Stocks’ Details
 

Sigma Healthcare Limited

Key Takeaways from Investor Day Presentation:Sigma Healthcare Limited (ASX: SIG) is the leading full-line pharmaceutical wholesaler and distribution businesses in Australia, delivering daily to pharmacies Australia wide. The market capitalisation of the company stood at A$768.09 Mn as on 26^th November 2019. Recently, the company has published an investor day presentation, wherein, it mentioned that non-CW sales witnessed a growth of 6.9% in 1H FY20. The reinvestment in its logistics network allows the company to drive operational efficiency and reduce its costs to better service its growing customer network. The following picture provides an idea of the financial performance of the company:


Financial Performance (Source: Company Reports)

What to Expect:The company stated that its sales and pharmacy banner pipelines are strong, and its investment cycle is delivering an efficient and effective DC network with significant capacity and capability to better service its customers. As a result, it is now well-positioned to actively seek further 3PL/4PL opportunities, hospital pharmacy and retail pharmacy customers.

Stock Recommendation:The company’s investment in critical long-term and efficient infrastructure remains on schedule and under budget. On the valuation front, the stock of SIG has EV to EBITDA multiple of 15.1x as compared to the industry median (Food & Drug Retailing) of 10.3x on TTM basis. SIG is trading at a P/E multiple of 26.85x against the industry median (Consumer Non-Cyclicals) of 12.1x on TTM basis. As per the ASX, the stock of SIG is trading towards its 52-week high of A$0.750. Thus, considering the valuation metrics and current trading levels, we have a watch stance on the stock at the current market price of A$0.735 per share, up 1.379% on 26^th November 2019.
 
 

Mesoblast Limited

A Quick Look at Q1 FY20:Mesoblast Limited (ASX: MSB) is a biotechnology company, operating in the area of adult stem cell technology. The company has a market capitalisation of A$966.02 Mn as on 26^th November 2019. The company has updated the market with the financial results for 1QFY20 for the period ended 30^th September 2019. It experienced a rise of 46% in revenues due to a rise of 43% in milestone revenues from strategic partnerships and an increase of 85% in revenues from sales of TEMCELL®1 HS. Inj. by Mesoblast’s licensee for steroid-refractory acute graft versus host disease in Japan against Q1 FY19.

Consolidated Income Statement (Source: Company Reports)
Future Aspects:One of the company’s major objectives is to continue to protect and expand its extensive estate of patent rights and trade secrets, which the company believes enables it to deliver commercial advantages and long-term protection for its product candidates based on the proprietary technologies, as well as support its corporate strategy to target large, mature and emerging healthcare markets for the exploratory therapeutic product candidates.
Stock Recommendation:As at 30^th September 2019, the cash on hand figure stood at US$34.5 million, and pro forma cash on hand stood at US$100.0 million. Over the upcoming 12 months, the company might have access to an additional US$65.0 million in non-dilutive capital under existing strategic partnerships and financial arrangements. In the span of three months and six months, the stock of MSB delivered returns of 28.11% and 25.00%, respectively. Therefore, considering the decent performance in Q1FY20, respectable returns in the past months, and agreement with Lonza for commercial product manufacture, we maintain a “Hold” rating on the stock at the current market price of A$1.840 per share, up 2.222% on 26^th November 2019.
 

Opthea Limited

Key Personnel’s Address to Shareholders:Opthea Limited (ASX: OPT) is in the business of developing innovative, biologics-based therapies for the treatment of eye disease. The market capitalisation of the company stood at A$713.33 Mn as on 26^th November 2019. Credit Suisse Holdings (Australia) Limited, on behalf of Credit Suisse Group AG and its affiliates, has become an initial substantial holder in the company on 21^st November 2019 with the voting power of 5.02%. Recently, the key personnel of the company addressed the shareholders at 2019 Annual General Meeting and stated that FY19 has been a very positive year for the company. The company’s progress was underpinned by the reporting of outcomes from the OPT’s Phase 2b clinical trial in wet AMD patients. It was mentioned that the positive outcomes of the study reflected a major milestone for Opthea and place the company as a global player in ophthalmology.

The current cash position of the company stood at A$30 million, including A$12.6 million received via the exercise of quoted options in late 2018 and by the receipt of an A$14.6 million tax rebate for R&D activities, which was conducted in FY19.


Consolidated Cash Flow Statement (Source: Company Reports)

Future Guidance:The company is highly encouraged by the results in this trial and look forward to reporting the data from the larger Phase 2a clinical trial in early 2020. The company is currently planning to rapidly advance OPT-302 into pivotal, registrational Phase 3 development on the back of strong clinical data. OPT enjoys a decent financial position to undertake this planning and complete the DME trial.

Stock Recommendation:The company’s strategy includes to develop OPT-302 as a combination therapy to be administered with any of the approved a-VEGF-A therapies or new VEGF-A inhibitors in development. Current ratio of the company stood at 5.66x in FY19 as compared to the industry median of 3.88x. This implies that the company is in a decent position to address its short-term obligations against the broader industry. As per the ASX, the stock of OPT is trading towards its 52-week higher levels. Thus, considering the aforesaid facts and current trading levels, we suggest investors to closely watch the stock for better entry levels at the current market price of A$2.710 per share, down 4.912% on 26^th November 2019.

Neurotech International Limited

Announcement of Capital Raising:Neurotech International Limited (ASX: NTI) is involved in the development of wearable neurotechnology devices to assist with neurological conditions like autism. The company, through a release dated 31^st October 2019 updated the market with the quarterly report for the period ended 30^th September 2019. During the quarter, NTI continued to develop the commercialisation of Mente, engaging with partners on territory development as well as the necessary regulatory approvals. NTI also focused on developing awareness, trust and a pipeline for e-Commerce enabled sales using an online and social media presence.

The company has recently received firm commitments from sophisticated and professional investors to raise up to $600,000 through the issue of convertible loans.The initial tranche of $300,000 has been issued.


Cash Flow Statement (Source: Company Reports)

Future Prospects:Neurotech remains committed to the development of Mente. The Board of the company is reviewing the options for it to continue the development of Mente, including accessing enough funding in a suitably attractive form to shareholders to finance the continued development.

Stock Recommendation:The overarching consideration of the company’s Board is to maximise the value of its assets, and specifically its Mente assets, for the benefit of its shareholders. NTI assumed a new strategy for US market entry with a focus on delivering Mente using partnerships with certified clinicians. The stock of NTI generated returns of -65.71% on YTD basis and -73.63% in the span of one year. As per the ASX, the stock of NTI is trading towards its 52-week lower levels. Thus, considering the current trading levels, price movement in the recent past, business developments, etc., we have a watch stance on the stock at the current market price of A$0.018 per share, up 20% on 26^th November 2019.

 
Comparative Price Chart (Source: Thomson Reuters)

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