Stocks’ Details
 

Mayne Pharma Group Limited

Mayne Pharma Submits NDA for E4/DRSP to the FDA: Mayne Pharma Group Limited (ASX: MYX) develops, manufactures and markets branded and generic pharmaceutical products around the world. As on 6 May 2020, the market capitalization of the company stood at $688.42 million. The company has submitted a New Drug Application to the US Food and Drug Administration to seek marketing authorization for E4/DRSP. During 1H20, the company reported sales of $227.2 million and EBITDA of $34.6 million. These were impacted by competition on key generic products. In the same time span, the company generated positive operating cash flow of $46.2 million with strong cash conversion and reported a significant reduction in spend base of $20 million. 


1H20 Financial Highlights (Source: Company Reports)

Outlook: The company has a clear strategy for growth which centers on repositioning the business into more sustainable categories and therapeutic areas such as dermatology. It will tightly manage its expense base achieving greater operating efficiencies.

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

EV/Sales Multiple Approach (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: As per ASX, the stock of MYX gave a return of 28.13% in the past one month. During 1H20, current ratio of the company stood at 2.21x, higher than the industry median of 1.69x. In the same time span, Asset/Equity ratio of the company was 1.71x as compared to the industry median of 1.95x. Considering the returns in the past one month, positive outlook and positive cash flow generation, we have valued the stock using EV/Sales multiple based illustrative relative valuation method and have arrived at an upside of lower double-digit (in percentage terms). For the said purposes, we have considered Opthea Ltd (ASX:OPT), Sigma Healthcare Ltd (ASX: SIG) and Integral Diagnostics Ltd (ASX: IDX) as peers. Hence, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.425, up by 3.659% on 6 May 2020.

Next Science Limited

Ensuring Stability in Suppressed Environment: Next Science Limited (ASX: NXS) is the research, development and commercialization of technologies which solve issues in human health caused by biofilms. As on 6 May 2020, the market capitalization of the company stood at $298.44 million. In the recently held AGM, the company stated that it has used its capital to expand the product application of XBIO platform technology and has developed a series of stress tested scenarios to ensure stability in the suppressed economic environment in the US and other target markets.

March Quarter Update:During the quarter ended 31 March 2020, the company reported revenue of $451k with cash receipts from customers of $633k. In the same time span, NXS held net cash and cash equivalents of $13.4 million.


Quarterly Cash Flow Statement (Source: Company Reports)

What to Expect: The company is continuing to service existing accounts with remote support. The work of its research and development, regulatory and quality teams has continued at normal pace, ensuring NXS is well-placed for long term growth. NXS is launching five new products and is increasing its regulatory approvals and clinical evidence.

Stock Recommendation: As per ASX, the stock of NXS gave a negative return of 22.54% in the past six months but a positive return of 46.02% in the past one month. During FY19, the gross margin of the company stood at 86.4%, higher than the industry median of 72.9%. On the TTM basis, the stock is trading at an EV/Sales multiple of 15.9x, higher than the industry median (Healthcare) of 8.9x. Considering the volatility in returns, expansion in clinical evidence and uncertainty in markets due to COVID, we give a ‘Watch’ stance on the stock at the current market price of $1.750, up by 6.061% on 6 May 2020, owing to its recent annual presentation.

Pacific Smiles Group Limited
Re-Opening of Dental Centres: Pacific Smiles Group Limited (ASX: PSQ) provides services and facilities to dental practitioners who practice at dental centres operated by Pacific Smiles. As on 6 May 2020, the market capitalization of the company stood at $186.95 million. The company has stated its dental centres has re-opened and is expecting that over 70 of its 93 dental centres will be operating in the short term.

During 1H20, the company reported increased patient fees by 14.5% to $105.4 million and growth of 9.4% in the same centres. In the same time span, Underlying EBITDA of the company went up by 15% to $12.9 million and NPAT saw a rise of 11.2% to $5.0 million.


1H20 Financial and Operational Highlights (Source: Company Reports)

Outlook: The company is targeting 250 centres in the long-term with a market share of over 5%. Given the rapid escalation of measures being employed by governments to slow the spread of COVID-19, PSQ has experienced reduced appointment volumes. The company, however, has surplus cash of approximately $18.7 million and has low gearing positions, which will help the business to navigate the uncertain market conditions. 

Valuation Methodology: Price to Cash Flow Multiple Based Relative Valuation (Illustrative)

Price to Cash Flow Multiple Approach (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: As per ASX, the stock of PSQ gave a return of 23% in the last one month and is inclined towards its 52-weeks’ low level of $0.705. During 1H20, gross margin of the company was 83.4%, higher than the industry median of 57%. In the same time span, net margin of the company was 6% as compared to the industry median of 3%. Considering the returns, trading levels, decent financial position midst pandemic, we have valued the stock using price to cash flow multiple based illustrative relative valuation approach and have arrived at a target upside of lower double-digit (in percentage terms). Hence, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.20, down by 2.439% on 6 May 2020.

Impedimed Limited

ImpediMed Secures US Government COVID-19 CARES Act Loan: Impedimed Limited (ASX: IPD) is engaged in the development and sale internationally of medical devices for diagnosing and monitoring human disorders and diseases. As on 6 May 2020, the market capitalization of the company stood at $39.07 million. The company has recently announced the receipt of loan proceeds of US$1,140,202 pursuant to the Paycheck Protection Program under the US CARES Act. These proceeds will help businesses to keep their workforce employed during the global pandemic.

During the quarter ended 31 March 2020, the company reported record annual recurring revenue of $5.5 million and record SOZO® revenue of $1.4 million.


Growth in SOZO Revenue (Source: Company Reports)

What to Expect: The company has taken cost reduction measures and has a phased plan in place to respond to potential impacts of the COVID-19. It has secured its supply chain and has doubled the distribution points. IPD is in a unique position to monitor customer data.

Stock Recommendation: As per ASX, the stock of IPD gave a return of 8.33% in the past one month and is trading close to its 52-week’ low level of $0.032, proffering a decent opportunity for accumulation. During 1H20, gross margin of the company stood at 74.1%, higher than the industry median of 72.4%. On the TTM basis, the stock is trading at an EV/Sales multiple of 3.8x, lower than the industry median (Healthcare) of 8.9x. Considering the returns in the past one month, current trading levels, and decent financial position, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.040 on 6 May 2020. 

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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