Medical Developments International Limited

MVP Details

Review of Balance Sheet: Medical Developments International Limited (ASX: MVP) is engaged in the manufacturing and distribution of a pharmaceutical drug, as well as medical and veterinary equipment. The company has recently, undergone its annual asset impairment review. It expects to recognise a non-cash charge of $7.5 - $8.5 million (after-tax) in the 30 June 2021 account statements.  Its business has been impacted by the COVID-19 pandemic, which resulted in the associated impairment of the intangible assets.

H1FY21 Financial Performance:

• During the period, the company delivered improved net sales to $12.57 million, reflecting an increase of 15.4% on the previous corresponding period.
• It reported a net loss of $1.13 million during the period.
• Cash and equivalents grew by 44.6% to $33.46 million at the end of H1FY21, from a level of $23.15 million at the end of the pcp period.
• Net Tangible Asset Per Share increased by ~1,600% to 28.9 cents during the period.

Increasing Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The prevalence of the COVID-19 pandemic poses a risk to the company’s operations and profitability in the near term.

Outlook: Despite the COVID-19 impact, the company expects a decent H2FY21 sales performance aided by reclamation of the marketing authorisations in Europe and signing of new agreements. It continues to pursue its long-term goals and plans to advance four additional APIs into the scale-up phase during 2021.

 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: As per a recent update, FIL Limited and its entities have become an initial substantial shareholder in the company with a voting power of 5.74%. As per ASX, the stock of MVP is trading below its average 52-weeks’ levels of $3.80-$7.29. The stock of MVP gave a negative return of ~37.19% in the past one year and a negative return of ~18.09% in the past one month. It has a support level of ~$3.76 and resistance level of ~$5.96 We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount to its peer average EV/Sales (NTM trading multiple), considering the loss from operations, increase in cash cycles and impact of COVID-19. For this purpose, we have taken peers such as Ecofibre Ltd (ASX: EOF), Neuren Pharmaceuticals Ltd (ASX: NEU), Probiotec Ltd (ASX: PBP), to name a few. Considering the expected upside in valuation and current trading levels, improvement in net sales, increase in cash equivalents & net tangible asset per share and the key risks associated with the business, we recommend a ‘Hold’ rating on the stock at the current market price of $3.81, down by ~2.807% as on 28 July 2021.

MVP Daily Technical Chart, Data Source: REFINITIV 

Osteopore Limited

OSX Details

Q1CY2021 Performance Update: Osteopore Limited (ASX: OSX) is a medical technology company and commercialises products for bone healing across multiple therapeutic areas.

• The company delivered decent performance during the Q1CY2021 period with revenues of S$327,622, reflecting ~21% increase on the pcp.
• Gross margin stood at 68.2% during the period.
• It ended the period with a cash balance of A$7.9 million as of 31 March 2021.

Increase in Cash Balance from FY19 end to FY20 end Period (Source: Analysis by Kalkine Group)

Change of Interests:  As per a recent update, The Rain Maker MGMT SDN. BHD, a substantial holder of the company, has decreased its voting power from 11.35% to 8.76%, now representing 10,268,345 ordinary shares.

Key Risks: The company’s line of business is exposed to prudent regulatory measures, which has the potential to impact the company’s operations and profitability.

Outlook: The company believes that its cost-effective and high-margin manufacturing process will play a significant part towards achieving profitability in the business. In addition, OSX also has a scalable business model that has quality off-the-shelf products and can be used over 1.1 million procedures globally.

Stock Recommendation: The company has updated that it has received notification of European Medical Devices Directive (MDD) certification and the CE mark has been extended to include 7 new designs. As per ASX, the stock of OSX is trading below its average 52-weeks’ levels of $0.36-$0.735. The stock of OSX gave a negative return of ~24.48% in the past six months and a negative return of ~20.43% in the past one month. On a TTM basis, the stock of OSX is trading at a P/BV multiple of 3.3x, lower than the industry median (Healthcare Equipment & Supplies) of 4.0x, implying undervaluation. Considering the current trading levels & valuation on TTM basis, increase in revenues, efficient & scalable business model, receipt of CE mark and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.370, as on 28 July 2021, 10:56 AM (GMT+10), Sydney, Eastern Australia.

OSX 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 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 analysis has been achieved and subject to the factors discussed above alongside support levels provided.

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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