Atomo Diagnostics Limited

AT1 Details

Q4FY21 Quarterly Update: Atomo Diagnostics Limited (ASX: AT1) is engaged in the development and sale of medical devices. The company has recently updated about its Q4FY21 activities and performance.

• The company and Viatris has announced the securement of agreement with Unitaid, and the first shipments are expected to be delivered by end of Q4FY21.
• Access Bio has received FDA EUA approval for the Carestart COVID-19 Antibody test, which is integrated with the Atomo Galileo device.
• AT1 reported revenues of ~$670k in Q4FY21 and total revenue of $6.7 million in FY21, reflecting an increase of ~25% over FY20.
• The company reported total cash receipts of ~$8 million in FY21.
• AT1 ended the quarter with debt-free and having a cash position of $17.95 million as of 30 June 2021.

Trend in Cash Balance (Source: Analysis by Kalkine Group)

Key Risks: The Group is exposed to foreign currency risks given that it undertakes certain transactions denominated in foreign currency.

Outlook: The company’s OEM business products has seen an increased traction with several major companies looking to access its rapid test technologies. It is also focused on establishing its infrastructure and commercial resourcing in the US.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:  Perennial Value Management Limited has undergone a change of interest in the company and has increased its voting power to 7.56% on 29 June 2021. As per ASX, the stock of AT1 is trading below its average 52-weeks’ levels of $0.130-$0.455. The stock of AT1 gave a positive return of ~14.28% in the past three months and a negative return of ~17.24% in the past six months. It has a support level of $0.20 and resistance levels of $0.26. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the robust increase improvement in performance, strong balance sheet and improvement in liquidity. For this purpose, we have taken peers such as Ansell Ltd (ASX: ANN), SDI Ltd (ASX: SDI), Cochlear Ltd (ASX: COH), to name a few. Considering the expected upside in valuation and current trading levels, improvement in revenues, grant of approval from FDA and key risks associated with the business, we recommend a ‘Hold’ rating on the stock at the current market price of $0.220, down by ~6.383% as on 5 August 2021.

AT1 Daily Technical Chart, Data Source: REFINITIV

Imagion Biosystems Limited

IBX Details

Q2FY21 Activities Update: Imagion Biosystems Limited (ASX: IBX) is focused on the development of non-radioactive and safe diagnostic imaging technology. The company has announced its Q2FY21 performance highlights.

• The company has reported the first patient enrolment into the Phase 1 study of HER2 Breast Cancer.
• IBX has announced a collaboration with Patrys Limited, with the objective of research into the use of Patrys antibody with Imagion MagSense nano particles and looking for improvement in brain tumor imaging and diagnostics.
• The company has received $2.6 million in R&D tax incentives in regard to R&D activities in 2020, compared to $2.2 million received in the prior year.
• The cash position was at $13.9 million as of 30 June 2021.

Trend in Cash & Short-Term Investments (Source: Analysis by Kalkine Group)

Key Risks:  The company is engaged in the development of complex imaging technology, which is subject to prudent regulatory approvals. As such there is the presence of regulatory risks.

Outlook:  With the progression of Phase 1 clinical study and the advancement in its development pipeline, the company is expecting the R&D expenses to increase in the next few quarters.

Stock Recommendation:  As per ASX, the stock of IBX is trading below its average 52-weeks’ levels of $0.053-$0.225. The stock of IBX gave a positive return of ~16.66% in the past one year and a negative return of ~10.25% in the past one week. On a TTM basis, the stock of IBX is trading at a P/BV multiple of 5.8x, lower than the industry average (Healthcare Equipment & Supplies) of 7.2x, implying undervaluation. Considering the current trading levels & valuation on TTM basis, enrolment of patient into the Phase 1 study, receipt of R&D tax incentive and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.068, as on 05 August 2021, 01:06 PM (GMT+10), Sydney, Eastern Australia.

IBX Daily Technical Chart, Data Source: REFINITIV

Osprey Medical Inc.

OSP Details

Q2FY21 Performance Update: Osprey Medical Inc. (ASX: OSP) is focused on making heart imaging procedures safe for patients who have poor kidney function. As per a recent update on 29 July 2021, it has reported its Q2FY21 performance and posted positive results on the back of strategic distribution agreements.

• Net revenues increased by ~54% to ~US$488k in Q2FY21, when compared to the pcp.
• The company has sold ~1,266 units in the US and sold ~364 units outside US.
• OSP reported cash receipts of US$603k during the quarter, reflecting an increase of ~20% from Q1FY21.
• The operating cash outflows stood at US$3.1 million, down by ~23% from prior quarter.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company’s operations have been affected due to the disruption brought in by the impact of COVID-19, and the uncertainty in the trading environment still persists.

Outlook: The company is well capitalised for future growth objectives with a cash balance of US$11.1 million as of 30 June 2021. OSP has also reported that it has a strong pipeline under GE Healthcare distribution agreement. It will continue to adopt a prudent cost management approach in view of the uncertain trading conditions due to the spread of COVID-19.

Stock Recommendation:  The company has appointed Steven Brandt as a Non-Executive Director to the board. As per ASX, the stock of OSP is trading below its average 52-weeks’ levels of $0.013-$0.043. The stock of OSP gave a negative return of ~36.36% in the past six months and a negative return of ~17.64% in the past three months. On a TTM basis, the stock of OSP is trading at a P/BV multiple of 6.3x, lower than the industry average (Healthcare Equipment & Supplies) of 11.7x, implying undervaluation. Considering the current trading levels & valuation on TTM basis, increase in net revenues & cash receipts, resilient pipeline and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.013, down by ~7.14% as on 05 August 2021.

OSP 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 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.

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

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