PainChek Limited

PCK Details

A Quick Glimpse at FY21 Highlights: PainChek Limited (ASX: PCK) is a developer of pain assessment technologies. The company has developed a smartphone-driven device, PainChek®, to measure pain levels and update the medical record on the cloud.

• Licencing Deal: for the year ended 30 June 2021, PCK inked an annual PainChek license deal for over 1500 residential aged care (RAC) facilities, which comprised 129,000 beds, thus depicting ~60% of the Australian market (in beds). Beds under license skyrocketed 110% year over year, indicating a propelling annual recurring revenue (ARR) prospect of up to $5.6 million.
• Obtaining Regulatory Approval: In FY21, the company received regulatory authorisation for its first version of the PainChek Infant App in Europe, Australia, and certain other markets. Moreover, the company unveiled its Universal App in Australia and Europe in FY21. The move has widened PCK’s application of the adult App, ensuring PainChek can be extended to manage pain assessments for all adults.
• Rise in Expenditure: In FY21, research expense increased to $2.65 million, compared to $2.27 million reported in FY20.
• International Expansion: Despite the COVID-19 led uncertainties, the company continued to bolster its presence in the UK market with a local sales and marketing team, leading to over 1,000 total beds, with further planned development of 1,500 beds. In New Zealand and Singapore New, the company ramped up sales of Residential Aged Care and formed a collaboration for the Home Care sector in Canada.

Top and Bottom-Line Highlights; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of seeking timely regulatory approvals for launching new products/Apps in different geographies. The company is also exposed to risks associated with general global economic and market conditions.

Outlook: In FY22, the company plans to unveil the Painchek Infant App in Australia for post-operative and post-vaccination infant pain evaluation by users as well as healthcare professionals. PCK will continue to evaluate new market entry opportunities in Asia, Canada, and Europe and seek US market clearance for the de-Novo application with the FDA.

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 company exited FY21 with a cash balance of $11.42 million, up from $6.12 million at the end of FY20. The stock of PCK gave a negative return of ~23.33% in the past six three months. The stock is currently trading at par to its 52-weeks’ low level of $0.044. The stock has been valued using an Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering general global economic and market conditions, regulatory and legislative pressures, declining top-line, etc. For this purpose of valuation, few peers like CogState Ltd (ASX: CGS), Beamtree Holdings Limited (ASX: BMT), Pro Medicus Limited (ASX: PME), and others have been considered. Considering decent liquidity position, expanding geographical presence, increase in active licensed beds, RAC facilities in FY21, regulatory clearances, indicative upside in the valuation, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.044 as on 14 October 2021, 12:30 PM, (GMT+10), Sydney, Eastern Australia.

PCK 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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