Stocks’ Details

Respiri Limited 

RSH Partners with Entech Electronics: Respiri Limited (ASX: RSH) is an e-Health SaaS company supporting respiratory health management. Its world-first technology detects wheeze, a typical symptom of asthma, COPD, and respiratory disease to provide an objective measure of airway limitation. On 22 September 2020, the company announced a partnership deal with Entech Electronics for the worldwide supply of the ground-breaking Respiri’s wheezo™.  Production of wheezo™ will take place at Entech Electronics’ operations in Shenzhen, China. In another update, the company stated that it has also entered into a partnership agreement with the Carlton Football Club AFLW for 2021 season. The partnership will bring awareness about the importance of asthma management and will facilitate the asthma care beyond the clinic.

FY20 Key Financial Highlights for the Period Ended 30 June 2020: During the period, the company reported total revenues of $2,206,967, up a whopping 113.98% year over year. Loss after income tax for the period stood at $7,260,935 as compared to a loss of $8,474,586 reported in FY19.  Net cash used in operating activities came in at $4,687,956 as compared to $6,411,324 in FY19. This result has been accomplished after fully expensing all research and development costs. The company is well-positioned to unveil wheezo® by this calendar year-end and remains on track to make good progress in all other areas. The company has also implemented cost-cutting initiatives and has raised ~$3.1 million through Share Purchase Plan (SPP) in April 2020. The total capital raised will aid the company’s business through a commercial launch in Australia, which is expected to take place by the year-end and at the beginning of 2021.

FY20 Key Highlights (Source: Company Reports)

What to Expect: The Group expects to begin generating revenue through wheezo® product sales in the coming years. As a result, the company expects CY21 product revenues comprising wheezo® device sales and associated Software as a Service (SaaS) subscription revenues to be in the range of $6-$8 million.

Stock Recommendation: As per ASX, the stock of RSH gave a positive return of 152.87% in the past six months and a return of 168.29% in the past three months. It is also trading close to its 52-week high of $0.24 and has a market capitalisation of ~$143.62 million. On the technical analysis front, the stock of RSH has a support level of ~$0.1 and a resistance level of ~$0.24. On the TTM basis, the stock is trading at a P/BV multiple of $57.5x, higher than the industry median (healthcare) of 3.8x. Therefore, considering the aforesaid facts, current trading levels and price movement in the stock, and higher valuation on TTM basis, we give an “Expensive” rating on the stock at the current market price of $0.23 per share, up by 4.545% on 22 September 2020, owing to the update related to the partnership deal with Entech Electronics.

PharmAust Limited

PAA Receives Funding from FightMND: PharmAust Limited (ASX: PAA) is a clinical-stage company focused on developing its own drug discovery intellectual property for the treatment of different types of cancers in humans and animals. On 21 September 2020, the company received funding of A$881,085 granted by FightMND, the largest independent funder of MND research in Australia for a Phase I trial examining the effects of monepantel (MPL) in Motor Neurone Disease (MND).

FY20 Key Results: For FY20, the company reported revenues of $4,123,411, down from $4,364,554 reported in the year-ago period. The company posted a loss of $1,361,990 as compared to the previous year loss of $1,551,222. EBITDA loss for the period stood at $968,857 as compared to $1,330,970 in FY19. Research and development expenses for the period came in at $605,351 as compared to $1,039,136 in FY19. The company reported total current assets of $4,070,108, which included cash of $2,880,496, trade and other receivables at $297,683. Total borrowings (including lease liabilities) at the end of the period stood at $14,71,851. Net cash outflow from operating activities came at $1,270,002, while net cash outflow from investing activities was at $30,229.

Key Highlight (Source: Company Reports)

Capital Raising Program: The company recently announced that it has raised $2.4 million through a placement primarily to Australian and Singaporean fund management institutions. Funds were raised through a placement of ~20 million fully paid ordinary shares.

