MedAdvisor Limited

MDR Details

H1FY22 Financial and Business Overview: MedAdvisor Limited (ASX: MDR) is a developer of a medication management platform, MedAdvisor, to connect users with pharmacies and a network of GPs. On 18 February 2022, MDR announced its entry into the New Zealand market via a three-year agreement with Green Cross Health Limited. The deal will facilitate MDR with nearly 40% of the New Zealand pharmacy market.

• Top-Line Performance: Total revenue in H1FY22 increased by 23.6% PcP to ~$38.7 million. Following the integration of Adheris, the US segment performed well with revenue growth of 22.0% PcP to $32.1 million. Australian segment operating revenue edged up by 33.0% to $6.6 million, primarily driven by investments in sales & marketing and increased market capacity from the API deal.
• Bottom-Line Performance: Adjusted EBITDA stood stable at a loss of $5.3 million after considering significant business investments of approximately $2 million concerning improving the Thriv product offering, IT infrastructure development, and digitalization initiatives.
• Financial Position: Operating cash flow improved with an outflow reduction of $1.2 million, with MDR moving closer towards break-even operating cash flow, followed by stringent receivables management. AU pharmacy footprint has widened to over 4,000, and AU patients have increased by ~36% to 2.4 million.

H1FY22 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

MDR posted a loss after tax of $7.52 million in H1FY22. The company holds a trend of losses driven by higher capex activities and acquisitions & restructuring costs, which may significantly drain cash levels. Considering global operations in place, adverse foreign exchange movements may affect a company’s financial performance.

Outlook

MDR reaffirms its FY22 guidance of revenues in the range of $72 million and $74 million and gross margin targeted at 53% to 54% (based on an exchange rate of AUD: USD of $0.73. The company remains committed to driving health programs in Australia with its five-year agreement with API acceleration growth. The Walmart contract represents a substantial growth opportunity, allowing MDR to deliver a full suite of digital offerings to Walmart customers.

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 MDR gave a negative return of ~12.162% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $0.230 - $0.415. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the mounting losses, forex headwinds and stringent regulations, the company might trade at some discount to its peers’ average EV/Sales multiple. For valuation, a few peers like ImExHS Ltd (ASX: IME), Beamtree Holdings Ltd (ASX: BMT), Ansell Ltd (ASX: ANN) and others have been considered. Given the significant top-line upshift, improved EBITDA, decent outlook, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.315, as of 3 March 2022, 10:30 (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

MDR 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 depend on the investors’ appetite for upside potential, risks, holding duration, and previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and is subject to the factors discussed above.

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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