Pharmaxis Ltd

PXS Details

Business Update: Pharmaxis Ltd (ASX: PXS) is a pharmaceutical research company, developing and commercialising healthcare products to treat fibrotic and inflammatory diseases globally. As per a recent announcement, the company has issued 85,000 ordinary fully paid shares at a price of $0.089. In addition, the company has announced a result of its phase 1c clinical trial (MF-101) to treat bone marrow cancer myelofibrosis. In addition, following successful recruitment, the company’s second dose cohort of the clinical trial commenced in Australian and South Korean hospitals.

Q3FY21 Key Updates:

• The company has recorded an increase in its revenue to $5.91 million in Q3FY21, compared to $1.28 million in Q3FY20, supported by the Bronchitol sales in Western Europe and the US.
• PXS has reduced its loss to $0.95 million in Q3FY21 from $9.53 million in Q3FY20. The sale of Russian rights aided the company to cut its annual cost by ~A$1 million.
• The company has reported receipts from customers of $1.18 million in Q3FY21.
• The cash balance of the company stood at $16 million as of 31 March 2021.
• The company has raised the capital of $4.1 million in April 2021, through institutional placement.

Financial Performance (Source: Analysis by Kalkine Group) 

Key Risks: There has been a significant delay in clinical trials due to the COVID-19 pandemic, which could impact the company’s operations.

Outlook:

• The company has announced to release its quarterly shareholder update on 28 July 2021 and conduct a virtual investor briefing on 29 July 2021, to present past progress and plans.
• Pharmaxis has focused on developing PXS-5505for myelofibrosis that aims to break down the fibrotic tissue in the tumor and enhance the effect of chemotherapy treatment.
• The collaboration with Prof Fiona Wood’s research group at the University of Western Australia (UWA) in Perth could benefit the patient and have significant commercial value.

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, the company has announced a sale of the Australian distribution rights for Bronchitol and Aridol for $2 million in Australia, New Zealand, and several Asian territories to BTC Health, effective 1 July 2021. The stock of PXS is trading below its average 52-weeks' levels of $0.071-$0.170. The stock of PXS gave a positive return of ~12.04% in the past one year and a positive return of ~24.0% in the past one month. On a technical analysis front, the stock of PXS has a support level of ~$0.080 and a resistance level of ~$0.110. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price with a correction of high single-digit (in % terms). We believe that the company can trade at some discount to its peer average EV/Sales (NTM trading multiple), considering the uncertainty led by COVID-19 impact and delays in the clinical trial. For this purpose, we have taken peers such as Probiotec Ltd (ASX: PBP), Mayne Pharma Group Ltd (ASX: MYX), Cann Group Ltd (ASX: CAN), to name a few. Considering the current trading levels and valuation, the recent rally in the stock price, losses in 3QFY21 and the key risks associated with the business, we suggest investors to book profit and give a 'Sell' rating on the stock at the current market price of $0.096, as on 28 July 2021, 3:53 PM (GMT+10), Sydney, Eastern Australia.

PXS Daily Technical Chart, Data Source: REFINITIV 

Wellard Limited 

WLD Details

Wellard Limited (ASX: WLD) engages in shipping, logistic activity for the supply of livestock and export in the international market.

Key Update for the Quarter Ended 30 June 2021:

• The company has generated cash from operating activities was US$5.7 million in Q4FY21 whereas US$9.6 million in FY21, driven by the excellent utilisation of Wellard’s vessels throughout the quarter.
• Wellard has reported receipt from customers of US$14.7 million in Q4FY21 vs US$43.5 million in FY21.
• The company has negotiated with Ruchira Ships Limited for M/V Ocean Drover to expand the lease term extension from December 2021 to December 2022, with a maturity of US$4.3 million.
• The company exited the quarter, with a cash balance of US$6.73 million, up 9% from US$6.1 million held as on 31 March 2021.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks:

• WLD is battered by risk associated with its marketing and export activities, political and regulatory risks and operational and financing risks.
• The company is exposed to price volatility in the global market, which could have a negative effect on its earnings.
  

Outlook: The Government has granted relief and tax incentive of US$22K in Q4FY21, which is expected to support the company in carrying out its operations effectively. Further, the company witnessed robust demand for its vessels by supplying breeding cattle out of southern Australia, New Zealand, and South America. This, in turn, aided the company to strengthen its foothold in the Northern Asian markets and expects the demand to further continue in Q1FY22. 

Stock Recommendation: As per a recent announcement, the company negotiated with Heytesbury Singapore Pte Ltd to extend the long-term bareboat charter of the M/V Ocean Swagman from March 2022 to June 2023. On a technical analysis front, the stock of WLD has a support level of ~$0.058 and a resistance level of ~$0.086. The stock of WLD is trading above its average 52-weeks' levels of $0.040-$0.086. The stock of WLD gave a positive return of ~80.48% in the past one year and a positive return of ~21.31% in the past one month. On a TTM basis, the stock of WLD is trading at an EV/EBITDA multiple of 2.6x, higher than the industry average (Food & Tobacco) of 1.5x. Considering the current trading levels and valuation on TTM basis, recent rally in the stock price, impact of COVID-19 pandemic and the key risks associated with the business, we give a 'Sell' rating on the stock at the current market price of $0.074, as on 28 July 2021, 11:20 AM (GMT+10), Sydney, Eastern Australia.

WLD 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.

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