Experiments Conducted Against SARS-CoV-2: In another update, the company announced a successful second repeat of its in vitro anti-viral confirmatory testing demonstrating anti-SARS-CoV-2 activity of both monepantel (MPL) and monepantel sulfone (MPLS). These latest experiments were performed by Australian NATA accredited clinical trial speciality laboratory 360biolabs Pty Ltd in Melbourne utilizing monkey VERO E6 cells. These experiments revealed that MPL and MPLS reduced virus load by up to 99% and 75%, respectively.

Stock Recommendation: Over the last six months, the stock of PAA went by 83.82%, and currently, it is trading lower than the average of its 52-week trading range. The company has a market capitalisation of $39.48 million. On a technical front, the stock of PAA has a support level of ~$0.065 and a resistance level of ~$0.2.  On Trailing Twelve Months (TTM) basis, the stock is trading at a price to book value multiple of 4.2x, higher than the industry median of 3.8x. Considering the above-mentioned facts, low market capitalisation, negative EBITDA and net margins, current trading levels, high debt to equity and valuations on TTM basis, we suggest investors to avoid the stock at the current market price of $0.13 per share, up by 4% on 22 September 2020.

Vection Technologies Ltd 

VR1 Secures Capital Facility: Vection Technologies Ltd (ASX: VR1) is a multinational software company that aims at real-time technologies for industrial companies’ digital transformation. On 21 September 2020, the company informed the market that it has signed a first public hospital to trial its Augmented Reality (AR) healthcare solutions. The trial is focussed on AR for endoscopic surgery and EMRS access through wearable devices. In another update, the company informed the market that it has secured an interest-free working capital facility from the Italian Government’s National Agency for Investment Attraction and Business Development, through its Mindesk division. The Facility will advance funds to the company over five work-in-progress periods, over a maximum period of two years, subject to incurred expenditure, to accelerate the development and commercialisation of the Mindesk product suite. 

FY20 Key Financial Highlights: In FY20, the company achieved strong triple-digit total revenue growth of 131%, which came in at $3.1 million. Underlying EBITDA for the period stood at growth $173,078, up 120% year over, despite the challenging COVID-19 lockdowns commenced in Q3FY20. The management team has performed strongly in the challenging COVID-19 environment, underlining the validity of VR1’s long term strategies. During the 2HFY20, the company successfully adapted to the general market conditions, which positioned the company for continued growth. The acquisition of Mindesk, during the 2HFY20, represented a strong value accretive initiative for the benefit of its shareholders, to accelerate real-time 3D Computer Aided Design (CAD) offerings. The company ended the period with a decent balance sheet, with a cash balance of ~$1.6 million. Net Assets at the end of the period stood at $6.1 million, up 52%.  Net Cash Inflow from Operating Activities increased 101% and came in at $15,263. The company remains focused on recurring revenue generation for stronger ARR metrics.

FY20 Revenue Highlights (Source: Company Reports)

What to Expect: The company remains on track to focus on key commercial initiatives to set the foundations for long-term growth, while carefully transitioning towards a sustainable recurring revenue business model. The company remains confident to provide strong growth during the second half of FY21 and into FY22, on the back of key market opportunities, including healthcare, education, tourism, and defence. The company expects to achieve 50% Annualised Recurring Revenue (ARR) growth by June 2022. 

Stock Recommendation: As per ASX, the stock of VRI gave a positive return of 393.75% in the past six months and a return of 113.51% in the past three months. It is also trading close to its 52-week high of $0.092 and has a market capitalisation of ~$66.18 million. On the technical analysis front, the stock of VR1 has a support level of ~$0.06 and a resistance level of ~$0.09. On the TTM basis, the stock is trading at an EV/Sales multiple of $19.6x, higher than the industry median of 5.3x. Also, on the TTM basis, the stock is trading at a P/BV multiple of $17.4x, higher than the industry median (Technology) of 4.1x. Thus, we are of the view that most of the positives are factored in at the current levels and the stock seems overvalued at the current juncture. Therefore, considering the aforesaid facts, current trading levels, price movement in the stock, and higher valuation on TTM basis, we give an “Expensive” rating on the stock at the current market price of $0.081 per share, up by 2.532% on 22 September 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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