Vitrus Health Limited

VRT Details

Increase in Shareholding: Vitrus Health Limited (ASX: VRT) is a healthcare firm providing day procedures, medical diagnostic and fertility and other assisted reproductive services (ARS). On 7 September 2021, Wilson Asset Management Group increased its shareholding from 5.05% voting power to 6.42% in VRT.

Issue of Shares: On 27 August 2021, VRT issued 5.147 million new shares at $6.80 per share under an underwritten placement offer to institutional investors to raise $35 million.

FY21 Key Takeaways:

• Revenue Growth: VRT posted revenue growth of 25.4% YoY to $324.60 million in FY21.
• Increase in NPAT: The NPAT in FY21 rose to $43.80 million, up by $42.6 million on FY20.
• Higher Cash Receipts: VRT collected $323.97 million of cash receipts from the customers in FY21 compared to $262.82 million in FY20.
• Liquidity Position: The company held $37.00 million cash and cash equivalents as of 30 June 2021.

Total Revenue & Net Income Trend from FY17-FY21; (Analysis by Kalkine Group)

Key Risks: The company faces the ongoing impact of the COVID-19 situation with the setback of the Delta variant and lockdown occurring in Australia and overseas markets. VRT faces forex headwinds and increased market regulations due to its expansion in Ireland, Denmark, Singapore, and the UK. 

Outlook:

• VRT plans to start its ARS “hub” strategy in Denmark and an egg donation program in Ireland in FY22 amidst the COVID-19 situation.
• The firm will invest in developing new clinics and labs in FY22 to facilitate growth in Brisbane, Nepean, and Copenhagen.
• The management has approved for proposal to deploy the Precision Fertility Digital Platform in FY22/23 to aid drive efficiencies.

Valuation Methodology: P/E 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: On 30 August 2021, VRT added two new Board members with Dr Priscilla Rogers and Ms Cathy Aston, as the Independent Non-Executive Directors. The stock of VRT gave a negative return of 18.79% in the past month, and a positive return of 60.0% in the past year. The stock is currently trading slightly above the 52-weeks’ average price level band of $3.510 - $7.470. The stock has been valued using the P/E based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ median, considering its slightly lower net cash from operating activities, low current ratio in FY21, risk of project delays related to the COVID-19 lockdowns, forex changes, and regulations in overseas markets, etc. For the purpose of valuation, few peers like Australian Pharmaceutical Industries Limited (ASX: API), Ansell Limited (ASX: ANN), Healius Limited (ASX: HLS), and others have been considered. Considering the current trading levels, decent financial performance in FY21, growth plans in FY22, global expansion, valuation, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $5.870 as on 17 September 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia. Investors with high-risk appetite should evaluate this stock in view of the technical support and resistance levels as well as taking into consideration associated risks in availability of fertility specialists, regulatory risks, and changes in technology.

VRT 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.

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