MedAdvisor Limited

MDR Details

Change in Substantial Shareholding: MedAdvisor Limited (ASX: MDR) is a MedTech company, that offers a world-class medication management platform that empowers patients to manage their medication and improve adherence. Recently, Perennial Value Management Limited (PVM) increased its substantial shareholding from ~9.21% to ~10.52%.

CEO transition to Support US growth opportunities: Recently, its Managing Director & CEO - Robert Read had decided to step down from the current role and will work in the Board to ensure an orderly and seamless transition to a new US-based Group CEO. Since the Adheris acquisition, ~80% of revenues and earnings are now sourced in the US, therefore it becomes really important to make U.S. a focal point.

Financial Highlights of Q3FY22

• Top-Line Update: MDR reported $11.3 million operating revenues for the quarter (down 10.1% on QoQ) and $49.9 million for YTD (up 96.1% on pcp basis). The Australian revenue was up by ~70.4% mainly owing to increased network and transaction. ARR up ~24.0% Y-O-Y to $7.9 million.
• Cash Position: With the cash receipts of $18.2 million (up ~84%), the company closed its accounts with a cash balance as of 31 March 2022 at $8.8 million.

H1FY22 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

The business’ financial and operational performance is susceptible to high competition and threat of substitution. In addition, the business is exposed to complex regulatory framework, which can later entail fines, penalties, etc.

Outlook

The U.S. business was awarded the 2022 Drug Store News REX (Retail Excellence) Award for Technology & Automation. With the Adheris acquisition, ~80% of the revenues and earnings are now sourced in the U.S. Together with these, the company’s CEO’s transition to the US operations makes U.S. the focal point. US revenue had a share of $7.4 million additionally the company received US$3 million (A$4.1 million) for the COVID awareness program, which went live but the same will be recognised in 4QFY22.

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 ~39.23% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.180 - $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 Adheris acquisition and proliferated financial stance, the company might trade at a slight premium to its peers’ EV/Sales multiple median. For valuation, few peers like ImExHS Ltd (ASX: IME), CogState Ltd (ASX: CGS), Beamtree Holdings Ltd (ASX: BMT), and others have been considered. Given the decent revenue surge, contract with API, increased reasonable investments, current trading levels, and upside indicated by valuation, we give a “Speculative Buy” recommendation on the stock at the closing market price of $0.1975, up by ~1.282% as of 27 May 2022.

MDR 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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