Volpara Health Technologies Limited

VHT Details

US$2.15 Million Contract Signed: Volpara Health Technologies Limited (ASX: VHT) a leading health technology software firm offering an integrated platform for the delivery of customised breast care via breast imaging analytics. VHT operates in Europe, North America, Asia-Pacific (APAC), the Middle East and Africa (EMEA), and Corporate. Recently, VHT signed the largest contract-to-date with Akumin Corp., a subsidiary of Akumin, Inc. in the US. The contract comes into effect immediately and VHT plans to install its Patient Hub software across the customer’s imaging centres in 11 states in the next 3 to 6 months. The US$2.15 million contract is for 5 years initially with upfront yearly payments and with an option to the customer to terminate the contract post 3.5 years.

Q2FY22 Business Update:

• ARR Growth: VHT recorded an ARR (Annual Recurring Revenue) of ~US$20.4 million from 700 plus customers, a rise of ~10% since Q4FY21-end. Q2FY22 delivered the highest growth in the net new ARR with the addition of US$1.2 million.
• Higher ARPU: VHT registered an ARPU (Average Revenue per User) of US$2.04 for Q2FY22. The ARPU over the entire installed base increased from US$1.42 in Q1FY22 to US$1.46 in Q2FY22.
• New Agreements Entered: The company signed partnership contracts with Natera for genetics collaboration and with Riverain, RevealDX, & MeVis, for lung cancer screening during Q2FY22.
• Software Product Usage: The company has contracted at least one software product to be deployed for breast cancer screening of ~13.4 million US women.

Total Revenue & Net Income Trend from FY18-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces stiff competition, regulatory changes, COVID-19 impact on the sector, higher expenditure on technological investments such as Platform & IP.

Outlook:

• VHT has a strong pipeline for Q3FY22 and plans to showcase its product platform at the world’s largest radiology event, RSNA, in Chicago in early December 2021.
• VHT anticipates exceeding NZ$25 million revenue and achieving 25% plus YoY growth in FY22.
• The company is increasing collaboration with the AI firms such as Riverain, MeVis, and RevealDX to build a lung platform and foray into the screening market. VHT estimates over $400 million ARR in the US market given the commercial opportunity for lung screening.

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: The stock of VHT gave a positive return of ~6.89% in the past three months and a negative return of ~12.98% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $1.050 - $1.715. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering the persisting COVID-19 challenges, the lower current ratio in FY21, and a continuing trend of net loss and negative ROE from FY18-FY21. For this purpose of valuation, few peers like Alcidion Group Limited (ASX: ALC), PainChek Limited (ASX: PCK), Beamtree Holdings Limited (ASX: BMT), and others have been considered. Considering the current trading levels, increase in ARPU and net new ARR, new agreements and Analytics deals signed, increased usage of Volpara® Health Breast Platform™ by more clinics, valuation, robust pipeline for Q3FY22, we give a ‘Buy’ rating on the stock at the current market price of $1.235, as on 18 October 2021, 10:54 AM, (GMT+10), Sydney, Eastern Australia.

VHT Daily Technical Chart, Data Source: REFINITIV  

Medlab Clinical Limited

MDC Details

Shareholders’ Address: Medlab Clinical Limited (ASX: MDC) is involved in the development and commercialisation of NanoCelle® (lead candidate), a proprietary delivery platform for cancer bone pain. MDC operates in the US, the UK, and Australia. In a recent address to the shareholders, MDC’s Chairman Michael Hall announced the appointment of Cheryl Maley as the Non-Executive Director and Laurie McAllister as the new Executive Directors to the Board.

• The company is progressing with the USA drug application approval for its Cannabis-based pain product NanaBis™. Based on the variable batch results of Cannabis (botanical substances), MDC cannot use it for medicine and hence, will use synthetic approved manufactured cannabis active ingredients. In case MDC will not be able to meet the initial drug registration requirements, MDC will pause the process and wait.
• MDC plans to enter phase 3 trial for NanaBis™ in 1HFY22.

Patent Update: In October 2021, MDC was granted the second US patent Orotate for treating depression or depressive disorders.

FY21 Highlights:

• Revenue Growth: The total revenue stood at $4.4 million, up by 54.5% YoY driven by robust nutraceutical sales performance in FY21.
• Net Loss Improvement: The net loss after tax improved to $12.32 million, down by ~8% YoY due to focus on cost reduction, commercialisation, and clinical activities.
• Increase in Net Assets: The Net Assets grew from $ 11.25 million as of 30 June 2020 to $14.90 million as of 30 June 2021.

Sales Revenue & Net Loss Trend During FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces regulatory delays, COVID-19 uncertainties, stiff competition, adequate funding for research and clinical activities.

Outlook:

• MDC will advance towards a more US-focused model as it develops its assets nutraceutical portfolio and partnering requirements.
• The company has received NanoCelle® patents in many global territories and plans to partner aggressively to commercialise its plans. MDC has deployed people at key positions in the US and the UK to facilitate discussions to commercialise NanoCelle®.
• MDC plans to keep developing its patent assets beyond the current patent portfolio.
• The company is progressing on the NanaBis™ and NanoCBD™ for drug registration and will continue to optimise NRGBiotic™ (for Depression) for regulatory expansion and reach to more markets.

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: The stock of MDC gave a negative return of ~34.69% in the past six months and a negative return of ~39.62% in the past nine months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.140 - $0.420. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering its continuing trend of net loss, negative cash outflows, and lower customer receipts in FY21, COVID-19 challenges, and regulatory delays. For this purpose of valuation, few peers like Adalta Limited (ASX: 1AD), Genetic Signatures Limited (ASX: GSS), Anteotech Limited (ASX: ADO), and others have been considered. Considering the current trading levels, increase in revenue and sales of nutraceutical business, lower net loss, improved liquidity position and a decline in the debt-to-equity ratio in FY21, expanded patent portfolio, valuation, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.150, as on 18 October 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

For spec buy stocks- Investors with a high-risk appetite should evaluate this stock given the technical support and resistance levels considering the associated COVID-19 impact, negative bottom-line, regulatory changes in different markets, and IP development risk.

MDC 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.

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.