Epsilon Healthcare Limited

EPN Details

Tetra Unveils Latest Face to Face Clinic in Melbourne: Epsilon Healthcare Limited (ASX: EPN) is a healthcare and pharmaceuticals company having operations in Australia and Canada. The company recently announced that its clinic group, TetraHealth has introduced a new clinic for in-person consultations in Melbourne. TerryWhite Chemmart Hawthorn will service the Victorian patient demand. Notably, the company targets further expansion in Sydney and Brisbane for later this year.

Q2FY21 Results Update:

• Tetra Health continued with its decent performance, reflecting a 48% increase in products dispensed during Q2FY21, when compared to Q1FY21. It reported a half-year revenue of over $785k.
• EPN has a debt facility with a current balance of $3.52 million, due for repayment on or before 31 October 2021, following repayments of $477k in 2QFY21.
• The company reported a reduction in net cash used in operating activities by ~50%, compared to the prior quarter, aided by receipt of the 2020 R&D tax incentive.
• At the end of 2QFY21, the company’s cash position stood at $3.1 million.

Cash Highlights (Source: Analysis by Kalkine Group)

Key Risks:

• The company is exposed to the prevailing global uncertainties related to COVID-19 and other geopolitical tensions.
• The company is exposed to forex headwinds and stiff rivalry from competitors developing similar product lines and services

Outlook: The company expects decent growth from the Tetra Health business with the introduction of new clinics across the east coast of Australia. The company has continued to invest in its Southport Facility in order to add new production capabilities and improved filtration technologies. 

Stock Recommendation: As per ASX, the stock of EPN is trading below its average 52-weeks’ levels of $0.120-$0.325.   The stock of EPN gave a negative return of ~41.99% in the past six months. On a TTM basis, the stock of EPN is trading at an EV/Sales multiple of 3.6x, lower than the industry median (Healthcare) of 14.7x, thus seems undervalued. Considering the valuation on TTM basis & current trading levels, the launch of a new clinic, growth in products dispensed, increased investments and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.140, up by ~3.449% as on 2 September 2021.

EPN Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the charts indicates RSI (14-period) 

Cann Global Limited

CGB Details

Key Highlights for FY21 Preliminary Results: Cann Global Limited (ASX: CGB) is engaged in growing and cultivating, processing, and marketing of hemp and medical cannabis.

• Decline in Revenues: In FY21, the company reported revenues of ~$1.49 million, depicting a decline of ~16% year over year, owing to a fall in export sales to Vietnam and a drop in revenue from Cann Global Thailand (CGT).
• Reduction in Total Loss: The company reported a total loss of $4.77 million in FY21, an improvement from $8.05 million loss reported in FY20.
• Expenditure Highlights: In FY21, R&D cost reduced significantly year over year, whereas administrative and corporate expenses were up on pcp, owing to new staff addition and higher consultant services to support a number of projects marketing.
• Reduction in Total Current Liabilities: The company’s total current liabilities stood at $2.39 million at the end of FY21, down 64% year over year, owing to repayments of other loans.
• Liquidity Position: As at 30 June 2021, CGB cash reserve stood at $10.5 million, up by 43% on pcp, due to the successful completion of an equity rights issue and placement.
• Key Developments: In FY21, the company remained on track to continue its product development based on its premium plant-based skincare products.

Revenue Highlights (Source: Analysis by Kalkine Group)

Key Risks: The company is present in product development and manufacturing, which needs regulatory approval to further launch in the market. The company exports and imports products from various countries, any fluctuation in the foreign exchange may lead to financial losses for the company. 

Outlook: The company is exposed to the impacts of the ongoing challenges due to COVID-19 led uncertainties. The company is expected to increase its R&D expenditure in FY22, owing to the commencement of clinical trials. Nevertheless, the company remains on track to expand its sales and distribution of existing products with a renewed focus on product sales in Australia. The company’s healthy balance sheet, and significant cash reserves are expected to aid its current business activities and upcoming projects. 

Stock Recommendation: The stock of CGB has a 52-weeks' high and low levels of $0.004-$0.02. The stock of CCV gave a negative return of ~4.75% in the past six months month. Considering the current trading levels, technical levels mentioned below, declining stock price movement, the pandemic impact on its operations, and the key risks associated with the business, we suggest a 'Sell' rating on the stock at the current market price of $0.005, as on 2 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia. 

Technical Overview:

On the daily chart, CGB stock prices are trading below the horizontal trend line resistance level of AUD 0.006 and continuously facing the resistance of the same indicating an overall downward trend for the stock. The leading indicator RSI (14-Period) is trading at ~50.04 levels indicating a negative momentum. An important support level for the stock, is placed at AUD 0.004 while the key resistance level is placed at AUD 0.006.

CGB Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the charts indicates RSI (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.

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 and its related entities do not hold interests in any of the securities or other financial products covered on the Kalkine website.

Kalkine Media Pty Ltd, an affiliate of Kalkine Pty Ltd, may have received, or be entitled to receive, financial consideration in connection with providing information about certain entity(s) covered on its website.