Doctor Care Anywhere Group Plc

DOC Details

Extended Losses Lead by Higher Cost: Doctor Care Anywhere Group PLC (ASX: DOC) utilise cloud-based technology for health insurers, healthcare providers and corporate customers to connect with patients and deliver a range of health services. It integrates virtual consultations with asynchronous diagnostic reviews through its cloud-based technology. DOC has incurred a significantly higher total cost in FY20. The operating cost increased to £3.07mn in the year ending on 31 December 2020 as compared with £0.85mn in the year ending December 2019. Similarly, during the same period, R&D cost increased to £2.18mn from £1.28mn and general and administration cost to £13.55mn from £5.91mn. Higher costs lead to extended losses for DOC. The company has registered a loss of £31.27mn in FY20 as compared with £5.67mn in FY19. 

Better Performance Against Forecast: DOC has posted a 5.8% increase in revenue for FY20 to £11.6mn as compared with prospectus forecast of £10.9mn for FY20F on the back of increased consultation. DOC posted an EBITDA loss of £8.7mn for FY20 against a forecast of £10.2mn for FY20F. This was due to lower offer costs linked with the company’s IPO and recharges growth to the Joint Venture with AXA health.

Partial disinvestment in its subsidiary: As per the company reports, on 31 January 2020, DOC has partially sold its subsidiary’s stake to AXA health. The company has sold 50% of the issued capital for Doctor at hand Diagnostic Limited, a subsidiary of DOC to AXA health at a total consideration of £3mn. 

Financial Results (Source: Company Reports)

Outlook: DOC is expected to add clinical pathways and services by providing their services in mental health and virtual self-pay diagnostics and specialists. The company is looking to expand internationally in Europe and APAC region and see a potential value in Health Analytics & chronic disease management. 

Valuation Methodology: EV/Sales based Relative Valuation Method (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: In the last one month, DOC has decreased by 12.91% and increased by 36.60% in the last three months. The current market capitalisation of DOC stands at ~$337.81mn as on 9 March 2021. The stock is currently trading slightly below the average 52-weeks’ price level range of $0.750-$1.520. On the technical analysis front, the stock has a support level of ~$0.922 and resistance of ~$1.099. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method. We believe that the company can trade at a slight discount as compared to its peer median, considering the cool off period post COVID-19 situation and change in the patient’s preferences to take a tele consultation. For the purpose we have taken peers Alcidion Group Ltd (ASX: ALC), Cochlear Ltd (ASX: COH), Medical Developments International Ltd (ASX: MVP), to name few. Considering the COVID-19 led uncertainties, increased losses in FY20, higher expenditure, volatility in price movement, and valuation, we give an “Avoid” rating on the stock at the current market price of $1.045, down by 1.416% as on 9 March 2021. We also suggest our investors to wait for better entry levels.

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

Althea Group Holdings Limited

AGH Details

Expanding Internationally: Althea Group Holdings Ltd (ASX: AGH) holds licenses and permits for the import, cultivation, production, and supply of medicinal cannabis. The company distributes five Althea branded medicinal cannabis products. As per the company report, AGH is signing agreements within different nations to make its products available in order to garner additional revenues. AGH is able to get licences from Germany’s health regulator (BfArM) to make its products available for sale and distribution in Gremany. In February 2021, AGH in collaboration with Nimbus Health GmbH shipped $1mn worth of products to Germany. AGH is looking for revenue of ~$650,000 over a period of 2.5 years through its subsidiary Althea Company Pty Ltd, signing an agreement with MG Biotech Ventures (Pty) Ltd and AfriCann (Pty) Ltd to export Althea products to South African markets.

Revenue Highlights (Source: Company Reports)

Initial Order from Cronos Group: AGH’s subsidiary, Peak Processing Solutions has received an order worth CAD$134,000 from Cronos Group’s subsidiary, Peace Naturals Project Inc. The production for the order is expected to begin in March 2021. Under the agreement, Peak will be providing ready to sale product in the Canadian market by performing hydrocarbon extraction of cannabis biomass. Peak has received a similar order on 22 February 2021 from WeedMD Rx Inc. for the value of CAD$130,000 to be delivered in March 2021.

Outlook: The company continued to grow strongly in the UK and Australia. The revenues were grown by 90% in the month of December 2020 to $209,706 as compared with November 2020. AGH, in collaboration with Lyphe group in UK, has made their products available for sale. The company will remain focus on strategic initiatives and shareholder value for the rest of FY21. 

Stock Recommendation: In the last one month, AGH has decreased by 12.49% and by 14.95% in the last three months. The current market capitalisation of AGH stands at ~$124.62mn as on 9 March 2021. The stock is currently trading above the average 52-weeks’ price level range of $0.150-$0.670. On the technical analysis front, the stock has a support level of ~$0.419 and a resistance of ~$0.575. On the valuation front, the stock is trading at a P/B multiple of 2.7x as compared to the industry median of 10.9x on a TTM (Trailing Twelve Months) basis. Considering the above factors, international expansion, especially in the UK and Australia, valuation on TTM basis, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.455, down by 4.211% as on 9 March 2021.

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

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