Stocks’ Details
 

Capitol Health Limited

CAJ Raises $29.8m in Placement to Institutional Investors: Capitol Health Limited (ASX: CAJ) is a leading provider of diagnostic imaging and related services to the Australian healthcare market. As on 16 April 2020, the market capitalization of the company stood at $150.85 million. The company has recently announced that it has raised $29.8 million from placement to institutional investors. These proceeds will be used to strengthen balance sheet flexibility, reduce net debt, and fund potential future acquisitions and other growth initiatives.

Decent Improvement in Financials: During 1H20, the company reported an increase of 11% in revenue to $8.2 million and a growth of 15% in underlying EBITDA to $1.8 million. The improvement in financial performance was supported mainly through growth in ageing population. During the half year, the company strengthened its management team and also commenced new cardiac imaging services.


1H20 Financial Performance (Source: Company Reports)

Growth Opportunities: The company is focusing on improvement in cost to serve of the business and expects market growth to return to a longer-term average. CAJ is focusing on existing businesses and is working to bridge human and AI to advance medical diagnostics.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation

Price to Earnings Multiple Based Approach (Source: Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As per ASX, the stock of CAJ is inclined close to its 52-week low level of $0.155, proffering a decent opportunity for accumulation. During 1H20, EBITDA margin of the company was 22%, higher than the industry median of 10.8%, indicating higher profitability. Capitol Health is well placed to navigate the impact of covid-19 pandemic and has implemented a range of operational measures to manage through this difficult period. Considering the trading levels, improvement in margins and positive outlook, we have valued the stock using Price to Earnings based illustrative relative valuation method and have arrived at a target upside of lower double-digit (in percentage terms). Hence, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.200, up by 2.564% on 16 April 2020, owing to its recent update regarding placement to institutional investors. 

Starpharma Holdings Limited

SPL7013 Shows Significant Activity Against COVID-19: Starpharma Holdings Limited (ASX: SPL) is a biotechnology company which is engaged in the development of dendrimer technology for pharmaceutical, life science and other applications. As on 16 April 2020, the market capitalization of the company stood at $346.48 million. The company has recently announced that its proprietary VivaGel® active, astodrimer sodium (SPL7013) have significant antiviral activity against the coronavirus that causes COVID-19. The company will now start short-term preclinical studies and will confirm the pathway with regulatory authorities.

Quarterly Financial Highlights: The company has recently released its cashflow report for the quarter ended 31 March 2020, wherein it reported cash balance of $36.1 million and net operating cash outflows of $0.9 million. The company has also received US$3 million from AstraZeneca for the successful dosing of the first patient in the phase 1 DEP® clinical trial for AZD0466.


Quarterly Cash Flow (Source: Company Reports)

Future Expectations and Impact of COVID-19: The company has implemented a broad program of measures to minimize the risk from global pandemic of COVID-19. Starpharma is well-positioned with ongoing programs operating across each portfolio. 

Stock Recommendation: As per ASX, the stock of SPL gave a return of 11.38% in the past one month and is moving towards its 52-weeks’ high level of $1.445. During 1H20, gross margin of the company stood at 88.5%, higher than the industry median of 68.3%. This indicates that the company is managing its costs well and is able to convert its revenue into profits. Considering the current trading levels, improvement in margins and decent outlook, we recommend a ‘Hold’ rating on the stock at the current market price of $1.10, up by 18.28% on 16 April 2020.

Osteopore Limited

FY19 Financial Highlights: Osteopore Limited (ASX: OSX) is engaged in the production of 3D printed bioresorbable implants that are used conjunction with surgical procedures to assist with the natural stages of bone replacement. As on 16 April 2020, the market capitalization of the company stood at$50.62 million. During FY19, the company recorded $0.41 million in revenues and gross profit of $0.29 million. At the end of FY19, the company had a net assets of $2,967,280. 


FY19 Financial Highlights (Source: Company Reports)

Update on Company’s Position Amidst COVID-19: The sales of the company remain strong and has not been significantly impacted by COVID-19 to date. The Singapore manufacturing facility remains fully operational and the supply chain of materials are fully operational.

Future Expectations: The company stated that the future sales growth will be supported by expanding production capacity and is confident that the current capacity is sufficient to meet customer demand. The company remains well-placed to continue momentum deeper into 2020 and is aiming to achieve multiple clinical and corporate milestones.

Stock Performance: As per ASX, the stock of OSX gave a return of 25% in the past one month and is trading close to its 52-weeks’ low level of $0.275. Despite the challenging times, Osteopore is continuing to progress key business development initiatives. The stock is placed in trading halt due to a pending announcement till 20 April 2020 or when the such announcement is released, whichever is earlier. The stock last traded at the market price of $0.470 per share.
 
 
Comparative Price Chart (Source: Thomson Reuters)

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