Stocks’ Details

Resmed Inc

Strong Sales Across the Masks Category:Resmed Inc (ASX: RMD) designs and manufactures equipment for treating sleep-disordered breathing and other respiratory disorders. The company has recently declared a distribution amounting to US$0.039 on RMD -CDI 10:1, to be paid on 19^th March 2020.

Quarterly Results for the Period Ended 31^st December 2019: During the second quarter of FY19, the company reported revenue amounting to $736.2 million, representing an increase of 14% on a constant currency basis. Apart from growth in revenue, the company witnessed gross margin expansion during the period. There was strong customer demand during the quarter, especially for the masks and accessories, that reported growth in high teens. Net income for the period increased by 29%, on account of strong sales and efficient cost management. Diluted earnings per share for the quarter went up by 28%, as compared to the prior corresponding period.


Quarterly Performance (Source: Company Reports)

Valuation Methodology: P/E Based Valuation

P/E 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 generated returns of 87.30% over a period of 1 year. Currently, the stock is trading very close to its 52-weeks high level of $26.360. During 2QFY19, the company reported a decent increase across all key metrics, with strong sales performance across the masks category, along with controlled costs. Gross margin for the period expanded by 50 bps as compared to pcp, positively impacted by changes in product mix and operational efficiencies. We have valued the stock using Price to Earnings based relative valuation method and for the purpose, have taken the peer group - Cochlear Ltd (ASX: COH), CSL Ltd (ASX: CSL), and Ramsay Health Care Ltd (ASX: RHC). As a result, we have arrived at a price correction of higher single-digit (in % terms), indicating that most of the positives are discounted at the current levels. Hence, we give an “Expensive” recommendation on the stock at the current market price of $26.180, down 0.3.5% on 19^th February 2020.

Clinuvel Pharmaceuticals Limited

Customer Receipts for Dec’19 Quarter Up by 43%:Clinuvel Pharmaceuticals Limited (ASX: CUV) provides a photoprotective drug to prevent the symptoms of skin and genetic diseases relating to the exposure to light and harmful UV radiation. The company is currently seeking agreement on the design of a multicentre Phase IIb vitiligo clinical study and has recently raised a request for Type C Guidance meeting with the US FDA. In addition to the above purpose, the meeting will also focus on obtaining the data package for a supplemental New Drug Application filing for SCENESSE®, a key drug produced by the company, to be used in vitiligo.

Quarterly Performance: During the quarter ended 31^st December 2019, the company reported substantial increase in receipts from customers, as compared to the prior corresponding quarter. Receipts for the period went up by 43% to $3.73 million. Cash and cash equivalents for the quarter declined in comparison to the previous quarter by $0.9 million, due to expenditure pertaining to expansion into new markets and lesser unit orders for SCENESSE® due to seasonal factors. Cash outflows for the coming quarter have been estimated at $5.01 million.


Cash Flow Forecast (Source: Company Reports)

Valuation Methodology: P/BV Based Valuation

P/BV 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 generated returns of 7.61% over a period of 1 year and is currently trading near its 52-week low level of $21. As per the most recent quarterly update, the company has been continuously engaged in expanding itself into the USA after receiving approval for marketing SCENESSE®. The company has also expended on improving its operations, by increasing the staff count, renewal of executive contracts, product handling and distributions, etc. We have valued the stock using Price to Book based relative valuation method and have arrived at a target price offering an upside of higher single-digit (in % terms). Considering the performance during the December quarter, steps taken for expansion and development, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $25.420, down 0.742% on 19^th February 2020.

Pro Medicus Limited

Improvement in Cost Base and Revenue:Pro Medicus Limited (ASX: PME) provides healthcare imaging software and services to hospitals and other entities in the healthcare domain.

Interim Results Highlights: During the six months ended 31^st December 2019, the company reported revenue from operations amounting to $29.3 million, up 15.7% on pcp.Profit after tax came in at $12.1 million, representing an increase of 32.7% on the prior corresponding half. The period was characterised by two five-year contracts signed with the Ohio State University Wexler Medical Center, Ohio, and Nines Inc, Palo Alto. After paying dividend and taxes, buy back of shares, the company reported a 20% increase in its cash balance at the end of the period, implying a strong financial position.


1HFY20 Performance (Source: Company Reports)
 
Stock Recommendation: The stock of the company generated returns of 55.31% over a period of 1 year. Currently, the stock is trading close to the average of its 52-week trading range of $13.079 - $38.390. During 1HFY20, the company saw its cost base reducing as a percentage of revenue, despite continued investment in increasing the staff numbers. The company ended the half with decent financial numbers and adequate cash reserves to support future growth. Considering the above factors, we give a “Buy” recommendation on the stock at the current market price of $22.99, up 2.68% on 19^th February 2020.

Ansell Limited

Strong Cash Flow Generation in 1HFY20:Ansell Limited (ASX: ANN) develops, manufactures and sells gloves and protective personal equipment in the industrial and medical markets.

1HFY20 Results: During the half year ended 31^st December 2019, sales amounted to US$753.3 million, representing growth of 5.3% on constant currency basis and 3.9% normally. EBIT for the period came in at US$91.8 million, up 17.4% on constant currency basis and 4.8% normally. Operating cash flow for the period remained strong at US$47.8 million, with a cash conversion rate of 92.9%. Dividend for the half amounted to 21.75 US cents, up 4.8% on prior corresponding half.


Financial Performance (Source: Company Reports)

Outlook: While the first half faced pressure due to global economic uncertainty, the company expects global growth to somewhat stabilise in the second half. While the management could not predict the overall impact of Coronavirus, it expects to see minimal impact in FY20. EPS for the year is expected in the range of 112 US cents – 122 US cents, as compared to FY19 full year adjusted EPS of 111.5 US cents.

Valuation Methodology: P/E Based Valuation

P/E 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 generated returns of 24.63% over a period of 1 year and is currently approaching its 52-week high level of $33.430.We have valued the stock using Price to Earnings based relative valuation method and arrived at a price correction of lower single-digit (in percentage terms). Considering the trading levels, decent performance in the first half, signs of stabilisation in global growth, and decent EPS guidance, we have a watch stance on the stock at the current market price of $31.990, up 1.814% on 19^th February 2020.

 
Comparative Price Chart (Source: Thomson Reuters)

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