Volpara Health Technologies Limited

Release of proposal to amend MQSA by FDA: A medical technology company, Volpara Health Technologies Limited (ASX: VHT) had made an announcement that the United States Food and Drug Administration (or FDA) had released a proposal to amend Mammography Quality Standards Act (MQSA) in order to include a requirement that all US screening facilities give information on breast density to women as well as their healthcare providers after mammogram. Also, VHT had made an announcement that it had expanded the arrangement with GE Healthcare so that customers outside of the USA can be covered. The new arrangement allows GE Healthcare to distribute VolparaDensity software of Volpara Solutions to the customers worldwide. S&P Dow Jones Indices had made an announcement about the changes in the S&P/ASX indices. Volpara Health Technologies Limited had been added in “All Ordinaries” and the change got effective at the open on March 18, 2019. In the quarter ended December 2018 (i.e. Q3 FY 2019), the cash receipts from the customers were robust as the figure stood at NZ$1.9 million in Q3 FY 2019 reflecting a rise of 192% as compared to Q3 FY18. As per the expectations, the expenses have witnessed a rise on the back of expansion of sales team in the US as well as engineering team in Wellington.


Net Cash Used In Operating Activities in Q3 FY 2019 (Source: Company Reports)

What To Expect From VHT: The company stated that, in FY 2019, its ARR (or Annual Recurring Revenue) is expected to witness the growth of at least 85% from FY 2018. Also, the percentage of the US women covered is anticipated to be at least 7.0% or 2.75 million women. On the balance sheet front, the current ratio increased from 4.29x (1HFY18) to 5.82x in 1HFY19 with debt-to equity ratio of 0.02x. It represents that the company is in a better position to meet the short-term obligations.

Stock Recommendation: The stock of Volpara Health had witnessed increases from the past few months as, in the span of previous six months, it had witnessed the rise of 33.02% and, in the time horizon of previous three months, the stock rose by 28.18%. Currently, the stock is trading towards its 52-week higher level of $1.550. Based on the foregoing and looking at the trading levels, we give an “Expensive” recommendation on the stock at the current market price of A$1.445 per share (up 2.482% on 5 April 2019), and wait for a correction and/ or additional growth catalysts that may boost the momentum from hereon.  

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