Volpara Health Technologies Limited 

VHT Details

Change in Director’s Interest: Volpara Health Technologies Limited (ASX: VHT) is a research, development, and manufacturing company that provides breast imaging analytics and analysis products based in New Zealand. VHT has announced on change of director’s interest on 4 May 2021. Monica Saini, the director with VHT has acquired an additional 180,000 shares for a total consideration of A$108,000 on 1 June 2021. 

Significant Improvement in ARR & ARPU: VHT has seen a significant increase in Annual Recurring Revenues (ARR) to NZ$27.9mn in FY21 against NZ$18.0mn in FY20. Similarly, the company has registered an increase in its Average Revenue Per User (ARPU) to US$1.40 in FY21 by selling its Volpara Breast Health Platform. 

FY21 Financial Highlights: VHT has registered an increase in revenue to NZ$19.74mn in FY21 against NZ$12.60mn in FY20 on an increase in contracts with customers and SaaS only revenue. The company has incurred a loss of NZ$17.48mn in FY21 due to higher operating costs. VHT has seen an increase in its cash balance to NZ$7.87mn as on 31 March 2021 against NZ$3.67mn as on 31 March 2020.

Revenue Growth (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to foreign exchange prices. Thus, any adverse movement in foreign exchange prices may impact the financials of the company. In addition, the company utilises technology to operate its business. Therefore, any obsolete technology may impact the business of the company. 

Outlook: VHT is well placed to capitalize the risk and genetics markets with its existing product suite and addition of CRA’s market-leading risk software. The company is looking to increase its revenue by 27-32% over FY21 by selling cancer screening software platform. The company is likely to invest in Volpara Lung in FY22 and onwards due to a high potential segment. After the recent mandate by CDC to improve access for patients seeking lung screening, VHT expects doubling of addressable market.

Valuation Methodology: EV/Sales based Relative Valuation Method (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 VHT gave a return of ~-1.59% in the last one month and a return of ~-8.88% in the last six months. The current market capitalisation of VHT stands at ~$304.09mn as of 9 June 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$1.190~$1.715. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with a low double-digit upside (in % terms). We believe that the company can trade at some premium as compared to its peer median, considering an increase in its top line in FY21 and a significant rise in ARR and ARPU in FY21. For this purpose, we have taken peers Pro Medicus Ltd (ASX: PME), Nanosonics Ltd (ASX: NAN), Next Science Ltd (ASX: NXS). Considering the company expects a growth in revenues over FY21, investing in a high potential lung screening technology Volpara Lung, robust balance sheet with an increase in cash balance as on 31 March 2021, associated business risks, and valuation, we recommend a “Speculative Buy” rating on the stock at the current market price of $1.23, up by ~1.652% as on 9 June 2021.

VHT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision 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 Valuation has been achieved and 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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