Volpara Health Technologies Limited

VHT Details

Highest Value Contract Signed by VHT: Volpara Health Technologies Limited (ASX: VHT) is engaged in the early detection of breast cancer by utilising health technology software. VHT is a major player in the US with ~39mn breast screenings per annum. Its geographic segments include North America, Europe, the Middle East, and Africa (EMEA), and Asia-Pacific (APAC).  The company has announced about signing its highest value contract worth over US$400,000 through its subsidiary CRA Health subsidiary. The management is positive on the signing of the contract and believes it will improve the sales of additional products.

Financial Highlights for 1HFY21: VHT has reported a growth of 38% YoY growth in its revenues in 1HFY21 to NZ$9.5mn, supported by an increase in subscription revenues, which went up by 71% on pcp. The company has posted a net loss of NZ$8.86mn in 1HFY21 due to a significant increase in operating and finance expenses and losses from foreign exchange. 

Increase in ARPU on New Deals: VHT has registered a consistent increase in Average Revenue Per User (ARPU). During the past few quarters, the ARPU base has shifted to more than US$1.0. VHT will benefit from a higher range of ARPU (US$1.75-US$4.30) in Q2FY21 via new deals.

Growth in Group ARPU (Source: Company Reports)

Key Risks: VHT is battered by stringent government regulations. Further, increasing expenses, vigorous competition from peers remain potential concerns. Also, integration risk and COVID-19 related uncertainties on its business operations may weigh on financial performance, going forward.

Outlook: VHT is looking to expand its customer reach and product reach to further enhance ARPU, going forward. The company is aiming to achieve a higher ARPU of ~US$10 per screen. The company expects to continue sales growth at the Volpara Breast Health Platform and increase multiple product sales into its existing customer base and improve overall customer experience.

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: In the last one month, VHT has decreased by 14.41% and increased by 4.49% in the last three months. The current market capitalisation of VHT stands at ~$330.09mn as of 12 March 2021. The stock is currently trading slightly above the average of its 52-weeks; price level range of $0.790-$1.720. On the technical analysis front, the stock has a support level of ~$1.27 and a resistance of ~$1.44. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering an increase in revenues, growth in ARPU positive outlook and higher focus on long-term SaaS contracts. For this purpose, we have taken peers such as Nanosonics Ltd (ASX: NAN), Polynovo Ltd (ASX: PNV). Considering VHT’s optimistic outlook on increasing ARPU in coming years, strong liquidity position, decent 1HFY21 fundamentals, valuation, current trading levels and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.395, up by 6.083% as on 12 March 2021.

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

Medical Developments International Limited

MVP Details

Robust Growth for Penthrox in Europe:  Medical Developments International Limited (ASX: MVP) is a healthcare company engaged in the manufacturing and distribution of pharmaceutical drugs and medical and veterinary equipment. The company has registered robust growth in the sales of Penthrox despite the Covid-19 impact. The sales for Penthrox in the EU region have seen significant growth since FY17, despite a 60-70% decrease in emergency room admissions. MVP’s transition into international markets is a successful one, given the opportunity for the success of Penthrox® in Australia and Europe. Approximately 90% of the Penthrox sales come from the UK, France, and Ireland. 

Financial Highlights for 1HFY21: MVP has posted a 15.4% YoY growth in 1HFY21 in its net revenues to $12.57mn. Net loss stood at $1.13mn in 1HFY21 against a profit of $0.24mn in 1HFY20 due to higher operating and other expenses. The company has registered a significantly higher cash balance of $33.46mn as at 31 December 2020, up 44.6% from the end of 1HFY20.

Key Highlights of 1HFY21 (Source: Company Reports)

Change in Director’s Interest: As per the company report on 27 January 2021, the director of the company, Gordon Naylor, has acquired an additional 100,000 ordinary shares at an average price of ~5.36 per share. 

Key Risks: MVP is present in multiple countries, which exposes the company to foreign exchange risk. The company is diversified in many segments, which may lead to higher diversification risk. The company also increased investment in R&D to achieve its growth plan. Also, stiff competition from peers remains a potential concern. 

Outlook: The company expects to witness a recovery in Australian sales in the days ahead and aims to build infrastructure for the worldwide growth of Penthrox®. The company expects to unveil its flagship product in the unlaunched markets by 2021. Germany and Spain offer key growth opportunities where MVP is focusing on launching its products in FY21.

Valuation Methodology: EV/Sales based Relative Valuation Method (Illustrative)

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: In the last one month, MYX has decreased by 8.44% and by 20.56% in the last three months. The current market capitalisation of MVP stands at ~$390.53mn as on 12 March 2021. The stock is currently trading slightly below the average of its 52-weeks’ price level range of $3.760-$8.890. On the technical analysis front, the stock has a support level of ~$5.101 and a resistance of ~$6.037. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium as compared to its peer average, considering a robust performance in the sales of Penthrox in the EU and decent liquidity position. For this purpose, we have taken peers Starpharma Holdings Ltd (ASX: SPL), Suda Pharmaceuticals Ltd (ASX: SUD), to name a few. Considering the MVP’s efforts in making significant progress towards expansion in EU region, positive outlook, increase in top line in 1HFY21, valuation, and current trading levels along with associated key risks, we recommend a “Speculative Buy” rating on the stock at the current market price of $5.64, up by 2.919% as of 12 March 2021.

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

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