Next Science Limited 

NXS Details

3QFY21 Highlights & Recent Updates: Next Science Limited (ASX: NXS) is a medical technology company mainly focussing on developing and commercialisation of XBIO technology, which solves the problems of bacteria biofilms.

• On 8^th November 2021, its proprietary - XPERIENCE^TM Surgical Solution got a green flag from Therapeutic Goods Administration (TGA), Australia. Before this, it was only sold in US market after FDA’s Approval in April 2021. Thereby NXS incurred an increased amount on its marketing in 3QFY21.
• The overall quarter was reflected by an improvement of ~29% increase in unaudited revenue on pcp basis, which came in atUS$2.2 million, mainly owing to good growth in BlastX^TM.
• With an increase in US surgery volumes, XPERIENCE^TM has gained traction and currently used by 54 hospitals. Its patent library now holds 38 patents.
• Its first shipment of Plastics and Reconstruction for TELA Bio Inc (10 years contract) was scheduled for November 2021. NXS’s aim is to expand market coverage in US and Asia.
• It closed its 3QFY21 with a cash balance of ~US$9.8 million, where major chunk of US$5.7 million was spent on Staff Costs.

Revenue Highlight (Source: Analysis by Kalkine Group)

Key Risks & Mitigations: The company is vulnerable to the following risks which also caused the business decline and volume reductions:

• Strong Competition: NXS works in a competitive market, which might pose some operational risk.
• Regulatory Risk: The company is prone to the changing and complex regulatory amendments, which might affect its functionality.

Outlook: Looking forward, with an aim to address a total surgical addressable market of US$6 billion, its main focus revolves around the marketing of its products especially XPERIENCE^TM and conversion of its Value Assessment Submissions (VAC) submissions into active accounts. While other areas include raising momentum of BlastX^TM sales and execution of its first sales with TELA Bio.

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

 
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: Over the last three months, the stock has provided a negative return of ~11.96% and is trading lower than the average 52-week price level band of AUD 1.100 and AUD 2.060. 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 % terms). After considering its partnership and expansive strategies and increase in quarterly revenue, the company can trade at some premium to its peers. For the purpose of valuation, peers like ImpediMed Ltd (ASX: IPD), Nanosonics Ltd (ASX: NAN), Anteris Technologies Ltd (ASX: AVR), and others have been considered. Considering the company’s quarter performance, forward looking market penetrating strategies, current trading levels, indicative upside in the valuation, and key risks associated with the business, we give a “Speculative Buy” rating on the stock at the closing market price of A$1.120, down by ~1.755% as on 10 December 2021.

NXS Daily Technical Chart, Data Source: REFINITIV 

Genetic Signatures Limited 

GSS Details

1QFY22 Highlights & Recent Updates:  Genetic Signatures Limited (ASX: GSS) is involved in Research and its commercialisation of individual genetic signatures, which helps in the diagnosis of infectious diseases. Its platform is 3Base.

• As per its investors update, the company’s revenue is greatly driven by outgoing COVID-19 outbreaks and its tests demands. Its 1QFY22 alone recorded a revenue of $12.4 million, owing to 95% contribution coming from Asia Pacific, while revenue for FY21 was $28.3 million.
• It recorded a positive cash flow of $2.9 million with $10.34 million as receipts from customers for 1QFY22.
• It closed its quarter with a cash balance of ~$33 million with no debt in 1QFY22.

Revenue Highlight (Source: Analysis by Kalkine Group)

Key Risks: The company is vulnerable to the following risks:

• Stiff Competition: GSS functions in highly competitive market which is dynamic and subject to significant changes.
• Regulatory Risk: The company has global expansion strategies, where the companies overseas are regulated by individual government bodies thereby indirectly affecting its functionality.
• Product Failure: The development of new products requires huge and effective amount of R&D, which might turn into a failure in case of inadequacy.

Outlook: Looking forward, GSS targets the high data pathology groups, hospitals and govt. programs and leveraging SARS-CoV-2 experiences for creating interest of EasyScreen^TM kits in the US and EU markets. Another area is product development, where the company’s focus is to register Enteric Protozoan Detection Kit and STI Genital Pathogen Detection Kits and to develop more test kits for flavivirus, measles, mumps etc. 

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

 
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: Over the last three months, the stock has provided a negative return of ~17.74% and is trading lower than the average 52-week price level band of AUD 1.04 and AUD 2.13. 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 % terms). After considering its decrease in current and quick ratio, supply chain disruption risk and increased costs in order to develop above-mentioned new products, the company can trade at some discount to its peers. For the purpose of valuation, peers like ImpediMed Ltd (ASX: IPD), Nanosonics Ltd (ASX: NAN), Palla Pharma Ltd (ASX: PAL), and others have been considered. Considering the company’s quarter performance, improving ROE and debt-to-equity ratio, current trading levels, 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 A$1.255, as on 10 December 2021, 02:44 PM (GMT+10), Sydney, Eastern Australia.

GSS 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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