Stocks’ Details
 

Starpharma Holdings Limited

Operations Continue with Minimal Disruption:Starpharma Holdings Limited (ASX: SPL) develops dendrimer products for life science, pharmaceutical, and other uses. The company recently updated that VivaGel® BV has been launched in the Central and Eastern European regions.

COVID-19 Update: The company incorporated all suitable measures to combat COVID-19, such as the Business Continuity Plan and several programs to safeguard its staff and trial patients. Starpharma stated that currently, all its operations, including in-house GMP manufacturing facilities and laboratory are fully operational.

For VivaGel® BV, inventory levels are well maintained and there is negligible disruption to supply chain activities. Regarding DEP® clinical programs, SPL assured that it had developed the design in such a way that there will be no impact on trial results from COVID-19. The company further assures that it can withstand the adverse impact of COVID-19 while maintaining a strong liquidity position.

Updates: On 14 May 2020, the company gave an update on the activities of its products. In May, Starpharma stated that it had completed the phase 1 component of its phase 1/2 trial for DEP® irinotecan. Earlier in February, VivaGel® BV was introduced in Asia under the brand name of BETADINE™ BV Gel. Starpharma’s study showed that the antiviral activity of SPL7013, the active in VivaGel®, has been approved and sold in products in Australia, Europe, and a few sections of Asia. 

Q3 FY2020 for the Period Ended 31 March 2020: The company is placed in a strong position with cash of $36.1 million available as on 31 March 2020, an increase of $0.2 million from the previous quarter. Net operating cash outflows stood at $0.9 million and relate to expenditure for commercialisation, regulatory and manufacturing costs for VivaGel® BV products. Also, it includes R&D related costs, which involve three internal DEP® clinical programs of SPL. Receipts amounted to $4.7 million, which included US$3 million from payment of AstraZeneca. This payment was in relation to the DEP® milestone for starting patient enrolment in the clinical trial of AZD0466. 


Operating Cash Outflow (Source: Company Reports)
 
What to Expect: Starpharma continues to progress its R&D and commercial activities in the prevailing environment of COVID-19 outbreak. Regarding the portfolio of VivaGel®, the company intends to commercially roll-out VivaGel® BV in Asia, Europe, and other markets and intends to obtain licence for Canada, India, and Israel. For DEP® portfolio, Starpharma plans to discover value-adding combinations of DEP® and progress the clinical trials for DEP® cabazitaxel, DEP® docetaxel & DEP® irinotecan. In the context of coronavirus and SPL7013, SPL plans to accelerate the development and will explore regulatory pathways, including for a nasal product.

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

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Key Risks: Due to COVID-19, global healthcare resources have been directed for the treatment of COVID-19 patients, which is expected to have an industry-wide impact on the ability of clinical research sites to enroll new trial patients and can also impact the overall timing of Starpharma’s clinical programs.However, the company mentioned that given the design of its clinical programs, it does not anticipate an adverse effect on the trial results.
 
Stock Recommendation: The stock of the company delivered a return of 16.17% in the past three months and is currently trading above the average of its 52-week low-high trading range of $0.615 - $1.445. The company is expanding its geographical coverage by applying for licenses and commercial roll-out of its products to other countries. Having said that there also exist the risks pertaining to the economic environment across countries. 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). For the purpose, we have considered peers such as Probiotec Ltd (ASX: PBP), Avita Medical Ltd (ASX: AVH), Nanosonics Ltd (ASX: NAN), etc. Therefore, considering the above factors and current trading levels, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $1.06, up by 9.278% on 16 June 2020. 
 

1300SMILES Limited

Focused on Cash Conservation: 1300SMILES Limited (ASX: ONT) owns and operates dental service facilities including dental surgeries. Its facilities are present in Queensland (at 10 major population centres) and South Australia (New South Wales). On 22 April 2020, the company notified the market that Jason Smith had acquired an indirect interest in 1,997 fully paid ordinary shares for a consideration of $10,101.54.

1H FY2020 Financials for the Period Ended 31 December 2019: The company entered the year 2020 with strong financials. The company paid a fully franked interim dividend of 13.25 cps, on 27 March 2020. Statutory revenue grew by 14.5% on pcp basis, to $23.5 million and NPAT increased by 6.8% on pcp basis, to $4.4 million. ONT’s internal measure which is more meaningful in many ways is OTC (Over the Counter) revenue. The Company reported an increase of 7% in OTC revenue to $32.1 million. EBITDA increased by 31.6% to $9.4 million. Earnings Per Share and interim dividend increased by 6.8% and 6%, respectively. Bank debt was $11.2 million, which increased by 21.7%. Net tangible asset backing per ordinary security for the current period was 29.5 cents as compared to 47.4 cents in the previous period.

