Stocks’ Details
 

CLINUVEL Pharmaceuticals Limited

Launch of Proprietary Drug in China: CLINUVEL Pharmaceuticals Limited (ASX: CUV) is engaged in the development of its proprietary first in class drug SCENESSE. The market capitalisation of the company stood at $1.05 Bn as on 23^rd April 2020. Recently, the company has launched SCENESSE® in China for the treatment of the rare genetic metabolic disorder erythropoietic protoporphyria (EPP). For this, the company has inked a collaboration agreement with Winhealth Pharma. Under the terms of the agreement, CLINUVEL and Winhealth Pharma would distribute SCENESSE® and train and accredit local hospitals to provide long-term care to Chinese EPP patients. Previously, the company has also rolled out SCENESSE® in the USA for therare disease erythropoietic protoporphyria. The following picture gives an overview of the financial performance for 1H FY20:


Key Financials (Source: Company Reports)

Active Product Pipeline: The company’s strategy is to focus on developing and commercialising SCENESSE® as a preventative therapy to photo-protect patients with EPP. CUV possesses an active product development pipeline covering existing and new treatments for a range of skin-related indications.

Stock Recommendation: The company managed to close 1HFY20 with a decent balance sheet comprising a cash balance of $57.432 million as compared to $54.269 million as at 30^th June 2019. This growth was mainly driven by increasing receipts from the commercial sale of SCENESSE® in the EU. Net margin of the company stood at 10.8% in 1HFY20 against the industry median of 6.3%. This implies that CUV has decent capabilities to convert its top-line into the bottom-line as compared to the broader industry. Therefore, considering the active product pipeline, increase in cash balance and launch of SCENESSE® in China, we give a “Buy” recommendation on the stock at the current market price of $19.870 per share, down by 6.582% on 23^rd April 2020.

Ramsay Health Care Limited

Successful completion of Institutional Placement: Ramsay Health Care Limited (ASX: RHC) owns and operates various healthcare facilities throughout Australia, France, Indonesia, Malaysia, and the United Kingdom. The market capitalisation of the company stood at $12.99 Bn as on 23^rd April 2020. RHC has recently notified the market that it has successfully wrapped up a fully underwritten institutional placement and raised $1,200 million. The company would also raise up to $200 million through an offer to participate in a non-underwritten share purchase plan (SPP). The company is raising equity to repay its loans and working capital management.


Key Dates (Source: Company Reports)

Withdrawal of Guidance: As a result of continuing high level of uncertainty surrounding the spread, duration and impact of coronavirus, the company has suspended its earnings guidance for FY20. 

Valuation Methodology:Price to Cash Flow Multiple Based Relative Valuation


Price to Cash Flow Multiple Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company is undertaking decisive action for cementing its balance sheet to navigate an uncertain operating environment and increase financial flexibility. RHC will continue to actively focus on limiting or deferring discretionary expenditure and capex. Current ratio of the company stood at 0.94x in 1H FY20, reflecting YoY growth of 29.8%. We have valued the stock using P/CF-based illustrative relative valuation method and arrived at a target price with an upside of lower double-digit (in percentage terms). Hence, in light of improved liquidity position, recent equity raising, which is likely to support future growth and valuation, we give a “Buy” recommendation on the stock at the current market price of $60.520 per share, down by 5.864% on 23^rd April 2020.
 

CSL Limited

Impact of Coronavirus: CSL Limited (ASX: CSL) is involved in the development, manufacturing, and marketing of pharmaceutical and diagnostic products. The market capitalisation of the company stood at $142.14 Bn as on 23^rd April 2020. Recently, the company notified the market with the update on COVID-19 pandemic, wherein, it stated that plasma collection will be impacted and it has undertaken various initiatives to mitigate the impact. CSL also expects some delays in capital projects and clinical trials due to the pandemic.


Financial Performance (Source: Company Reports)

Guidance for FY20: The company has reiterated its profit guidance in the range of around US$2,110 million to US$2,170 million for FY20 on a constant currency basis.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation


EV/EBITDA Based Valuation (Source: Thomson Reuters)
 
Note: All forecasted figures have been taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:  The company has a strong capital position comprising liquidity of around US$1.1Bn. The stock of CSL is trading at a premium P/E multiple of 49.39x as compared to the industry average (Healthcare) of 16.1x on TTM basis. As per ASX, the stock is trading towards its 52-week high levels of $342.750. We have valued the stock using EV/EBITDA based illustrative relative valuation method, and for the purpose, we have taken peers such as Ramsay Health Care Ltd (ASX: RHC), Sonic Healthcare Ltd (ASX: SHL), Resmed Inc (ASX: RMD), etc., and arrived at a target price with limited correction (in percentage terms). Thus, in light of current trading levels and expected correction, we have a watch stance on the stock at the current market price of $306.670 per share, down by 2.038% on 23^rd April 2020.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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