Stocks’ Details

Nearmap Limited

Decent Growth in FY20 Despite the Global Pandemic: Nearmap Limited (ASX: NEA) is a location intelligence firm, engaged in online aerial photomapping with the use of camera systems and processing software. As on 20^th October 2020, the market capitalization of the company stood at ~$1.26 billion. The Group’s revenue increased by 25% from $77.6 million in FY19 to $96.7 million in FY20 driven by expansion of ACV portfolio, and growth in global subscriptions. The global subscriptions increased from 9800 in FY19 to 10,458. The Group’s net expenses increased by 41% due to higher investments targeted across business segments. The Group suffered a loss for the year FY20 of ~$36.71 million as compared to $14.93 million in FY19.

FY20 Financial Highlights (Source: Company Reports)

Outlook: The company’s CFO plans to run the business to cash flow breakeven during FY21. For FY21 outlook, the company plans to increase the alignment of its Product, Sales and Marketing teams to its main verticals bearing maximum interest to expand company’s higher value product suite. For FY21, the company is targeting 20-40% ACV growth from medium to long term and underlying churn of less than 10%. It also expects cash balance in the range of $32 million to $35 million in FY21. The company has announced holding a virtual AGM on 12 November 2020.

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

EV to Sales Based Market Multiple Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The Group has no debt on its Balance Sheet and its balance of Cash and Cash Equivalents stand at $36.1 million for FY20. The stock of NEA gave a positive return of 10.25% in the past one month and a positive return of 3.61% in the past three months. The stock is trading close to 52-weeks’ high levels. The stock of NEA has a support level of ~$2.419 and a resistance level of ~$2.928. We have valued the stock using the EV to Sales multiple based relative valuation method and arrived at a target upside of lower double-digit (in % terms). Considering the current trading levels, decent returns in the past six months, and positive long-term outlook, we recommend a ‘Hold’ rating on the stock at the current market price of $2.59, down by 0.387% on 20^th October 2020.

Mayne Pharma Group Limited

FY20 results down from FY19, however, stable performance in 2H20: Mayne Pharma Group Limited (ASX: MYX) is engaged in the development of branded and generic pharmaceuticals with footprint in the US and Australia. As on 20^th Oct 2020, the market capitalization of the company stood at ~$545.69 million. The company reported a decrease of 13% in revenue from $525.2 million in FY19 to $457 million in FY20. For FY20, its reported EBITDA stood at $80.3 million, down by 28% and net loss after tax was $93 million, affected by impairment of the generic portfolio. The company’s reduced debt stood at $248 million. It reported a net operating cash inflow of $100 million for FY20 and Cash and Cash Equivalents balance stood at $137.8 million in FY20 as compared to $89 million in FY19.

FY20 Financial Highlights (Source: Company Reports)

Outlook: For FY21, the company aims to successfully commercialize key pipeline products – NEXTSTELLIS and generic NUVARING pending at the FDA. It is prioritizing cost savings from the new supply agreements, improvements in the manufacturing network and grow revenue from alternate non-retail channels. It expects reaping benefits from the business pipeline and increasing manufacturing sales of Contract Services segment. For Specialty Brands, they have restructured the dermatology base to receive normalized prescription patterns and grow TOLSURA to nullify the impact by COVID-19. The company has announced holding an online AGM on 24 November 2020.

Stock Recommendation: The stock of MYX gave a negative return of 13.51% in the past six months and a negative return of 8.57% in the last one month. The stock is trading at 52-weeks’ low levels and thus retains potential for further growth. On a Technical front, the stock of MYX has a support level of ~$0.253 and a resistance level of ~$0.398. Considering the current trading levels, volatile returns in the past months and decent long-term outlook, we give a ’Speculative Buy’ recommendation on the stock at the current market price of $0.320, down by 1.539% on 20^th October 2020.

Creso Pharma Limited

1H20’s Business Performance Impacted by COVID-19: Creso Pharma Limited (ASX:CMP) is a developer of cannabis and hemp derived therapeutic, nutraceutical and life-style products for human and animal health. As on 20^th October 2020, the market capitalization of the company stood at ~$19.96 million. The company reported 57% increase in revenue from $907k in FY19 to $1,453k in FY20. It was due to increase in revenue from sale of products and rise in other income. The company reported 177% increase in Net loss after tax from $6.27 million in FY19 to $17.40 million in FY20. The company’s Cash and Cash Equivalents balance stands at $3.28 million in June 2020, higher as compared to $2.8 million in December 2019.

FY20 Financial Highlights (Source: Company Reports)

Creso Pharma Benefits from Medicinal Cannabis Uptake in Israel: In October, the company announced that the number of authorized medicinal cannabis patients in Israel has more than doubled over the past two years to over 70,000 per month, reflecting a significant market opportunity available for its Medicinal Cannabis portfolio in the Israeli market.

TGA reclassification of CBD: CPH received an interim decision by TGA, allowing Australian consumers to buy CBD products over over the counter through pharmacies without prescription. However, the final decision will be made by 1 February 2021. This development unlocks a major opportunity for Creso Pharma’s CBD and hemp products to progress on several opportunities to capitalize on a growing market.

Outlook: The company has a clear strategy to expand its footprint as it enters 2H20. It is positive about Mernova’s entry and growth into retail cannabis market, new commercialization avenues on the back of R&D initiatives taken for both animal health and nutraceutical portfolios. For 2H20, Mernova’s revenues are expected to improve in the upcoming period driven by grant of Sales License form Health Canada and a rising wholesale order pipeline backed by key industry players such as Israel based Univo Pharma Ltd.

Stock Recommendation: The stock of CPH gave a negative return of 10.60% in the past one month and a negative return of 7.81% in the last three months. The stock is trading at 52-weeks’ low levels and thus retains potential for further growth. On a Technical front, the stock of CPH has a support level of ~$0.028 and a resistance level of ~$0.206. On a TTM basis, the stock of CPH is trading at EV/Sales multiple of 5.8x, lower than the industry median (Healthcare) of 12.1x, and thus seems undervalued. Considering the aforesaid facts and current trading levels, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $0.029 on 20^th October 2020.

Daily Comparative Chart (Source: Refinitiv, Thomson Reuters)

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