NEXT SCIENCE LIMITED

NXS Details

The report is an updated version of the report published on 30^th May 2022 at 3:55 pm GMT.

Business Updates: Next Science Limited (ASX: NXS) operates in GICS- Health Care Supplies sector where its prime activity includes the commercialization and development of XBIO technology.  

• NXS has signed a multi-year agreement with Oraderm Pharmaceutical (medical sales joint venture between Arrotex pharmaceutical and Douglas pharmaceuticals) for distribution of the company’s antimicrobial wound gel, BlastX in Australia, and New Zealand.
• Recently, Judith Mitchell announced to retire as CEO of NXS before 30^th June 2023. However, management indicated that the next CEO will be from the USA.

Key Updates from AGM:

• The company has established a new exclusive distribution partnership with TELA Bio Inc, to sell XPERIENCETM in US plastic surgery market. NSX also supplemented its manufacturing capacity by expanding its relationship with Holopak in Germany.
• NXS expanded its balance sheet by raising A$14.9mn by completing the placement of new stocks to sophisticated and institutional investors, with the aim to support working capital requirements.

March Quarter Highlight, (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to various financial risks like credit risk, and liquidity risk. NXS is also exposed to market risk, such as change in foreign exchange rate.

Outlook: A decent Q1FY22 results, and the recent FDA approval in April 2021 for XPERIENCETM, marks an important milestone for NXS, with the potential to significantly accelerate its revenue in the future. Management’s future focus will be on optimising distribution partnerships into improved and enhanced relationships. NXS aims to expand BlastX customer base under a direct selling model after the successful transition of BlastX distribution back to Next Science Ltd.  With respect to accelerating future revenue, the company focuses on supplementing manufacturing capacity and diversifying its supply chain by broadening its relationship. 

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: The stock is currently trading below its average 52-week low-high level of $0.795-$1.980, offering a decent opportunity for accumulation. The stock went down by ~5.08% in the past one month. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount to its peers, considering the pandemic’s impact on the NXS US market and negative margins. For the purpose of this valuation, a few peers like Nanosonics Ltd (ASX: NAN), Polynovo Ltd (ASX: PNV), Anteris Technologies Ltd (ASX: AVR), and others have been considered. Considering the upside valuation, better Q1FY22 results, optimisation of distribution partnership, expected growth in XPERIENCE^TM product, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.830, as of 30^th May 2022, 12:55 PM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

NXS 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 for 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 a 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 price

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