CMP Details

30 June 2021 Business Update: Compumedics Limited (ASX: CMP) engages in research, development, commercialisation of medical devices like ambulatory recording device and further provides brain research technologies, pharmaceutical clinical trials and research services.

• The company has recorded revenue of $35.6 million in FY21, compared to $35.1 million in FY20. Revenue grew in France, Germany, and other parts of Europe but it declines in Asia.
• CMP is expecting an improved positive EBITDA due to revenue stability, expense mitigation, and government COVID-19 assistance in H1FY21.
• The company reported its revenue growth on a constant currency basis, where FY21 AUD/USD rate is considered at 0.75 against 0.67 for FY20.
• The cash position of the company stood at $6.1 million as of 30 June 2021.

Financial Performance (Source: Analysis by Kalkine Group)

Outlook: The company is planning release its guidance for FY22 on 26 August 2021. CMP has progressed the installation of its MEG system at Barrow Neurological Institute in Phoenix, Arizona. The management is committed to focus on a return to strong growth through the realisation of its break-through opportunities.

Key Risks: Due to COVID-19 pandemic, the company has been facing challenges in clinical trials and disruption to the customers globally that has the potential to impact the company’s performance in the near-term future.

Stock Recommendation: As per recent update, the company has executed several research and collaborative agreement with third party to initial commercialize applications for the Somfit technology. The stock of CMP is trading below its average 52-weeks' levels of $0.355-$0.580. The stock of CMP gave a negative return of ~9.52% in the past one year and a negative return of ~17.39% in the past three months. On a TTM basis, the stock of CMP is trading at an EV/Sales multiple of 1.9x, lower than the industry median (Healthcare) of 13.9x, implying undervaluation.  Considering the current trading levels and valuation on a TTM basis, decent cash position, resilient sales despite the impact of COVID-19 pandemic, government assistance in FY21, increase in reinvestment rate and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.370, down by 2.632% as on 21 July 2021.

CMP Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.