Stocks’ Details
 

Ramsay Health Care Limited

Agreement Finalised With State Governments: Ramsay Health Care Limited (ASX: RHC) provided numerous healthcare facilities in Australia, France, Indonesia, Malaysia and the United Kingdom. The market capitalisation of the company stood at $13.99 Bn as on 7^th May 2020. The company recently announced that it has finalised the comprehensive agreement with the State of Queensland, under which it will provide its facilities and services during the COVID-19 pandemic. The term of the agreement commenced on 31^st March 2020. Previously, the company has also finalised a similar agreement with the State of Victoria. RHC has recently opened its share purchase plan to raise around A$200 million following the successful completion of A$1,200 million placement.


Pro-Forma Capitalisation and Liquidity (Source: Company Reports)

Suspension of Guidance: Considering the continuing high level of uncertainty surrounding the spread, duration and impact of coronavirus, the company has withdrawn its earnings guidance for FY20.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months
 
Stock Recommendation: The company is currently undertaking decisive actions to strengthen its balance sheet, so that it can navigate through the current uncertain operating environment. Net margin of the company stood at 4.2% in 1H FY20, which is higher than the industry median of 3.0%. This implies that RHC has decent capabilities to convert its topline into the bottom line against the broader industry. We have valued the stock using the P/E multiple based illustrative relative valuation method andarrived at a target price with an upside of lower double-digit (in percentage terms). For the purpose, we have taken peers like Cochlear Ltd (ASX: COH), Sonic Healthcare Ltd (ASX: SHL) and Resmed Inc (ASX: RMD). Therefore, in light of the improvement in net margin and recent equity raising, we give a “Buy” recommendation on the stock at the current market price of $62.000 per share, down by 0.911% on 7^th May 2020.

CSL Limited

New Private Placement: CSL Limited (ASX: CSL) is engaged in the development, manufacturing and marketing of pharmaceutical and diagnostic products, cell culture media and human plasma fractions. The market capitalisation of the company stood at $139.29 Bn as on 7^th May 2020. CSL has recently priced a new private placement of USD750 million, which has a weighted average interest rate of 2.68% and an average life of 11.5 years. This new debt facility would strengthen the current debt maturity profile of CSL. The company stated that plasma collection is likely to be impacted by COVID-19, and it is taking various initiatives to address the impact.


Debt Maturity Profile (Source: Company Reports)

Profit Guidance for FY20:  The company has reiterated its profit guidance in the range of $2,110 million to $2,170 million for FY20 on a constant currency basis.

Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months, *1USD = ~1.55 AUD

Stock Recommendation:  The stock of CSL has witnessed a correction of 4.10% and 4.32% within the time span of one month and three months, respectively. We have valued the stock using P/E multiple based illustrative relative valuation method, and for the purpose, we have taken peers such as Ramsay Health Care Ltd (ASX: RHC), Cochlear Ltd (ASX: COH), Resmed Inc (ASX: RMD), etc., and arrived at a target price with correction of low-single-digit (in percentage terms). Thus, it can be said that the stock of CSL is slightly overvalued at current trading levels. Hence, based on the above-stated factors, we have a watch stance on the stock at the current market price of $307.930 per share, up by 0.375% on 7^th May 2020.

Medical Developments International Limited

Approval Received for Penthrox®: Medical Developments International Limited (ASX: MVP) is in the business of pharmaceutical drug, medical and veterinary equipment. The market capitalisation of the company stood at $494.8 Mn as on 7^th May 2020. Recently, the company announced that it has received approval for the sale of Penthrox in The Netherlands and Bosnia & Herzegovina. Penthrox® is used for Emergency relief of moderate to severe pain in conscious adult patients with trauma and associated pain. Previously, the company has received approval for Penthrox® in Thailand. The below picture provides an overview of financial performance for 1H FY20:


Key Financials (Source: Company Reports)

Future Aspects: In the upcoming months, the company is expecting to complete the launch of Penthrox® into the remaining European Union countries, Mexico, Iran, Jordan, and South Korea.

Stock Recommendation: Current ratio of the company stood at 3.74x in 1H FY20 as compared to the industry median of 1.69x. This implies that MVP is in a decent position to address its short-term obligations against the broader industry.  Debt to equity of the company stood at 0.08x in 1H FY20, which is lower than the industry median of 0.10x. The stock of MVP has provided returns of 36.59% and 26.51% during the span of one month and six months, respectively. Hence, considering recent approval for Penthrox®, decent liquidity position and deleveraged balance sheet, we give a “Hold” recommendation on the stock at the current market price of $7.490 per share, down by 0.663% on 7^th May 2020.

Telix Pharmaceuticals Limited

Market Authorisation Application Submitted: Telix Pharmaceuticals Limited (ASX: TLX) is in the development and commercialisation of molecularly targeted radiation products for the treatment of cancer. The market capitalisation of the company stood at $354.82 Mn as on 7^th May 2020. TLS has submitted a marketing authorisation application in Europe for TLX591-CDx for the imaging of prostate cancer with Positron Emission Tomography. During Q1 FY21, the company achieved significant milestones on the path to commercialisation of prostate cancer imaging product. TLX also wrapped up the acquisition of licensed radiopharmaceutical production facility in Seneffe. The company scheduled to conduct its Annual Shareholders Meeting 2020 on 12^th May 2020.


Net Cash Used in Operating Activities (Source: Company Reports)

Sound Financial Position: In order to preserve financial capacity, the company is focused on marketing authorization. The company is in a sound financial position with cash runway until late-2021.

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

EV/Sales Based Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of TLX experienced corrections of 2.10% and 15.15% during the span of three months and six months, respectively. We have valued the stock using EV/Sales based illustrative relative valuation method and arrived at a target price with the correction of mid-single-digit (in percentage terms). Thus, considering the current trading and levels, we have a watch stance on the stock at the current market price of $1.380 per share, down by 1.429% on 7^th May 2020. 

 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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