Uscom Ltd

UCM Details

Uscom Ltd (ASX: UCM) is a medical technology company, focused on the development and marketing of premium non-invasive cardiovascular and pulmonary medical devices. The company has a market capitalization of ~$26.24 million as of 3^rd June 2021.

H1FY21 Results Performance (For the Half Year Ended 31 December 2020)

The company has recorded growth of 232% in sales of goods to $2.27 million over pcp with revenue and income growth of 184% to $2.74 million over pcp. The company’s cash balance at the end of the period stood at $2.3 million. It has logged a net operating cash inflow of $0.39 million as against the net operating cash outflow of $0.75 million in the pcp.

Key Data (Source: Company Reports) 

Received TGA Clearance for New Monitors

The company on 27 May 2021 stated that it has been provided Free Sales Certificate by the Therapeutic Goods Administration (TGA) for its two fresh haemodynamic monitoring devices namely – USCOM O2 and USCOM Basic monitors. These are a specific category of the USCOM 1A non-invasive ultrasound Doppler hemodynamic monitor.

Got European CE Mark Approval

UCM on 24 May 2021 informed about the approval of the CE mark for its digital ultrasonic SpiroSonic AIR spirometer, which is used to assess asthma, COPD, occupational lung disease, and post-Covid syndrome. CE mark is certified legal compliance set by the European community.

Q3FY21 Performance Update

The company has recorded a 20% decline in revenue during the quarter ended 31 March 2021 to $0.78 million from $0.98 million in the preceding quarter. It also witnessed a 53% reduction in cash receipts to $0.89 million from $1.91 million in the preceding quarter. Further, it registered a net cash outflow of $0.25 million during the period. Besides, the cash flow remained positive for the YTD and the cash on hand stood at $2.03 million on 31^st March 2021.

Key Risks

Delay in getting requisite regulatory approvals for its products would hurt its financial performance. Besides getting regulatory certification has become increasingly complex as well as expensive and time-consuming. Since the company operates in global markets, thereby it is exposed to risks like international trade wars, adverse currency movement, geopolitical, economic, and trade risks.

Outlook

UCM’s BP+ has bagged regulatory approval from NMPA, thus led to an additional revenue stream for Uscom China. The company remains hopeful that its international approval will aid in sustained growth momentum given its new products are fed into the growing international distribution network.

Stock Recommendation

UCM has delivered 6-months and 9-months returns of ~+9.4% and ~-2.8%, respectively. The stock is trading lower than the average of the 52-week high price of $0.28 and 52-week low price of $0.115. The company’s sales and receipts remained lower in Q3FY21 over pcp owing to the impact of the Chinese New Year and as the pandemic restricted the activities in both Europe and the US.

Considering the aforesaid facts and current trading levels, we suggest investors to book profits.

Hence, we give a “Sell” recommendation on the stock at the current market price of A$0.175 per share, up by 2.941% on 3^rd June 2021.

Daily Technical Price Chart

Source: REFINITV, Note: Purple colour line reflects Relative Strength Index (14) Period 

Creso Pharma Limited

CPH Details

Creso Pharma Limited (ASX: CPH) develops and markets cannabis and hemp-derived nutraceutical, therapeutic, and lifestyle products for animal and human health. Mernova Medicinal Inc. (Mernova), a wholly owned subsidiary of CPH, distributes dried cannabis plant retail products in Canada and overseas market. The company has a market capitalization of ~$154.29 million as of 3^rd June 2021.

Result Performance (Quarter Ended 31 March 2021 – Q1FY21)

For the first quarter ended 31 March 2021, the company reported an increase in revenue to $1,385k, up by 237% on QoQ. Mernova, the overseas Canadian sales division, reported sales revenue of $759k, up by 340% YoY, primarily led by the increase in sales is due to the repeat orders for its Ritual Green product and ongoing change to a recurring revenue model. Mernova has secured its first order for the recently introduced new pre-roll joint range under the brand-Ritual Sticks. Cash balance at the end of the period stood at $18.6 million.

Key Data (Source: Company Reports)

Result Performance (Year Ended 31 December 2020 – FY20)

Revenue of the company from ordinary activities for the full year period stood at $2.45 million, a decline of 32.5% on previous year, mainly because of the pandemic. Revenues from nutraceutical products fell by $1,532,906 due to the deferral of re-orders, albeit conditions appeared to improve in the later part of 2020, with some significant orders being received for delivery and recognition in 2021. Mernova, in its first full year of production, increased its revenues by $354,240 as it established itself as an emerging producer of superior artisanal cannabis products, with the outlook for revenues in Mernova in 2021 expected to grow further. Loss of the company from ordinary activities after tax attributable to members stood at $32.04 million, an increase of 133% on previous year. Net Tangible Assets Per Security for the period stood at 1.37 cents per share (cps), as compared to 7.35 cps in the previous year. No dividends have been paid or declared by the Group since the end of the previous financial year.

Key Data (Source: Company Reports)

Outlook:

With Swiss and Canadian business advancing on the back of multiple orders, market entries, LOIs, and distribution agreements, the company expects growth to continue in the coming period. With favorable regulatory changes (such as permission of OTC sales of low-dose CBD products in Pharmacies and others) in cannabis industries, CPH seeks to unlock these avenues. With the LOI signed by CPH’s Swiss division with CERES Natural Remedies (CERES), it aims to expand anibidiol distribution in the US (subject to US cannabis legislative reform). CPH progressed on its application to dual list on the OTCQB (OTC) market in the US and planning to get listed in Q2FY21.

Key Risks:

The company faces risks of regulatory changes in the evolving cannabis industry. It bears the risk of the launch of new products in new geographies, changes in the production and supply of cannabis.

Stock Recommendation:

The company’s gross margin and EBITDA margin for FY20 stood at -593.3% and -1257.3%, respectively. ROE for FY20 stood at -196.7%, and current ratio for FY20 stood at 1.45x, lower than the industry median of 2.53x.

Considering the aforesaid facts and current trading levels, we suggest investors to book profits. Hence, we give a “Sell” recommendation on the stock at the current market price of A$0.180 per share, up 28.571% on 3rd June 2021.

Daily Technical Price Chart

Source: REFINITV, Note: Purple colour line reflects Relative Strength Index (14) Period 

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 on 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 uptrend may take a pause due to profit booking or selling interest.

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