Stock Details

4DMedical Limited

Approval from TGA in Q1 FY21: 4DMedical Limited (ASX: 4DX) provides medical imaging software and hardware. The market capitalization of the company stood at $601.01 million as on 10^th November 2020. On 7^th August 2020, the company got listed on the Australian Securities Exchange (ASX) after a successful IPO of $55.79 million at an offer price of $0.73 per share. During Q1 FY21, the company received approval from the Australian Therapeutic Goods Administration for its XV Lung Ventilation Analysis Software (XV LVAS) for inclusion in the Australian Register of Therapeutic Goods (ARTG). This approval places the company in a decent position to progress the global launch of XV LVAS after receiving FDA 510(k) clearance in May 2020. During the quarter, the company reported net operating cash outflows of $4.46 million.

Use of IPO Funds (Source: Company Reports)

FY20 Financial Highlights: For the year ended 30^th June 2020, the company reported sales revenue amounting to $1.2 million, reflecting a rise of 77% over pcp. The company recorded a net loss after tax of $21.97 million, which include non-cash interest expense of $7.7 million. As on 30^th June 2020, the cash reserves of the company stood at $8.4 million, indicating a rise of 173% from 30 June 2019. This excludes the capital raised from its initial public offering (IPO) in August 2020.

Outlook: The company stated that its SaaS business model is likely to facilitate rapid penetration into the local lung diagnostic market through its XV Technology^TM platform. On the back of the recent TGA approval, 4DX is anticipating increased and accelerated investments in realizing the Australian market opportunity. The company has scheduled to conduct its 2020 Annual Shareholders Meeting on 20^th November 2020.

Stock Recommendation: As on 30^th September 2020, the cash balance of the company stood at $48.09 million. In the past three months, the stock has moved up by 39.63% and as a result, the stock is inclined towards its 52-week high level of $2.980. On a technical analysis front, the stock of 4DX has a support level of ~$2.084 and a resistance level of ~$2.444. Thus, considering the recent listing, loss making business, current trading level and upside movement in the stock within few months, we advise investors to ‘Avoid’ the stock at the current market price of $2.150 per share, down by 5.287% on 10^th November 2020.

Atomo Diagnostics Limited

AtomoRapid HIV 1&2 Approved from TGA:  Atomo Diagnostics Limited (ASX: AT1) is involved in the supply of unique, integrated rapid diagnostic test (RDT) devices to the global diagnostic market. The market capitalisation of the company stood at ~$191.53 million as on 10^th November 2020. Recently, the company notified that it has received approval for AtomoRapid HIV 1&2 rapid diagnostic test from the Therapeutic Goods Administration (TGA). AtomoRapidÔ HIV (1&2) is used by medical professionals in point of care settings in Australia. The company added that the AtomoRapid HIV (1&2) test identifies the presence of HIV antibodies in a single drop of blood.

A look at Q1 FY21 Performance: For the three months ended 30^th September 2020 (Q1 FY21), the company reported revenues (unaudited) amounting to around $2.5 million. In addition, it experienced strong customer demand for its product, which was generated by COVID-19 point of care antibody testing. AT1 recorded cash receipts from customers of $3.04 million, reflecting a rise of 65% over Q4 FY20. In addition, the company’s revenue in FY20 increased by around 10x of FY19 to $5.37 million, which was mainly supported by the rise of HIV rollout via Mylan and demand for COVID-19 antibody testing devices.

Key Metrics (Source: Company Reports)

Outlook: Going forward, the company plans to focus on its growth drivers, which include attaining regulatory approvals to support the commencement of device sales from key international contracts with Access Bio and DIVOC Labs for North America and India, respectively. In addition, the company’s focus will be more on the opportunities related to the sale of a rapid COVID-19 screen into the local market.

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

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation: The company closed Q1 FY21 with a cash balance of $26.3 million and nil debt. In the past one and three months, the stock has corrected 6.94% and 10.66%, respectively. We have valued the stock using the price to earnings multiple based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Ansell Ltd (ASX: ANN), Mach7 Technologies Ltd (ASX: M7T) and Sonic Healthcare Ltd (ASX: SHL). On a technical analysis front, the stock of AT1 has a support level of ~$0.321 and an immediate resistance level of ~$0.350. Therefore, considering the recent approval from TGA, decent cash position, nil debt and key risks associated, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.330 per share, down by 2.942% on 10^th November 2020. 

Compumedics Limited

Profitable Underlying Business Despite the Challenging Times: Compumedics Limited (ASX: CMP) is engaged in the development and commercialization of technology in computer-based patient monitoring and diagnostic systems. The market capitalization of the company stood at $79.72 million as on 10^th November 2020. During FY20, COVID-19 left a major impact on the company’s business, which resulted in a fall of 15.5% in revenues from shipped and invoiced sales to $35.1 million. Despite the impact of COVID-19, the underlying business of the company was profitable.  Underlying EBITDA and NPAT for the year amounted to $2.3 million and $1.8 million, reflecting a fall of 61% and 55% over FY19, respectively. However, the company managed to secure sales orders of $35.2 million during the year.

Key Financials (Source: Company Reports)

Outlook: The company plans to focus on the launch of new product platform and expansion of neuroscan into much larger MEG brain analysis imaging market. The company is likely to conduct its 2020 Annual General Meeting on 19^th November 2020.

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

Price to Earnings Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

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

Stock Recommendation:  The company ended FY20 with an increased cash balance of $6.4 million as on 30^th June 2020 as compared to $4.6 million as on 30^th June 2019. The stock of CMP has corrected 18.18% in the last six months. We have valued the stock using the price to earnings multiple based illustrative relative valuation and arrived at a target price with an upside of low double-digit (in percentage terms). For the purpose, we have taken peers such as Ansell Ltd (ASX: ANN), Mach7 Technologies Ltd (AS: M7T), Sonic Healthcare Ltd (ASX: SHL), to name a few. On a technical analysis front, the stock of CMP has a support level of ~$0.396 and an immediate resistance level of ~$0.527. Thus, in light of the increased cash balance, profitable underlying business, positive outlook and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.460 per share,  up by 2.222% on  10^th November 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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