Financials (Source: Company Reports)
 
Valuation Methodology:Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)  
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Key Risks: As per the recent COVID-19 update, the company has had a massive impact on its operations and trading after March. Currently, the company is operational with around 50% of its practices and that too on a part-time basis. The practices are open subject to the demand from patients and the availability of staff and dentists. 1300SMILES is following Level 3 restrictions, which states that only emergency and urgent cases can be treated while maintaining all the necessary precautionary care. As stated on 6 April 2020, the company had around $10 million of undrawn facilities. To get financial assistance, the company is exploring the option of the JobKeeper program of the Federal Government. In the above scenario, the company is exposed to the risk of further adversities due to COVID-19 and maintaining the adequate amount of funds to sail through.
Stock Recommendation: As per ASX, the stock of ONT is currently trading below the average of its 52-week low-high trading range of $4.69 - $6.6. The stock of the company gave a positive return of 2.91% in the last one month. The company has recently paid an interim dividend and delivered a good performance in OTC revenue. Along with that, the company is struggling to combat the prevailing situation and is seeking the JobKeeper subsidy as well.We have valued the stock using price to earnings multiple based illustrative relative valuation method and arrived at a target price of low double-digit upside (in percentage terms). For the purpose, we have considered peers such as Estia Health Ltd (ASX: EHE), Pacific Smiles Group Ltd (ASX: PSQ), SDI Ltd (ASX: SDI), etc. Therefore, considering the above factors and current trading levels, we give a ‘Speculative Buy’ recommendation on the stock at the current market price of $5.25, down 0.943% on 16 June 2020. 
 

Ansell Limited

FY20 EPS Guidance Re-affirmed: Ansell Limited (ASX: ANN) provides safety protection and superior health solutions. It researches, develops, and invests in producing and distributing products that improve human well-being. On 5 June 2020, the company notified the market that Christine Yingli Yan, John Andrew Bevan, Christina Stercken and Leslie Desjardins, directors of the company, had acquired ordinary shares in the company. Number of shares acquired stood at 142, 215, 142 and 160, respectively.

Retirement Deferred: ANN notified the market that Mrs Marissa Peterson, non-executive director, had postponed her retirement from 2020 AGM until 2021 AGM. This decision was made due to her intense knowledge of the company’s operations that would be valuable in the current situation of COVID-19.

Business Update & Key Risks: The company witnessed a solid demand for some of its products such as Microflex® & TouchNTuff® single use examination gloves, AlphaTec® hand and body protection products and Gammex® & Encore® surgical gloves. However, COVID-19 has posed some challenges such as low demand for some industrial products, constraints on export within the EU and outside, and slowdown of economic growth. Due to changing COVID-19 conditions, the business is subject to possible delays and disruptions to transport and local distribution of products.

Snippet of 1H FY2020 Results for the Period Ended 31 December 2019: During the period, the company delivered the sales of $753.3 million, which indicates an increase of 3.9%. Industrial Global Business Unit’s organic growth of 1.3% pertains to the continued growth in the APAC region and recovery in the EMEA region. A solid momentum was maintained in Healthcare Global Business Unit with organic growth of 3.4%. EBIT was marked at $91.8 million, an increase of 4.8% on yoy basis. The period saw strong operating cash flow generation of $47.8 million with cash conversion of 92.9%.  

Financial Highlights (Source: Company Reports)
 
Reassurance of Guidance: The company held cash and committed undrawn bank facilities of ~$515 million as at 29 February 2020. Also, Ansell has negligible debt maturities in the upcoming few months. On 30 March 2020, the company reassured its FY2020 EPS guidance range to be US 112 cents to US 122 cents. Ansell expects to provide FY2021 guidance in August 2020. 
 
Valuation Methodology:EV/EBITDA Multiple Based Relative Valuation (Illustrative)

 
EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: The stock of ANN delivered a return of 6.18% in the past one month and is trading close to its 52-week high level of $36.31. The company has an annual dividend yield of 2.05% and a P/E ratio of 23.34x.We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and arrived at a target price of high single-digit upside (in % terms). For the purpose, we have considered peers such as Ramsay Health Care Ltd (ASX: RHC), Sonic Healthcare Ltd (ASX: SHL), and Resmed Inc (ASX: RMD). Considering the above factors, lower demand for its industrial products, and current trading levels, we maintain a ‘Hold’ recommendation on the stock at the current market price of $35.36, up by 1.843% on 16^th June 2020. 
 
 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.