Volpara Health Technologies Limited

VHT Details

Acquisition of CRA Health, LLC: Volpara Health Technologies Limited (ASX: VHT) develops breast care technology platform for diagnosing breast cancer in patients and provide personalised patient care. As on 2^nd February 2021, the market capitalisation of the company stood at ~$372.73 million. On 2^nd February 2021, the company announced acquisition of profitable Boston-based CRA Health, LLC by acquiring its outstanding equity. It paid US$18 million up front and will pay US$4 million based on meeting the performance and employee retention numbers.  

Q3FY21 Results: The company recorded the highest Q3 sales results with Annual Recurring Revenue (ARR) of NZ$20.7 million, up by 20% on pcp basis. This is due to higher demand for its breast care platform, significant upsells, and key new deals during the quarter. It earned cash receipts of NZ$4.6 million from customers, up by 2% on Q3FY20 despite the pandemic situation and weakened USD. The growth in cash receipts and subscriptions inflows since Q1FY21-Q3FY21 remained strong and grew up by 20% YoY. It had cash reserves of NZ$60.6 million and net cash outflows at NZ$3.1 million, the lowest since June 2019 and less than budgeted and at the end of Q3FY21.

Cash Receipts Q1FY20-Q3FY21 (Source: Company Reports)

Outlook: The company plans to launch Volpara Enterprise to BSQ in early FY21. It also aims to roll out new branding and penetrate multiple product sales into the existing customer base.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of VHT gave a positive return of 20.78% in the past three months and a positive return of 14.92% in the past six months. The stock is currently trading towards its 52-weeks’ high level of $1.82. The stock of VHT has a support level of ~$1.457 and a resistance level of ~$1.611. We have valued the stock using Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like Redbubble Limited (ASX: RBL), Temple & Webster Group Limited (ASX: TPW), Wesfarmers Limited (ASX: WES) and others. Considering the current trading levels, growth in top line for 1H21, decent Q3FY21 results including new deals & growth of health-tech platform, decent outlook for FY21, and valuation, we give a ‘Hold’ rating on the stock at the current market price of $1.535, up by 3.367% on 2^nd February 2021.

VHT Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Osteopore Limited 

OSX Details

Cooperation Agreement with Cell Technologies and Terumo Blood: Osteopore Limited (ASX: OSX) is a health technology firm commercialising customised specific micro-structured scaffolds engineered for bone healing across several therapeutic areas. The company has a patented technology to produce scaffolds via 3D printing and bioresorbable material for bone regeneration. As on 2^nd February 2021, the market capitalisation of the company stood at ~$58.63 million. On 1^st February 2021, the company

announced a cooperation contract with Cell Technologies (CT) and Terumo Blood (TB) to promote and sell their complementary regenerative products in APAC. The agreement will allow Osteopore products to be accessed through Terumo Blood and Cell Technologies’ network of blood centres, researchers, hospitals, therapeutic clinics, and private medical practices. 

A Look at Q4FY20 (ending December 2020) Results: The company recorded revenue growth of $429k for Q4FY20, up by 5% on Q3FY20 and 18% revenue growth on YoY basis. OSX achieved revenue of $1.50 million for CY20, a rise of 36% on pcp basis. OSX was granted funds and tax incentives to the tune of $56,000 for the quarter by Singaporean government due to the pandemic situation and due to its essential service provider status. During Q4FY20, OSX has made its production floor fully operational post its recent expansion of the manufacturing facility in Singapore. During the quarter, the company inked several exclusive distribution contracts to distribute its products in New Zealand & Australia, Austria & Germany, Nordics, and the Middle East. The company received cash receipts of $442k from the customers and held cash reserve of $9.02 million as on 31 December 2020.

Growth in Quarterly Revenue, CY19-CY20 (Source: Company Reports)

Outlook: The company has a fully functional manufacturing facility. With satisfactory productivity levels, it has received government aid to work along A*Star SIMTech to work on automation measures for CY21 commencing from January.

Stock Recommendation: The stock of OSX gave a positive return of 9.09% in the past three months and a positive return of 16.67% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.275. The stock of OSX has a support level of ~$0.466 and a resistance level of ~$0.556. Considering the current trading levels, revenue growth for 1H20, and subsequent quarters Q3-Q4FY20, string of new distribution deals and fully operational facility in Singapore, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.50 on 2^nd February 2021.

OSX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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