IDT Australia Limited

IDT Details

Director’s Resignation: IDT Australia Limited (ASX: IDT) is engaged in supplying products, research, and development in the pharmaceutical space, including medicinal cannabis. In a recent update, IDT announced the retirement of Ms. Mary Sontrop as the Director effectively from 16 November 2021 and lodged an Appendix 3Y notifying the sale of Ms. Sontrop’s shares.

AGM Presentation Highlights:

• Profitable Bottom-Line: The company returned to profitability in FY21 after posting its first operating profit in 2009. The NPAT in FY21 rose by ~209.6% YoY to ~$2.1 million from a loss of ~$1.9 million in FY20.
• Licence Grant from TGA: During FY21, IDT executed the Letter Agreement with the Australian Department of Health to bring its sterile manufacturing facility into a state of readiness to offer COVID-19 vaccine manufacturing services. It has received the sterile manufacturing licence from TGA (The Therapeutic Goods Administration). The facility can now be used to aid a range of sterile contract manufacturing and product development opportunities.
• Engagement With Regulators: IDT is engaging with the MIPS (Monash Institute of Pharmaceutical Sciences) and Victorian Government to provide cGMP accredited manufacturing services to develop the country’s first mRNA COVID-19 receptor binding domain vaccine.

Total Revenue & Net Income Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces regulatory delays, forex headwinds, peer competition. It also faces the risk of developing contract services and new products for its medicinal cannabis customers.

Outlook:

• The company has finalised the process development of cannabis resin products and continuing with the implementation of its medicinal cannabis manufacturing plan. It is expanding the stability data for oil-in-bottle and flower-in-bottle products and progressing with a pipeline of new product development avenues.
• In FY22, IDT plans to grow its range of proprietary medicinal cannabis products and establish the Boronia manufacturing facility in Victoria as a centre of excellence to produce GMP medicinal cannabis products.
• The company will progress talks with the Australian & Victorian Government, Australian National, and Monash University, and others to produce COVID-19 vaccines and other therapeutics locally and mitigate Australia’s dependence on imported medicines.

Stock Recommendation: The stock of IDT gave a negative return of ~23.21% in the past one month and a negative return of ~36.29% in the three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.165 - $0.755. On a TTM basis, the stock of IDT is trading at a price-to-book value multiple of 3.4x, lower than the industry (Biotechnology & Medical Research) median of 4.9x, thus seems undervalued. Considering the current trading levels, receipt of sterile readiness for the manufacturing facility from TGA, finalisation of development of proprietary medicinal cannabis products, return to profitability, valuation on a TTM basis, market volatility, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.39, as of 29 November 2021, 10:30 AM (GMT+10), Sydney, Eastern Australia.

IDT Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: 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.

Technical Indicators Defined: -

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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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