ResApp Health Limited

RAP Details

Patient Enrolment Began for COVID-19 Cough Study: ResApp Health Limited (ASX: RAP) develops smartphone applications such as ReAppDx and SleepCheck to diagnose respiratory diseases. As of 17 May 2021, the market capitalisation of RAP stood at ~$40.38 million. On 17 May 2021, RAP reported recruiting its first participant for the US-based clinical study to discover the relationship between COVID-19 infection and cough. RAP is continuing with the recruitment initiatives and marketing for faster enrolment. RAP aims to hire up to 1,500 patients (symptomatic and asymptomatic) during the next three months. The recruits will enrol using the study application (COVID-Cough) for iPhone. Upon enrolment, the study recruits will record a cough sample and submit a medical form using the app. The participants will receive a test kit order and undergo an RT-qPCR at-home test (saliva) to test the COVID-19 infection within 24 hours. RAP plans to offer live updates to shareholders on patient enrolment and data analysis.

Distribution Partnership with Ilara Health: On 4 May 2021, RAP announced a distribution contract with Ilara Health, a Kenya based firm. As per the contract, “Ilara” will market and promote ResAppDx application to clinics and medical facilities in Kenya for acute respiratory illness.

Q3FY21 Results Declared: RAP received cash receipts of $48,000 via advanced payments from AstraZeneca and for SleepCheck downloads from Apple and Google. It received $859,000 via tax rebate and Government grant. RAP net cash outflow from operations stood at $957,000 in 3QFY21. During the quarter, Medgate AG started a pilot trial of the ResAppDX respiratory test spanning its telemedicine services for three months in Switzerland. The companies are collaborating to evaluate the App on Medgate’s services’ impact and engage in more extensive commercial engagements given the trial results. During Q3FY21, RAP received The TGA approval and CE mark certification for its Class I wearable medical accessory for sale in Australia (ANZ) and Europe. It held a cash and cash equivalents balance of $3.2 million at the end of the period.

Q3FY21 Cash Flow from Operating Activities (Source: Company Reports)

Key Risks: The company faces the risk of launching new products/Apps/versions, industry competition, and the threat of new technological disruptions. It is exposed to the risk of lesser patient enrolment, due to the pandemic situation.

Outlook: RAP will undertake a pilot evaluation of its ResAppDx application at five partner sites in Kenya. It expects the preliminary study data for the COVID-19 Cough Study by the next quarter. The company will launch its ResAppDx into Medetective, a wellness and health management program as per its software licencing contract with Workplace Medicine Australia Limited (“WMA”). The launch is now planned for Q4CY2021.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Data Source: Refinitiv, Thomson Reuters, 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 RAP gave a negative return of 22.72% in the past three months and a negative return of 45.74% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.046. The stock of RAP has a support level of ~$0.041 and a resistance level of ~$0.074. We have valued the stock using the Enterprise Value to Sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight premium compared to its peer average, considering its slightly higher receipts for Q3FY21, new distribution agreement with Ilara Health, and TGA approval for wearable accessory sale in Australia. For this purpose, we have taken peers like ImExHS Limited (ASX: IME), CogState Limited (ASX: CGS), Capitol Health Limited (ASX: CAJ) and others, under Healthcare Care Equipment & Services. Considering the current trading levels, higher receipts for Q3FY21, TGA clearance for a new wearable device, new contract with Ilara Health, licensing contracts with AstraZeneca K.K. and WMA, trial of ResAppDx in the telehealth services of Medgate AG, valuation, and associated risks mentioned above, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.051, up by ~8.510% on 17 May 2021.

RAP Daily Technical Chart (Source: Refinitiv, Thomson Reuters) 

PainChek Limited

PCK Details

Registered Increase in RAC Beds & UK Sales, Q4FY21: PainChek Limited (ASX: PCK) is a developer of pain monitoring and assessment technology/Application using smartphones. As of 17 May 2021, the market capitalisation of PCK stood at ~$69.86 million. The company reported an increase of 69% and 61% on a pcp basis in the residential aged care (RAC) facilities and approved beds, respectively, as of 31 March 2021, as per its yearly licence. It reported an increase of 219% YoY in the PainChek clinical assessments in aged care. It posted Contracted Annualised Recurring Revenue (ARR post-government trial) of $3.5 million, up by 14% YoY for Q3FY21. PCK entered into new agreements with Erskine Homes in Scotland, Community Integrated Care, and a lead generation contract with WELL pharmacy in the UK. It entered a Memorandum of Understanding (MOU) with nViso for developing social robotics in the aged care sector in Japan. Its UK team is well placed to execute more expansive European market entry. PainChek Universal Solution (PUS) has been TGA approved and is released as an App and system upgrade to the current clients. During Q3FY21, PCK completed a pilot study for home care providers in Q1CY21. PCK held a cash balance of $11.91 million as of 31 March 2021.

Q3FY21, Growth in RAC Facilities (Source: Company Reports)

Key Risks: The company faces the risk of seeking timely regulatory approvals for launching new products/Apps/versions in different markets. It is exposed to the disruptions caused by the pandemic environment in different operating geographies.  

Outlook: PCK is in discussions with multiple large service provider contracts and has a robust pipeline of Aged Care beds to foster growth in 2021. Its UK market is experiencing stability and a rise in sales pipeline due to the vaccination drive. For PainChek Infants App, the company is on track to receive TGA clearance and CE Mark in Q2CY21 and later launch into the markets in 2HCY21. It will launch the PainChek Universal Home Care (PUHC) system into the ANZ, UK and Canada and other markets, with its sales teams and overseas partners in 2HCY21.

Stock Recommendation: The stock of PCK gave a negative return of 12.85% in the past three months and a negative return of 32.22% in the past six months. The stock is currently trading towards its 52-weeks’ low level of $0.058. The stock of PCK has a support level of ~$0.043 and a resistance level of ~$0.079. On a TTM basis, the stock of PCK is trading at a price to book value multiple of 5.6x, lower than the industry average of 7.7x. Considering the current trading levels, growth posted for contracted ARR for Q3FY21, new agreements entered by PCK in the UK, pipeline of Aged Care beds for 2021, launch plans for Infants App and PUHC in ANZ and overseas and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.061, down by ~1.613% on 17 May 2021.

PCK Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Note: 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.

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