iCollege Limited

ICT Details

ICT Off-Market Takeover Bid for RedHill Education: iCollege Limited (ASX: ICT) is engaged in providing vocational education and offers training solutions of knowledge-based skills to gain employment.

• In an off-market takeover bid, ICT informed the market that it has plans to acquire up to 100% of the ordinary shares in RedHill Education Limited. ICT recently stated that it is broadening the offer period to 20 September 2021, unless revoked or extended following the Corporations Act 2001.
• In another update, subject to the due diligence condition, the company stated that it has agreed to differ the Offer by raising the bid consideration, from the initial offer of 7.6 ICT Shares for every 1 RedHill Share to 9.5 ICT Shares for every 1 RedHill Share.
• Notably, in the absence of a Superior Proposal, ICT has declared its Offer consideration as final. RedHill Directors have recommended and accepted the revised ICT Offer, pertaining that the amended offer will deliver a substantial premium for RedHill shares. The transaction will also aim to assimilate two highly complementary businesses to create a well-capitalised, scaled and leading education portfolio. The revised offer will expand RedHill’s earnings base and bring immediate cost and revenue synergy opportunities.
• The Revised ICT Offer is scheduled to close on 20 September 2021, unless extended by iCollege.

Issuance of Options: On 12 August 2021, ICT informed the market regarding the issuance of 5,000,000 unquoted options to important advisors to the business pertaining to share placement to professional and sophisticated investors. The options were issued at nil cost and are exercisable at 15 cents per ordinary share, with an expiry period on 9 November 2023.

FY21 Key Results Update:

• Increase in Revenues: Revenues from operation in FY21 stood at $16.29 million, up from $10.81 million.
• Rise in Operation EBITDA & NPAT: During the period, the company reported operating EBITDA of $2.02 million, compared to a loss of $1.04 million reported in FY20. NPAT in FY21 came in at ~$317k, compared to loss of $2.64 million reported in FY20.

Revenue Highlights (Source: Analysis by Kalkine Group)

Risk Analysis: The company is exposed to risks associated with general global economic and market conditions. Also, risks related to the restrictions on the travel ban and international border closure might have an impact on overseas student enrolments.

Outlook: The company remains on track to witness growth in its domestic training operations and expansion into new training areas. In addition, a stable contribution from the international student business adds to the positives. Moreover, the company is actively pursuing expansion opportunities in New South Wales and Victoria via potential acquisition.

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 of the company has been corrected by ~23.33% in the past six months. Currently, the stock has a 52-week’s high and low level of $0.044 and $0.170, respectively. The company 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 some discount as compared to its peers’ average, considering risks related to closer of international borders and travel restrictions, COVID-19 led uncertainties, etc. For the purpose of valuation, peers like IDP Education Ltd (ASX: IEL), Tabcorp Holdings Ltd (ASX: TAH), and other, all falling under consumer discretionary space, have been considered. Considering decent FY21 performance, optimistic outlook in the long run, takeover bid for RedHill Education, expanding international footprint, valuation, and current trading level, we recommend a “Speculative Buy” rating on the stock at the market price of $0.105, as on 19 August 2021, 11:30 AM (GMT+10), Sydney, Eastern Australia.

ICT Daily Technical Chart, Data Source: REFINITIV 

Note: The purple color indicates RSI (14-days period), green color represents the volume, sky blue and red color lines indicates SMA for 50 and 21-day period. 

AdAlta Limited

1AD Details

AdAlta Limited (ASX: 1AD) is a clinical-stage biotechnology company, focused on creating novel therapies for high unmet medical conditions.

Key Findings from Q4FY21:

• GE Healthcare has extended its research agreement with AdAlta, as there is a progression of a panel of granzyme B i-bodies into preclinical development.
• The company has reported that its Phase I clinical and PET imaging programs have achieved their objectives, with several doses of AD-214 well tolerated in healthy volunteers.
• The company received an advance of $1.68 million in loan facility from Radium Capital.
• 1AD reported operating cash inflows of $211,121 in Q4FY21, compared to $111,257 in the prior quarter. The cash flows were aided by research fees from GE Healthcare and grants from BTB.
• The cash position stood at $5.79 million at the end of the quarter compared to $6.05 million as at 31 March 2021.

Cash Highlights (Source: Analysis by Kalkine Group)

Key Risks: The company is a clinical-stage bio-technology company. As such there is a high amount of investments into its R&D. Therefore, there is a risk of profitability if the R&D investments do not fructify.

Outlook: The company remains focused to maximise the products developed using its i-body platform. In order to advance the development of its i-body platform, the company has been conducting collaborative partnerships. In this regard, it has an agreement with GE Healthcare to co-develop i-bodies as diagnostic imaging agents against Granzyme B.

Valuation Methodology: EV/Sales Flow 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 ASX, the stock of 1AD is trading below its average 52-weeks’ levels of $0.080-$0.265. The stock of 1AD gave a negative return of ~51.89% in the past six months. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ median EV/Sales (NTM trading multiple), considering the positive data from phase 1 clinical trials, synergies from partnership agreement, decent operating cash inflows, etc. For the purpose of valuation, peers such as Medlab Clinical Ltd (ASX: MDC), CSL Ltd (ASX: CSL), and others have been considered. Considering the current trading levels, indicative upside in valuation, positive Phase 1 results, strategic collaboration and the key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the market price of $0.087, as on 19 August 2021, 12:30 PM (GMT+10), Sydney, Eastern Australia.

1AD Daily Technical Chart, Data Source: REFINITIV

Note: The purple color indicates RSI (14-days period), green color represents the volume, sky blue and red color lines indicates SMA for 50 and 21-day period.

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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