Stocks’ Details

Clinuvel Pharmaceuticals Limited

FDA Meeting Confirmed for 29^th April 2020: Clinuvel Pharmaceuticals Limited (ASX: CUV) is a biopharmaceutical company developing treatments for severe genetic and skin disorders. The US Food and Drug Administration has provided its approval to discuss the North American development program for SCENESSE®, to be used in combination with NB-UVB for the pigment loss disorder, vitiligo. Currently, the condition is treated by NB-UVB, but is not sufficient to provide a consistent repigmentation solution.

Business Marked Safe from COVID-19: Recently, the company also updated that the business operations will not be affected due to the outbreak of coronavirus and is closely monitoring any potential impacts.The company has all the required quality checks in place to ensure safe and secure sourcing, manufacturing and distribution, and expects smooth operations within the European Economic Area or the United States.

Half Yearly Results: During the six months ended 31^st December 2019, the company reported revenue amounting to $9.971 million, up 11% on the prior corresponding half. Cash position at the end of the period stood strong, with a balance of $57.432 million, up 34% on pcp.


Half Year Revenue Comparison (Source: Company Reports)
 
Valuation Methodology:EV/Sales Multiple Based Relative Valuation

EV/Sales Based Valuation (Source: Thomson Reuters)

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

Stock Recommendation: The stock of the company gave negative returns of 46.69% over a period of 1 month and is currently trading close to its 52-week low level of $12.920. Over the past 4 years, the company has continued to report robust growth in revenue and has demonstrated the strength of the business through stable patient retention. Some of its strategic priorities for 2020 include, growth in the USA and Europe, a pipeline of new programs for the treatment of serious disorders like vitiligo, and inorganic growth through value adding opportunities outside the business. We have valued the stock using EV/Sales based relative valuation method and have arrived at a target price with lower double-digit upside (in percentage terms). For the said purpose, we have considered Mesoblast Ltd (ASX: MSB), Avita Medical Ltd (ASX: AVH), MGC Pharmaceuticals Ltd (ASX: MXC), etc., as peers. Hence, we give a “Buy” recommendation on the stock at the current market price of $14.270, up 2.294% on 19^th March 2020.
 

Integral Diagnostics Limited

1HFY20 Experiences both Organic and Inorganic Growth:Integral Diagnostics Limited (ASX: IDX) is engaged in the provision of diagnostic imaging services.

1HFY20 Results: During the six months ended 31^st December 2019, the company delivered organic growth, along with benefits from acquisitions. Operating revenue for the period went up by 15.3%, resulting in an operating EBITDA of $29.3 million, up 9.7% on the prior corresponding period. The company completed the acquisition of Imaging Queensland Group in November 2019 and integration and performance in line with expectations. Interim dividend for the half year amounted to 5.5 cents per share, as compared to 5.0 cents in the prior corresponding period.


Key Financials (Source: Company Reports)

Outlook: Going forward, the company will continue to integrate Imaging Queensland into the platform, to avail synergistic benefits, while it taps more such strategic acquisitions to compliment the current business. Moreover, the company aims to enhance patient experience through digital advancements and is focused on organic growth through new brownfield and greenfield opportunities.

Valuation Methodology:P/CF Based Relative Valuation

P/CF Based Valuation (Source: Thomson Reuters)

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

Stock Recommendation: The stock of the company gave negative returns of 25.43% over a period of 1 month and is currently trading inclined towards its 52-week low level of $2.328. During the first half, the company was engaged in expanding its operations and completed the redevelopment of the hospital on the Gold Coast and another hospital in Ballarat. The company continued to invest in radiologists to offer quality patient care and service. We have valued the stock using Price to Cash Flow based relative valuation method and arrived at a target price with lower double-digit upside (in percentage terms). Hence, we give a “Buy” recommendation on the stock at the current market price of $2.50, down 12.281% on 19^th March 2020.

Estia Health Limited

EHE Suspends FY20 Guidance: Estia Health Limited (ASX: EHE) is engaged in the provision of services in residential aged care homes in Australia. In an announcement to the exchange, the company notified that it will be distributing a dividend amounting to $0.054 on 27^th March 2020. The company also updated that the Vanguard Group became a substantial shareholder with a voting power of 5.003%.  

Another key update was regarding the suspension of FY20 guidance due to rising uncertainty because of COVID-19. The company is continuously monitoring the situation and has not reported any material impact among its residents or employees so far.

1HFY20 Results: During the half year ended 31^st December 2019, the company reported profit after tax amounting to $14.3 million amid sector-based challenges, reflecting the quality of services provided. The company was focused on increasing its market share and reported occupancy levels higher than the industry averages. The company follows a disciplined approach to cost management while investing in new capacity and making appropriate divestments.


Performance Highlights (Source: Company Reports)

Valuation Methodology:Price to Earnings Based Relative Valuation

Price to Earnings Based Valuation (Source: Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The stock of the company gave negative returns of 45.76% over a period of 1 month and is currently trading close to its 52-week low level of $1.120. During 1HFY20, the company reported decent financial performance while continuously expanding its portfolio through the refurbishment program and the greenfield project for additional capacity. Balance sheet at the end of the period remains strong with net debt of ~106 million as on 13^th March 2020 and low gearing. We have valued the stock using Price to Earnings based relative valuation method and arrived at a target price with lower double-digit upside (in percentage terms). For the said purpose, we have considered Regis Healthcare Ltd (ASX: REG), Japara Healthcare Ltd (ASX: JHC), Ansell Ltd (ASX: ANN), etc., as peers. Hence, we give a “Hold” recommendation on the stock at the current market price of $0.990, down 10% on 19^th March 2020.

Australian Pharmaceutical Industries Limited

2HFY20 Full Year to Improve:Australian Pharmaceutical Industries Limited (ASX: API) is engaged in wholesale distribution of pharmaceutical products to pharmacies. The company is also a retailer of health and beauty products through Priceline and Priceline Pharmacy franchise stores and owned Priceline stores in Australia.

Key Highlights of FY19 Results: During the year ended 31^st August 2019, the company reported total revenue amounting to $4,010.7 million, down 0.4% on pcp. Underlying NPAT for the period amounted to $56.6 million, up 3.2% on prior corresponding period NPAT of $54.8 million, with Priceline Pharmacy like-for-like sales continuing the forward momentum.


Financial Results (Source: Company Reports)

Outlook: The company acquired Clear Skincare in FY19 and expects key contribution from the same due to demand for high-margin, non-invasive cosmetic medicine services. The company has achieved good growth across existing clinics and has a strong pipeline of new ones. In the second half, the company expects an improvement in full year NPAT, subject to shift in trading conditions and anticipates investments to add further efficiencies and improved service for the future.

Valuation Methodology:EV/EBITDA Multiple Based Relative Valuation

EV/EBITDA Based Valuation (Source: Thomson Reuters)

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

Stock Recommendation: The stock of the company gave negative returns of 14.90% over a period of 1 month and is currently inclined towards its 52-week low level of $1.005. The management of the company is focused on developing a pipeline of Priceline Pharmacies and Clear Skincare clinics, that is experiencing huge demand as customers become more aware of result-driven skin treatments. Moreover, the company aims for stringent balance sheet management and strong cash generation to support its growth initiatives. We have valued the stock using EV/EBITDA based relative valuation method and have arrived at a target price with lower double-digit upside (in percentage terms). Hence, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.145, down 4.583% on 19^th March 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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