Ansell Limited

ANN Details

Buy-Back Update: Ansell Limited (ASX: ANN) operates through two segments: Industrial Global Business Unit (GBU) and Healthcare Global Business Unit (GBU). It is a safety protection solutions company which develops, manufactures, sources, and distributes gloves and other personal protective equipment. A total of 2,907,588 shares have been bought back by the company till 8^th March 2022 and 5,000 on the very date.

1HY22 Operational Highlights

• Change in Substantial shareholding: Recently, Allan Gray Australia Pty Ltd and its related bodies corporate became ANN’s substantial shareholder with voting power of ~5.21%.
• Balance Sheet Items: The company closed its accounts with a cash balance of US$179.8 million at the end of 31^st December 2021 versus US$235.6 million at the end of 30^th June 2021.

Key Metrics (Source: Analysis by Kalkine Group)

Key Risks: The company is vulnerable to the risks associated with the impacts of COVID19 and the new variant Omicron, which affects its operations and thus impacts sales. Other risks are its regulatory risks, compliance risks and stiff competition.

Outlook: The company expects no significant loss of manufacturing output in coming 2HFY22 and a decline in Exam/SU prices and outsourced supplier costs in 1HFY23. Due to seasonality, ANN expects higher production and therefore sales growth in Industrial and for Surgical and Life Sciences businesses within HGBU, which keeps an expectation of EPS guidance of 125¢ - 145¢ provided on 31^st January 2022 on track.

Valuation Methodology: P/E Value 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 ANN gave a negative return of ~28.66% in the past year. The stock is currently trading lower than the 52-weeks average price level band of $23.760 - $44.070. The stock has been valued using the P/E Value multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering regulatory requirements risks and slightly falling gross and net margins, the company might trade at a slight discount to its peers’ P/E Value multiple average. For valuation, few peers like Sonic Healthcare Ltd (ASX: SHL), Ramsay Health Care Ltd (ASX: RHC), Healius Ltd (ASX: HLS) and others have been considered. Given the 1HFY22 performance, reducing debt-to-equity ratio, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Buy” recommendation on the stock at the current market price of $24.970, as of 9 March 2022, 10:35 AM (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.

ANN Daily Technical Chart, Data Source: REFINITIV

Opthea Limited

OPT Details

Removal from S&P/ASX 300 Index: Opthea Limited (ASX: OPT) is a biotechnology company and it is involved in developing and commercialising therapies mainly for eye diseases. OPT’s lead product candidate is OPT-302. On 8^th March 2022, OPT was removed from S&P/ASX 300 Index, effective from 22^nd March 2022.

1HY22 Operational Highlights

• Change in Substantial shareholding: Recently, Bank of America Corporation and its related bodies corporate and Regal Funds Management Pty Ltd (RFM), increased their voting power to ~8.18% and ~11.58% (ordinary), respectively.
• Balance Sheet Items: The company closed its accounts with a cash balance of US$88.27 million at the end of 31^st December 2021 versus US$118.19 million at the end of 30^th June 2021.

1HFY22 Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges: OPT faces clinical trial, approval and development risks associated with the development of novel therapies and commercialization. The company meets additional risks of patent protection, COVID-19 uncertainties, and regulatory requirements.

Outlook: Over the coming 12-18 months, OPT will continue to work with a global Clinical Trial Organization (CRO) to quicken clinical trial activations to identify eligible patients for enrolment into the ShORe and COAST trials. They also expect to complete patient recruitment in the Phase 3 clinical trials by mid-2023, along with reporting of top-line data for the primary analysis. If it turns out to be favourable, they might file for marketing approval for OPT-302.

Valuation Methodology: Price/Book Value 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 OPT gave a negative return of ~44.63% in the past year. The stock is currently trading near the 52-weeks low of $0.800. The stock has been valued using the Price to Book Value multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering the low nil debt-to-equity ratio and higher gross margin than industry median, the company might trade at some premium to its peers. For valuation, few peers like Aroa Biosurgery Ltd (ASX: ARX), Kazia Therapeutics Ltd (ASX: KZA), Mesoblast Ltd (ASX: MSB) and others have been considered. Given, US FDA regulatory requirements and early-stage risks of novel therapies development, decent prospects for OPT-302, 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 $0.805, as of 9 March 2022, 10:35 AM (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.

OPT Daily Technical Chart, Data Source: REFINITIV

Healius Limited

HLS Details

Change in Substantial shareholding: Healius Limited (ASX: HLS) is a healthcare company which operates through three segments: Pathology, Imaging and Day Hospitals. On 3^rd March 2022, Vinva Investment Management Limited became a substantial shareholder in HLS with a voting power of ~5.29%.

1HY22 Operational Highlights

• Change in Directors’ Interest: Recently, Kathryn McKenzie and Jennifer Macdonald acquired 1,004 and 6,024 fully paid ordinary shares, respectively.
• Balance Sheet Items: The company closed its accounts with a cash balance of $107.5 million at the end of 31^st December 2021 versus $70.1 million at the end of 30^th June 2021.

Key Metrics (Source: Analysis by Kalkine Group)

Key Risks: The company is vulnerable to the risks associated with unfavourable movement due to market volatility caused due to COVID-19 and its new variant Omicron, which affects its operations and thus impacts the sales.

Outlook: Healius announced Agilex Biolabs acquisition which will support as a strategic adjacent in Pathology and will offer a high-margin capital-light growth profile, revenue diversification, and a platform into the global clinical trials sector. The acquisition got completed on 31^st January 2022. The company plans to pay its interim dividend on 15^th April 2022.

Valuation Methodology: P/E Value 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 HLS gave a negative return of ~44.63% in the past year. The stock is currently trading near its 52-weeks low price level of $3.800. The stock has been valued using the P/E Value multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). Considering regulatory requirements risks and foreign currency risks, the company might trade at some discount to its peers. For valuation, few peers like Sigma Healthcare Ltd (ASX: SIG), Integral Diagnostics Ltd (ASX: IDX), Ramsay Health Care Ltd (ASX: RHC) and others have been considered. Given the 1HFY22 performance, increasing current ratio, current trading levels, growing gross and net margins, 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 $4.080, as of 9 March 2022, 10:35 AM (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.

HLS 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 be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and is subject to the factors discussed above alongside support levels provided.

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 the 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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