Pro Medicus Limited

PME inked $14 Mn - 7 Year contract with Duke Health: Health care sector company, Pro Medicus Limited (ASX: PME) recently announced that its wholly-owned U.S. subsidiary, Visage Imaging, Inc.signed $14 Mn contract with Duke Health for a duration of 7 years. This will help Pro Medicus in consolidating its position in the highly competitive market and enable it to leverage its development and commercialisation efforts across an increasing base of academic, research oriented clients which might provide with strategic advantage particularly in rapidly evolving fields such as artificial intelligence as well as machine learning.

In its 1H FY 2019 report, it highlighted cash reserves at $24.735 Mn. Its EBIT margin was reported at 51.8%. The Board of Directors proposed a fully franked interim dividend of 3.5 cents per share and special fully franked dividend of 2.5 cents per share. Special dividend will be paid on May17, 2019. During 1H FY 2019, the company’s revenues rose in all key jurisdictions i.e. by 40% in North America, by 30% in Australia, and by 204% in Europe and, as a result, the revenues for the half increased by 59.4% to $25.3 million.


H1FY19 Revenue Break-up (Source: Company Reports)

What To Expect:It is expected that revenue from professional services will decrease as a % of total revenue as Exam (Transaction) revenue increases. The company’s product, Visage RIS, has received long term (5 years) contracts with Primary Healthcare and I-MED. As per the report, with respect to Visage Imaging, PACS market is estimated to be more than US$2 Bn p.a.

Stock Recommendation: Pro Medicus Limited’s share generated positive YTD return of 56.97%. On the valuation front, its P/B multiple stands at 44.97x higher than the peer median of 3.05x, indicating overvalued position at the current juncture. Also, the stock price is trading towards the 52-week higher level. Hence, considering the aforesaid facts and current trading level, we find the stock to be “Expensive” at the current market price of $18.710 per share (up 4.818% on 24 April 2019).
 

Nanosonics Limited

Decent Top-Line & Bottom-Line Performance By NAN: Nanosonics Limited (ASX: NAN) recently announced that Mitsubishi UFJ Financial Group, Inc. became a substantial holder of the group since April 18, 2019 with voting power of 5.01%. In another update, it announced that the French Ministry of Health has released updated guidance for the appropriate disinfection of endocavitary ultrasound probes. This new guidance by the ministry is the latest in a growing number of European guidelines requiring the appropriate level of disinfection for ultrasound probes, supporting the company’s growth plans in the European region.

In its H1FY19 results, it reported an increase in sales by 36% pcp to $40.7 Mn. It was mainly driven by the new product launch and geographic expansion during the same period.By consideration the timing of the trophon2 launch, in 1HFY19, the global installed base grew 9% to 19,310 units (up 20% in last 12 months) with the North American installed base growing 9% to 17,020 units and EMEA up 16% to 850 units. Its free cash flow for the half was $1.6 million compared with $3.9 million in the prior corresponding period and $2.3 million in the prior half. The cash flow for the half year was impacted by an increase in inventory of $3.2 million associated with the launch of trophon2 and an increase in trade and other receivables of $5.0 million due to realigning payment terms with the key distributor with the standard payment terms and the timing of invoicing/payments by that distributor.


H1FY19 P&L Statement (Source: Company Reports)

What To Expect: The company aims to focus on establishing the trophon technology as the standard of care in those markets where trophon is already represented. It also plans to expand into new markets as fundamentals for adoption strengthen with the release of new guidelines and plans to develop new products focussing towards unmet needs in infection prevention.

Stock Recommendation: Nanosonics Limited’s share generated positive YTD return of 64.39%. Its gross margin and net margin for H1FY19 stood at 75.2% and 17.5% better than the industry median of 67.4% and 17.3% respectively, which implies a decent financial position than its peer group. Its current ratio for H1FY19 stood at 8.11x better than the industry median of 2.48x, implying company’s better ability to address its short-term obligations than its peer group. Hence, considering the aforesaid facts and current trading level, we recommend a “Hold” rating for the stock at the current market price of $4.570 per share on April 24, 2019.
 

Bionomics Limited

BNO’s Share Trading At 52 Weeks Low: A global stage biopharmaceutical company, Bionomics Limited (ASX: BNO) has recently announced the term extension of its Executive Chairman, Dr. Errol De Souza till June 30, 2019 from earlier March 31, 2019. In its H1FY19 results, it reported an increase in revenue from ordinary activities by 3% pcp to $2,424,127. It reported a strong cash position of $27.35 Mn on December 31, 2018. It was due to $6,568,808 R&D Tax Incentive Refund received for the 2017/2018 financial year; $654,000 in licensing revenue from the Cancer Therapeutics CRC (CTx); and $9.8 million raised via private placement to BVF Partners L.P.


H1FY19 P&L Statement (Source: Company Reports)

What To Expect: The company is expected to continue to assess its strategic options for partnering and portfolio prioritisation whilst conserving cash. An update of the strategic review will be provided in conjunction with the announcement of the BNC210 Phase 2 Agitation trial data in the second quarter of CY2019 and progress of its partnered therapeutic candidate with MSD. Additionally, it is pursuing several drug discovery programs in its core areas of cognition and pain to therapeutic candidate identification and partnering.

Stock Recommendation: Bionomics Limited’s share generated positive YTD return of 16.28%. It is trading close to its 52 weeks low of $0.099 which provides an opportunity for accumulation. However, in the past 6 months, the stock provided -24.24% return which indicates that the stock is quite volatile.

Hence, considering the aforesaid facts and current trading level, we maintain our “Speculative Buy” recommendation on the stock at the current market price of $0.140 per share (up 12% on 24 April 2019).
 

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