Opthea Limited

OPT Details

Fast Track Grant for OPT-302: Opthea Limited (ASX: OPT) is a biotechnology company that develops drugs, innovative, biology-based therapies for the treatment of eye disease. As per a recent announcement, US FDA has granted Fast Track designation for the company’s VEGF-C/-D ‘trap’ inhibitor, OPT-302 in combination with anti-VEGF from the U.S. Food and Drug Administration (FDA). It is a therapy to treat patient with neovascular (wet) age-related macular degeneration (AMD).

H1FY21 Financial Performance:

• The company has recorded an increase in its revenue to $314,294 in H1FY21, compared to $273,115 in H1FY20.
• OPT has incurred a loss of $34.98 million in H1FY21 against $7.62 million PcP. The company has increased in R&D expenses to $18.80 million in H1FY21 vs $8.34 in H1FY20.
• The cash position of the company stood at $202.54 million as of 31 December 2020.

Revenue Trend (Source: Analysis by Kalkine Group)

Outlook: The publishing of the Phase 1b and Phase 2a DME trials in peer reviewed journals could have a positive impact on company’s goodwill and competitive in the market. The company is expanding its reach by establishing US-based operations. OPT is investing in R&D which could provide upgraded and innovative offerings to the clients.

Key Risks:

• The COVID-19 pandemic could cause delay in preclinical studies, clinical trials, and disruption in clinical supply which could have an impact on the bottom line.
• The company is exposed to regulatory risk, capital adequacy risk that can directly affect the company operations.

Stock Recommendation: The stock of OPT is trading lower than the average 52-weeks' price level of $1.240-$3.280. The stock of OPT gave a positive return of ~6.80% in the past one week and a negative return of ~50.91% in the past one year. On a TTM basis, the stock of OPT is trading at a Price/Book multiple of 4.2x, lower than the industry median (Biotechnology & Medical Research) of 5.5x. Considering the current trading levels, R&D investment, healthy cash position, increase in revenue and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $1.290, as on 26 July 2021, 3:14 PM (GMT+10), Sydney, Eastern Australia.

OPT Daily Technical Chart, Data Source: REFINITIV 

Integral Diagnostics Limited

IDX Details

Business Update: Integral Diagnostics Limited (ASX: IDX) is a diagnostics & research company that provides medical imaging services to general practitioners, medical specialists, and allied health professionals and their patients through 64 radiology clinics in Australia and New Zealand. In a recent announcement, the company has advised that 336,145 fully paid ordinary shares are currently held under voluntary escrow which will release on 31 July 2021.

H1FY21 Financial Performance:

• Increase in Revenue: The company has recorded an increase in its revenue by 29.5% to $170.7 million in H1FY21, compared to $131.8 million in H1FY20.
• Rise in Bottom Line: IDX has incurred a statutory profit of $19.9 million H1FY21, up by 82.6% from $10.9 million in H1FY20 driven by an increase of the average fee per exam by 2.6%.
• Increase in Free Cashflow: The company recorded raise in free cash flow by 70.2% to $42.7 million in H1FY21 against $25.1 million in H1FY20 and net debt increased to $137.3 million as of 31 December 2020.
• IDX has reported an increased operating EBITDA by 50.3% to $52.0 million in H1FY21, compared to $34.6 million in H1FY20.
• The company declared fully franked dividend of 5.5c per share in H1FY21.
• The period ended with a cash balance of $68.76 million as of 31 December 2020.

Revenue Trend (Source: Analysis by Kalkine Group) 

Key Risks:

• COVID-19 Uncertainties: The COVID-19 outbreak and associated government restrictions have impacted patient activities and increased employee cost.
• Regulatory Risks: Delay in the receival of necessary approvals from regulatory authorities can impact the company’s operations.

Outlook: Looking ahead, the company is focused on accelerating the use of digital and AI technologies to improve the patient and referrer experience. Further, the company is focused on evaluating further strategic acquisitions.

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 IDX is inclined towards its 52-weeks’ high level price of $5.550. The stock of IDX gave a positive return of ~40.57% in the past one year and a positive return of ~19.33% in the past six months. On a technical analysis front, the stock of IDX has a support level of ~$4.99 and a resistance level of ~$5.55. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM trading multiple), considering the improvement in the EBITDA and increase in cash position. For this purpose, we have taken peers such as Capitol Health Ltd (ASX: CAJ), Virtus Health Ltd (ASX: VRT), Sonic Healthcare Ltd (ASX: SHL), to name a few. Considering the current trading levels, recent rally in the stock price, government restrictions, increase in net debt and the key risks associated with the business, we suggest investors to book profits and give a 'Sell' rating on the stock at the current market price of $5.380, as on 26 June 2021, 11:05 AM (GMT+10), Sydney, Eastern Australia.

IDX 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 for 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 the 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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