Orthocell Limited

Issued New Shares on May 21: Orthocell Limited (ASX: OCC) has an engagement in the development and commercialization of cell therapies and related technologies. The Company recently announced the issuance of 2,096,489 new shares. In another update, it announced the successful CelGro® nerve regeneration treatment clinical results and the realisation of the significant commercial potential of the CelGro® platform technology. CelGro® is a de-risked platform technology which is approved for sale in bone defect repair in the EU, with tendon and nerve products to follow.

H1 FY 2019 Financial Performance: Its sales revenues from ordinary activities increased by 40.9% pcp to $506,875 in 1HFY19. Its loss from ordinary activities after tax attributable to the owners of Orthocell Limited increased by 67.1% pcp to $1,406,151.No dividend was proposed for the period.


H1FY19 P&L Statement (Source: Company Reports)

What To Expect: The Company remains focused on executing its strategic market entry plans into Europe for use of CelGro® in dental bone and soft tissue repair and achieving regulatory approval for the same in the US and Australia.Orthocell intends to leverage the CE Mark to accelerate the introduction of the CelGro® tendon and soft tissue indications and achieve US regulatory approvals, in parallel to the commercialisation of Ortho-ATI® and pipeline products.

Upcoming Catalyst (Source: Company Reports)

Stock Recommendation: Its current ratio for 1H FY 2019 stands at 1.36x which is lower than the industry median of 4.55x. On the valuation front, its P/B and EV/Sales multiple for TTM stands at 22.6x and 53.3x which are higher than the industry median of 3.0x and 8.8x, respectively, indicating overvalued position at the current juncture.  Moreover, it is noteworthy that the share price of the company has gained an impressive return of 266.67% in the past three months as of 24 May 2019. Currently, the stock is trading slightly above the average of 52 week high and low prices of around $0.442. Hence, considering the sharp run-up in the stock in the past three months and valuations, we advise investors to keep a close watch on the stock at the current market price of $0.495 per share and wait for a few more trading sessions to get the better entry level.
 

Greenland Minerals Limited

GGG Announced Increase In Rare Earth Recoveries: Greenland Minerals Limited (ASX: GGG) has an engagement in the mineral exploration and project evaluation, specifically at the Kvanefjeld Project, Southern Greenland.

The Company recently announced the Kvanefjeld Optimised Feasibility Update, wherein it reported an 8% increase in rare earth recoveries to 94% within the refinery circuit. It was primarily due to the design of a single leach stage, which results in fewer solid/liquid separation stages. It reported US$31 Mn per annum increase in revenue at current rare earth prices. There was a 40% reduction in annual operating costs. Kvanefjeld’s improved metallurgical performance results in a reduction in operating costs to less than US$4 per kg REO. The outcome of the feasibility study positions Kvanefjeld as one of the lowest-cost, highest margin undeveloped rare earth projects globally.

In its March 2019 quarter report, net cash used in operating activities was reported at $0.945 million. The net cash and cash equivalents for the quarter were reported at $5.7 million.


FY18 P&L Statement (Source: Company Reports)

What To Expect: In the recent years, the growth in rare earth demand has been limited by end?user concerns over pricing instability and surety of supply; however, demand has returned, and the outlook continues to strengthen. Kvanefjeld provides an excellent opportunity to introduce a large, stable supplier at prices that are readily sustainable to end?users. In addition, rare earths from Kvanefjeld will be produced in an environmentally sustainable manner further differentiating it as a preferred supplier of rare earth products to end?users globally. These factors serve to enhance demand growth. Uranium forms an important part of the global base?load energy supply, with demand set to grow in the coming years as developing nations expand their energy capacity.

Stock Recommendation: Its current ratio for FY18 stands at 6.52x, which is better than the industry median of 1.67x, which implies that the company is in a better position to address its short-term obligations. Moreover, its P/B multiple for TTM stands at 1.3x marginally, which is lower than the industry median of 1.4x. Hence, considering the aforesaid facts and current trading level, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.096 per share (down 8.571% on May 24, 2019).
 

Uniti Wireless Limited

Overvalued at the Current Juncture: Uniti Wireless Limited (ASX: UWL) is into the business of fixed wireless broadband network, that connects residents and businesses across Australia to some of the fastest internet speeds. The Company recently announced that it has entered into binding transaction documentation to acquire 100% of Call Dynamics Pty Ltd, effective from 1st June 2019. Call Dynamics is a fastest growing, specialist Communications Platform-as-a-Service company, focusing on modern inbound voice services, providing call tracking solutions which allow businesses to accurately track inbound traffic sources and keywords, to enhance marketing efficiency and call-handling professionalism. Various complementary features between the two businesses will enable UWL to aggressively pursue customer growth from SOHO through to larger enterprises, with enhanced sales reach, product diversity, digital marketing smarts and scale efficiency.

In another update, IOOF Holdings Limited ceased to be a substantial holder of UWL, effective from May 14, 2019.

H1FY19 Financial Performance: UWL recorded a Net Loss after Tax of $7.2 Mn after including one-off cost incurred in achieving the ASX listing and completing the FuzeNet acquisition. The Net Loss after Tax excluding one-off items was $3.1 Mn. Its EBITDA for the half year was negative $1.6 Mn (excluding one off costs) as compared to $0.8 Mn negative in the prior corresponding period.


H1FY19 P&L Statement (Source: Company Reports)

What To Expect: The Call Dynamics acquisition is forecast to be materially earnings per share accretive to UWL shareholders in FY2020 and beyond. Based on the forecast earnings for the business, FY2020 EPS accretion will be approximately 13%, increasing to approximately 20% in FY2021, as a result of integration efficiencies and anticipated growth in customer numbers. UWL has forecasted a positive pro forma EBITDA of $1.7 Mn for the second half year of FY19 which includes the consolidation of FuzeNet for the full six months. The Prospectus forecast pro forma EBITDA FY19 (assumes FuzeNet owned for the full year and excluding one-off costs) is $2 Mn.

Stock Recommendation: UWL’s share generated a positive return of 500.0% in the span of three months. It is presently trading towards its 52-week higher level which indicates a good possibility for correction. On the valuation front, its EV/Sales for TTM stands at 21.4x which is higher than the industry median of 1.8x. Hence, considering the aforesaid facts and current trading level, we give an “Expensive” rating on the stock at the current market price of $1.110 per share (down 1.333% on May 24, 2019).

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