PainChek Limited

PCK Details

Decent Growth in Q3FY21 Contracted ARR: PainChek Limited (ASX: PCK) develops and markets pain assessment technology products for children young enough to speak and adults having speech difficulty or who have dementia. It has developed and rolled out its smartphone-based application, PainChek®. As of 29 April 2021, the market capitalisation of the company stood at ~$74.36 million. PCK reported an initial entry in the home care, hospital and disability markets and growth in its Core Aged Care market during Q3FY21. It posted an increase of 14% YoY in the contracted ARR (normalised post-government trial) for Q3FY21 to $3.5 million. It posted growth in the Residential Aged Care (RAC) facilities to 993, up by 69% YoY. The sanctioned beds under its yearly licence grew to 80k, up by 61% YoY. It recorded a penetration rate of over 35% for the Aged Care market and over 219% YoY growth in the PainChek clinical assessments in the Aged Care. 

PCK has launched its CE Marked PainChek Universal App to its existing clients in ANZ from April 2021 with a large Aged Care provider Ability. It inked an MOU with a Swiss firm, nViso, to develop new personal robots with nViso’s technology for the Japanese aged care sector. It held a cash reserve of $11.91 million as of 31 March 2021. 

Contracted ARR Trend (Source: Company Reports)

Key Risks: The company is exposed to the risks related to the delay in discussions on its large provider contracts due to the resurgence in the pandemic cases, virtual training of aged care clinicians, and workshops of Aged Care providers.

Outlook: The company has a robust pipeline of Aged Care beds to assist growth in FY21. It is working on launching its new PainChek Universal Home Care (UHC) system into the ANZ and overseas in the UK, Canada, and others. It is on track to seek ANZ and European regulatory clearance for the application submitted for its PainChek® Infant product. In the UK, PCK achieved new sales in Scotland and England and is expanding through new partnerships. In Canada, it is building market reach AlayaCare (local partner). For increasing entry and distribution in the hospital market, PCK is engaging in discussions with multiple partners in different markets.

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

Data Source: Refinitiv, Thomson Reuters, 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 PCK gave a negative return of 11.42% in the past three months and a negative return of 31.11% in the past six months. The stock is currently inclined towards its 52-weeks’ low level of $0.061. The stock of PCK has a support level of ~$0.047 and a resistance level of ~$0.08. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For this purpose, we have taken peers like Mach7 Technologies Limited (ASX: M7T), Alcidion Group Limited (ASX: ALC), PKS Holdings Limited (ASX: PKS), etc. We believe that the company can trade at a slight premium than its peer median, considering growth in contracted ARR, and increase in RAC facilities and clinical assessments. Considering the current trading levels, decent Q3FY21 performance, growth in the UK market, the pipeline of Aged Care beds in FY21, the launch of new products planned, valuation, and risks associated with the delays in business meetings and launch of new introductions, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.062, down by 6.061% on 29 April 2021.

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

ResApp Health Limited

RAP Details

Firm Commitments Received to Raise $5.5 million: ResApp Health Limited (ASX: RAP) is a health technology developer of smartphone applications (ResAppDx, SleepCheck) for diagnosing respiratory disease. As of 29 April 2021, the market capitalisation of the company stood at ~$48.11 million. RAP has announced the receipt of institutional firm commitments to raise $5.5 million via the issue of 94.82 million new fully paid shares at 5.8 cents per share. It will deploy the proceeds in hiring key personnel for product development measures and working capital needs. Fidelity International (FI), one of its substantial shareholders, has committed to invest $1.5 million in capital raising. Post-placement, FI will hold 9.99% interest in RAP. The placement was expected to settle on 16 April 2021.

TGA Clearance for Class I Medical Device: On 25 March 2021, RAP notified the TGA sanction and registration of its wearable medical device (Class I) to permit the sale and promotion of the clip-on wearable in Australia. To begin with, RAP will use the wearable in clinical trial settings to examine cough frequency.

Second Licensing Agreement with AstraZeneca K.K.: On 12 March 2021, RAP announced its one-year licensing contract with AstraZeneca K.K. to licence the integration of its cough counting technology in latter’s smartphone asthma monitoring Application in patients.

1HFY21 Results Declared: The company reported revenue of $46k from its customer contracts in 1HFY21. It incurred a net loss of $3.12 million, down by 18% YoY for 1HFY21. It held a cash and cash equivalents balance of $4.21 million at the end of the reporting period.

1HFY21 P&L Highlights (Source: Company Reports)

Key Risks: The company faces the risk of delay in the launch of Apps and new products, technical glitches in the operation of the upgraded versions/ new products, seeking high-worth licencing contracts and partnerships with major clients.

Outlook: The company will launch its ResAppDx into Medetective, a wellness and health management program as per its software licencing contract with Workplace Medicine Australia Limited (“WMA”). The launch is now planned for Q4CY2021. On 29 April 2021, announced the release of its Quarterly Activities and Cashflow Report for Q3FY21 and has invited its shareholders to join the conference call on 30 April 2021.

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

Data Source: Refinitiv, Thomson Reuters, 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 RAP gave a negative return of 28.20% in the past three months and a negative return of 49.09% in the past six months. The stock is currently inclined towards its 52-weeks’ low level of $0.052. The stock of RAP has a support level of ~$0.045 and a resistance level of ~$0.072. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For this purpose, we have taken peers like CogState Limited (ASX: CGS), ImExHS Limited (ASX: IME), PainChek Limited (ASX: PCK), etc. We believe that the company can trade at some discount than its peer median, considering its negative operating cash flows in 1HFY21, track record of incurring net losses, and the risks associated with the launch of new Apps, growth of partnerships and downloads. Considering the current trading levels, improved financial results in 1HFY21, TGA clearance for a new wearable device, the licensing contracts with AstraZeneca K.K. and WMA, trial of ResAppDx in the telehealth services of Medgate AG, valuation, and associated key risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.056 on 29 April 2021.

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

Note: 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.

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