Genetic Signatures Limited

GSS Details

Q4FY21 Trading Update: Genetic Signatures Limited (ASX: GSS) is engaged in the research of identifying individual genetic signatures for assistance in the diagnosis of infectious diseases. The company has recently posted about its Q4FY21 performance.

• It reported sales revenue of $5.4 million during the period, reflecting an increase of ~27% on the prior quarter.
• FY21 sales revenue stood at $28.3 million, up by ~151% on the prior year.
• International sales revenue made a contribution of ~21% to the revenue mix in FY21, compared to 10% in FY20.
• The company ended the period with a cash balance of $30.1 million as of 30 June 2021, with no debt on the balance sheet.

Trend in Revenue (Source: Analysis by Kalkine Group)

Key Risks: The company invests a considerable amount for its R&D activities, and any failure to get regulatory approvals might impact the profitability of the company.

Outlook: The company has commenced FY22 with strong momentum in sales and to date orders received in July were over $4 million. It has continued with the progress on the FDA submission for the EasyScreen Enteric Protozoan Detection Kit.

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: As per ASX, the stock of GSS is trading below its average 52-weeks’ levels of $1.040-$2.420. The stock of GSS gave a negative return of ~22.44% in the past six months and a positive return of ~5.55% in the past three months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at some discount to its peers’ median, considering the decrease in liquidity and increase in cash cycle days. For the purpose of valuation, few peers like Oncosil Medical Ltd (ASX: OSL), Palla Pharma Ltd (ASX: PAL), Trajan Group Holdings Ltd (ASX: TRJ) have been considered. Considering the expected upside in valuation & current trading levels, robust increase in sales, healthy balance sheet, positive sales momentum in FY22 and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the market price of $1.300, as on 19 August 2021, 11:00 AM (GMT+10), Sydney, Eastern Australia.

GSS Daily Technical Chart, Data Source: REFINITIV 

Micro-X Ltd

MX1 Details

Performance Update for Quarter Ended 30 June 2021: Micro-X Ltd (ASX: MX1) develops ultra-lightweight carbon nanotube-based X-ray products, primarily for the healthcare and security markets. The company has recently announced its performance for the quarter ended 30 June 2021.

• It received customer receipts of $5.3 million for Mobile DR range in FY21 and received $0.8 million during the quarter.
• The company has successfully tested new x-ray tube and high voltage generator for Rover Mark II, during the period.
• It ended the period with a strong balance sheet having a cash balance of $30.1 million and is debt-free following the repayment of SAFA facility.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company’s line of business is prone to strict regulatory purview, which might have an impact on its profitability.

Outlook:   The company has witnessed positive traction in sales from the appointment of distributors and dealerships in the US and EMEA region. It is expected to sign contracts for the programmes for Self-Service Airport Security Checkpoint and Brain Tomo in the coming quarter and is expected to secure $13 million of development funding.

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:  As per a recent update, Perennial Value Management Limited has undergone a change of interests in the company and has increased its voting power to 13.50%. As per ASX, the stock of MX1 is trading below its average 52-weeks’ levels of $0.155-$0.450. The stock of MX1 gave a negative return of ~31.08% in the past six months and a positive return of ~54.54% in the past one year. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ median, considering the loss from operations and increase in cash cycle days. For the purpose of valuation, few peers like ImpediMed Ltd (ASX: IPD), Nova Eye Medical Ltd (ASX: EYE), Atomo Diagnostics Ltd (ASX: AT1) have been considered. Considering the expected upside in valuation & current trading levels, successful testing of x-ray tube & high voltage generator, strong balance sheet and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the market price of $0.240, as on 19 August 2021, 10:15 AM (GMT+10), Sydney, Eastern Australia.

MX1 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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