Nanosonics Limited

Decreased Director’s Stakes In NAN: Nanosonics Limited (ASX: NAN) is a health care company which manufactures and distributes trophon EPR ultrasound probe disinfector and its associated consumables and accessories. It has an engagement in research, development, and commercialization of infection control and decontamination products and related technologies.

The company recently declared that one of its Directors named Dr David Fisher had offloaded 40,000 (direct) ordinary shares for the consideration of $182,909.68 as on 26 April 2019. Thus, post this development Dr David Fisher now has a direct stake in 248,424 fully paid ordinary shares & an indirect stake in 165,516 ordinary shares.

In another update, the company announced about the French Ministry of health issuing guidance for the appropriate disinfection of endocavitary ultrasound probes.The recommendations state the requirement of endocavitary ultrasound probes should undergo intermediate level disinfection even if a sheath is used. It also discusses the benefits if automated disinfection as being standardised, reproducible, traceable, and time-efficient.

Key Metrics of H1FY19: Revenue from contracts with customers increased by 36% pcp to $40.7 Mn. Profit after income tax increased by 221% pcp to $7.1 Mn. The cash balance witnessed the rise of $1.8 million to $71.3 million. The company recorded a current ratio and quick ratio of 8.11times and 7.11 times, respectively for 1HFY19. This is higher than the industry average of 2.48x and 1.74x, respectively. The higher than average industry current ratio indicates that the company is better-placed to payout its short-term obligations.


H1FY19 NAN Revenue Metrics (Source: Company Reports)

What To Expect: The company aims to expand its footprint into the new markets. It is expected that NAN will continue to invest in R&D to build a pipeline of new potential product opportunities with a goal of introducing a range of new products over time commencing with the first by the end of FY20 (subject to regulatory approval).

Moving forward, the company expects ongoing investments in infrastructure, people and capability to drive strategic growth agenda.

Stock Recommendation: Its EBITDA margin for H1FY19 stands at 24.7% lower than the industry median of 27.9%. Its ROE for H1FY19 stands at 7.3% lower than the industry median of 8.7%. In the last one year, the share price rose by 90.23% as at May 02, 2019 and is trading close to a 52-week high level of $5.020. Hence, we presume that there might be a possibility of correction in the upcoming trading session. By looking at a sharp run in the stock price over the one year, we suggest investors to book profit at the current level and liquidate their holdings. Hence, we recommend a “Sell” rating on the stock at the current market price of $4.870. 

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