decent results of Q1FY21, business update, and outlook for FY21, new partnerships and growth of downloads of SleepCheck, and valuation, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.078, down by 1.266% on 28th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclosure: BPH Energy Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

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