Virtus Health Limited

Transfer and Collaboration Agreement: Virtus Health Limited (ASX: VRT) is involved into the provisioning of healthcare services, which includes medical day procedure services, medical diagnostic services and fertility services. The market capitalisation of the company stood at A$361.75 Mn as on 4^th July 2019. Recently, the company, via a release dated 10^th April 2019, stated that it had entered into the transfer and collaboration agreements for its “Ivy” Artificial Intelligence Technology with Vitrolife and Harrison. AI. The agreement includes two main components such as, Transfer to Vitrolife of intellectual property and patent applications (“IP”) relating to the Ivy AI technology from the current owners, Virtus Health and Harrison. AI, responsible for the development and collaboration agreements between the parties for an initial period of 3 years in order to ensure further development of the technology in time-lapse incubator application.

The release also stated that the initial payment from Vitrolife relating to the transfer of the IP happens to be USD 6 million. In addition to the initial purchase price, the additional payments of up to USD 2 million may be paid in relation to the achievement of product development targets over the span of the next 3 years.

The company reported revenue of $140.7Mn in 1H FY19 which was primarily fueled by strong TFC (The Fertility Centres) performance in Victoria and New South Wales (VIC and NSW).


Revenue Growth (Source: Company Reports)
 
What to Expect: The company provided updates on growth strategy in ARS, Diagnostics and Day Hospitals. With respect to ARS, it is planning to work towards profitable market penetration by acquisition and organic growth. In relation to diagnostics, it is planning to make an investment in people and facilities to accelerate technology and network expansion. Coming to the Day Hospitals, it is planning to optimise utilisation and efficiency of the expanded network.         
 
Stock Recommendation: The company stated that the acquisition and integration of international businesses had remained key to its growth strategy.  On the stock’s performance front, it produced returns of 15.09% and 13.92% in the time span of one month and three months, respectively. Hence, considering the above-stated facts, we maintain our “Hold” recommendation on the stock at the current market price of A$4.530 per share (up 0.667% on 4^th July 2019).
 

Blackmores Limited

New Appointment:Blackmores Limited (ASX: BKL) is into the development, sales and marketing of natural health products for humans and animals. The market capitalisation of the company stood at A$1.59 Bn as on 4^th July 2019. Recently, the company with the help of release dated 2^nd July, updated the market about the appointment of Mr Alastair Symington as CEO and MD of the company, effective from 1^st October 2019. Mr Symington has over 23 years of experience in grooming, beauty and health. The company generated revenue of $460.1Mn in 9M FY19, reflecting a growth of 6% on the YoY basis. The net profit after tax stood at A$44.2Mn in 9M FY19, which represents a decrease of 14% on the YoY basis.

Revenue and NPAT (Source: Company Reports)

Future Prospects: The company plans to continue its focus on decreasing excess stock in channels to China. It is not expecting second half profit performance to be ahead of the first half result. The company has an accelerating plan to streamline the business. It is aiming savings of $60 Mn over three years. Adding to that,the company stated that the implementation would incur some one-off costs in the fourth quarter.

Stock Recommendation:  The current ratio of BKL stood at 2.06x in 1H FY19, reflecting YoY growth of 1.7%, which represents that Blackmores Limited is in a good position to settle its short-term obligations. With respect to stock’s past performance, it produced a return of 0.55% in the time period of one month. On the flip side, it yielded a negative return of 1.98% and 26.30% in the time period of three months and six months, respectively. As a result, it can be assumed that the stock is quite volatile. Currently, the stock is trading towards its 52 weeks lower level of $80.450. Hence, considering the aforesaid facts and current trading level, we put our wait and watch stance on the stock at the current market price of $90.010 (up 0.667% on July 4, 2019).
 

Vitalharvest Freehold Trust

Estimates of Distribution: Vitalharvest Freehold Trust (ASX: VTH) is a listed investment trust, who makes an investment in real estate. The market capitalisation of the company stood at A$171.13Mn as on 4^th July 2019. Recently, VTH, via a release dated 26^th June 2019, stated that it is not able to accurately determine the amount of the distribution for the period ending on 30^th June 2019 until it is in receipt of the calculation of the final variable rent figures under the terms of the leases.

However, it provided the estimates of the distribution of 0.5 cents per Unit. VTH delivered rental revenue of $10.7Mn for the five months from the initial public offering and restructure. It reported a total comprehensive loss of $8.1Mn for the five months from IPO and restructure and net loss after tax amounting to $8.2Mn.


Financial Results (Source: Company Reports)

Future Strategy: Vitalharvest Freehold Trust’s growth and investment strategies revolve around focusing on mature, operating agricultural assets which are leased to quality operators/managers, diversified by crop, geography, water source and tenant, strategically located in productive farming locations in Australia and New Zealand and subject to attractive long-term leases.

Stock Recommendation: The EBITDA margin of the trust stood at 91.7% in 1H FY19 against the industry median of 62.2%. The current ratio stood at 1.53x in 1H FY19 as compared to the industry median of 0.49x. On the stock’s performance front, it produced a negative return of 3.65% and 4.64% in the time span of one month and three months, respectively. Hence, considering the above-stated facts, we advise the investors to closely watch the stock at the current market price of A$0.920 per share (down 0.541% on 4^th July 2019.

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