Bionomics Limited

BNO Details

Clearance from US-FDA: Bionomics Limited (ASX: BNO) is involved in the development of innovative treatments for cancer and diseases of the central nervous system. Recently, the company has received clearance of IND for Evaluation of BNC210 in a Phase 2 Social Anxiety Disorder PREVAIL Study from US-FDA. The company added that the PREVAIL Study remains on target to initiate by the end of 2021 and is likely to read out topline data by the end of 2022.

Q1FY22 Financial Summary:

• During the quarter ended 30 September 2021, the company has appointed Mr Miles Davies as a Non-Executive Director to the Board and also commenced a Phase 2b trial to evaluate the tablet formulation of BNC210 in patients with Post-Traumatic Stress Disorder and the topline results are likely to come in 1HFY23.
• The company recorded increased research & development expenditure for the quarter to $3.27 million from $1.53 million against the previous quarter. The increase was primarily because of the ATTUNE Study.
• As on 30 September 2021, the cash balance of the company stood at $22.17 million as compared to $28.50 million as on 30 June 2021.

Cash (Source: Analysis by Kalkine Group)

 FY21 Financial Summary:

• Fall in Revenue: BNO’s revenue from continuing operations for the year fell by $46,662 to $Nil in FY21.
• Increase in Losses: BNO reported a loss from after tax of $8,697,037 against $5,818,975 in FY20 due to a fall in revenue, other income, and other gains and losses from continuing operations.

Key Risks:

• Clinical Trial Risk: The company’s operational and financial health could be impacted by any failure in the clinical trial.
• Regulatory Risk: BNO’s is exposed to a more complex regulatory environment; any failure in non-compliance could lead the business to fines, penalties etc.

Outlook:

• The company is planning an initial public offering of American Depositary Shares in the United States and a concurrent listing of ADS’s on Nasdaq in the near future.
• In addition, the company would continue to undertake drug and clinical development and would also seeking to commercialise the outcomes
• The company has scheduled to conduct the Annual General Meeting on 2 December 2021.

Stock Recommendation: BNO closed FY21 with a cash balance of ~$28.5 million as compared to ~$4.57 million as on 30 June 2020. The stock of BNO is near to its 52-week low level of $0.106, offering a decent opportunity for accumulation. The stock has been corrected by ~23.33% and ~41.02% in the past one and three months, respectively. The stock is trading at a P/BV multiple of 2.9x as compared to the industry median (Healthcare) of 3.8x on a TTM basis. Thus, it can be said that the stock is undervalued at the current trading levels. Considering the valuation on a TTM basis, clearance from US-FDA for trial, decent liquidity position, low debt to equity, decent outlook, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.115, down by ~4.167% as on 15 November 2021.

BNO Daily Technical Chart, Data Source: REFINITIV 

Quantum Health Group Limited 

QTM Details

Scheme Implementation Deed: Quantum Health Group Limited (ASX: QTM) is involved in the distribution and service of state-of-the-art medical products in the field of radiology, oncology, aesthetics and environmental health across Asia. As announced on 8 November 2021, QTM and Paragon Care have entered a scheme implementation deed for the merger of both companies. The objective behind the merger is to expand geographical reach across the Asia Pacific region.

• As per the terms of the agreement, Quantum shareholders are likely to receive 0.243 Paragon Care shares for each Quantum share as on record date, which will be in Early-mid February 2022. and after the merger, Paragon Care will be the ongoing listed entity.
• The merged entity will be owned approximately 56.17% by Paragon Care shareholders and approximately 43.83% by Quantum shareholders after the merger.

FY21 Financial Summary:

• Fall in Revenue: The company recorded revenue amounting to $56 million in FY21 against $59.4 million in FY20, reflecting a fall of 6% as the company actively realign its business mix to a reoccurring, higher-margin service model.
• Rising EBITDA and NPAT: QTM posted a rise of 15% in EBITDA to $10.7 million against $9.33 million in FY20, and NPAT rose by 20% to $7.7 million.
• Rising Service Installation Base: QTM witnessed a rise of 3,500 systems in its service install base, backed by the acquisition of service businesses of Carestream in Australia, New Zealand, and the Philippines in 2020.

Revenue & EBITDA (Source: Analysis by Kalkine Group)

Key Risks: 

• Stiff Competition from Peers: The company’s operation and financial performance could be impacted by the increasing competition in the industry in which it operates.
• Forex Headwinds: QTM’s business is exposed to a risk arising from the adverse movement in foreign currency as it operates in many geographies.
  

Outlook

• The company believes that its growing service business provides long term reoccurring revenue streams at much higher margins.
• QTM possesses long-standing relationships with leading global suppliers and customers throughout Asia, and it is aiming to increase its installed base by providing long-term recurring service revenues.
• The company is planning to conduct the Annual General Meeting on 29 November 2021.

Stock Recommendation: The company closed FY21 with a net cash balance of $4.5 million, which comprise of total cash balance of $11.9 million and borrowings of $7.4 million. The stock of QTM has been corrected by ~5.71% in the past one month. The company is trading below its 52-week low-high average of $0.044 - $0.105, respectively. On a TTM basis, QTM has an EV/Sales multiple of 1.4x as compared to the industry median (Healthcare Equipment & Supplies) of 9.8x. Thus, it seems that the stock is undervalued at the current trading levels. Considering the valuation on a TTM basis, Increasing EBITDA and NPAT, decent long-term outlook, current trading levels and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.066, as on 15 November 2021 11:45 AM (GMT+10), Sydney, Eastern Australia.

QTM Daily Technical Chart, Data Source: REFINITIV 

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

Note 2: Investment decision 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 Valuation has been achieved and subject to the factors discussed above.

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.

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

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