Fundamental Insights on this Pharma Stock - MDR

MedAdvisor Limited

MDR Details

H1FY22 Financial Updates: MedAdvisor Limited (ASX: MDR) is a MedTech company which provides a world-class medication management platform that empowers patients to manage their medication and improve adherence.

• Improved Top-line: Total revenue in H1FY22 advanced by 23.6% PcP to $38.7 million. Following the integration with Adheris, the US revenue performed strongly with 22.0% PcP increase. Australian revenue expanded by 33.0% to $6.6 million, owing to increased network capacity and investment support in sales and marketing.
• Bottom-Line Resilience: Adjusted EBITDA stood stable at a loss of $5.3 million relative to a loss of $5.5 million PcP, after significant business investment of ~$2 million for enhancing the Thriv product offering, IT infrastructure, and digitalisation.
• Financial Position: Operating cash flow (adjusted for leases) advanced sequentially, alongside a reduced outflow of $1.2 million relative to $2.5 million outflow in H1FY21 with MDR moving close to operating cash flow breakeven.

H1FY22 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

The business’ financial and operational performance is susceptible to high competition and threat of substitution. In addition, the business is exposed to complex regulatory framework, which can later entail fines, penalties, etc.

Outlook

MDR has signed 5-year contract with Australian Pharmaceutical Industries (API), favoring positive impact on Australian business growth. During the period the company signed the US$3 million COVID-19 awareness pilot program. From growth standpoint, AU pharmacy footprint enlarged by 11.2% to over 4,000 and patients went up by 35.7% to 2.4 million.

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 MDR gave a negative return of ~20.00% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.230 - $0.415. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the high competition and complex regulatory framework, the company might trade at a slight discount to its peers’ EV/Sales multiple average. For valuation, few peers like ImExHS Ltd (ASX: IME), Beamtree Holdings Ltd (ASX: BMT), Total Brain Ltd (ASX: TTB), and others have been considered. Given the decent revenue surge, contract with API, increased reasonable investments, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.26, as of 23 March 2022, at 10:30AM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

MDR 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 previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and is 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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