Japara Healthcare Limited

JHC Details

Decent Topline Growth in FY20: Japara Healthcare Limited (ASX: JHC) owns, operates, and develops residential aged care homes. The market capitalisation of the company stood at ~$184.40 million as on 4^th February 2021. In a recent market update, the company stated that it has no active cases of COVID-19 amongst its residents or staff. In addition, five of its Victorian homes were impacted by COVID-19 outbreaks during the first months of FY21. As on 25^th October 2020, the company had a portfolio occupancy of 87.6%, indicating 3,902 occupied places. During Q1 FY21, revenue per resident was in line with the expectation, but the lower occupancy levels. In the month of September 2020, the company opened 25 place extension to its Albury Home.

During FY20, the company reported total revenue amounting to $427.5 million, reflecting a rise of 6.9% against FY19. This was mainly supported by additional development earnings and increased revenue per resident. EBITDA and statutory net loss after tax for the amounted to $32.9 million and $292.1 million (includes a non-cash impairment charge of $291.9 million), respectively. During FY20, the company maintained its focus on resident and staff well-being and long-term growth for shareholders in spite of immense challenges by the sector and the company.

FY20 Key Metrics (Source: Company Reports)

Outlook: Looking forward, the cost and revenue implications are likely to be uncertain due to COVID-19. In addition, the funding environment may present challenges, and occupancy remains below historical levels. The company has scheduled to release its 1H FY21 on 24^th February 2021.

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

Price to Cash Flow 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 closed FY20 with net bank debt of $190.7 million and available liquidity of $154 million. The stock of JHC has provided a return of 10.15% in the last one month. The 52-week low-high range for the stock stands at $0.345 - $0.975, respectively. We have valued the stock using the P/CF multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). On the technical analysis front, the stock has a support level of ~$0.375 and a resistance level of ~$0.859. Hence, considering the aforesaid facts, valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.690 per share with no change on 4^th February 2021.

JHC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

BARD1 Life Sciences Limited

BD1 Details

A Look at December 2020 Quarter: BARD1 Life Sciences Limited (ASX: BD1) is involved in the development and commercialisation of cancer diagnostic products. The market capitalisation of the company stood at ~$45.49 million as on 4^th February 2021. Recently, the company released its business update for the quarter ended 31 December 2020, wherein, the company has achieved strong progress across its cancer R&D programs. In addition, the company’s US distributor has gained a new high-volume customer for hTERT ICC test. The company recorded net cash outflow from the operating activities stood at $2,840k.

Cash Flow (Source: Company Reports)

Consolidation of Shares: In the month of December 2020, the company finished a consolidation of its ordinary shares based on 1 ordinary share for every 30 ordinary shares held. The total number of ordinary shares on issue decreased to 79,817,772 from 2,394,530,384. Shareholders % holding and value in the company remained unchanged.

Financial Highlights: During FY20, BD1 recorded revenue amounting to $169,385, reflecting a rise of 187.5% on the previous year. Net loss for the year stood at $3,260,440 as compared to $1,730,572 in FY19. In the month of July 2020, BD1 finished the acquisition of Sienna Cancer Diagnostics, which supported the company in strengthening its leadership, business, pipeline and balance sheet.  During the year, the company has been granted multiple new patents across 3 patent families in Australia, Europe, Hong Kong, Israel, Japan and Singapore.

Outlook: Looking forward, the company is planning to further build its diagnostics portfolio through the acquisition of innovative diagnostic technologies, novel biomarkers and later-stage products which support its existing technologies and development programs

Stock Recommendation: As on 31^st December 2020, the cash balance of the company stood at $7.3 million. During FY20, the company recorded a current ratio of 8.42x against the industry median of 1.29x, which indicates that the company is well-placed to address its short-term obligations against the broader industry.  The stock of BD1 has corrected by 7.93% and 22.66% in the last one and three months, respectively. As a result, the stock is inclined towards its 52-week low levels of $0.570, offering decent opportunities for accumulation. On a technical analysis front, the stock has a support level of ~$0.568 and a resistance level of ~$1.111. Hence, considering the decent progress in R&D Cancer Program, growth in topline and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.600 per share, up by 5.263% on 4^th February 2021.

BD1 Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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