Medlab Clinical Limited

MDC Details 

Latest Update on Extraordinary General Meeting (EGM): Medlab Clinical Limited (ASX: MDC) is engaged in two segments, namely Nutraceutical and Pharmaceutical Research. The company is scientifically formulated through its Manuka-C to support the immune system. It includes evidence-based ingredients consisting of a blend with over three ascorbates. The company is planning to raise $15mn through the placement of shares after approval from the shareholders. For the purpose, the company has scheduled an EGM to raise $15mn in two tranches. The company has completed tranche 1 by issuing ~48.37mn shares at a price of $0.24 per share, raising $11.6mn. The company will be raising a further $3.4mn in tranche 2 by issuing ~14.12mn shares at a price of $0.24 per share. The company will be utilising the raised funds towards Phase 3 trials in the US, UK, and Australia, prospect of US Expanded Access IND and working capital requirements for research programs and discussions on NanoCelle delivery technology.

1HFY21 Financial Highlights: The company has registered an increase in total revenue to $4.47mn in 1HFY21 as compared with $2.52mn in 1HFY20. The company has posted a loss of $5.34mn in 1HFY21. The company has registered a decline in its cash and cash equivalents to $6.87mn as on 31 December 2020 as compared with $9.06mn as on 30 June 2020.

Total Revenue Growth in 1HFY21 (Source: Company Reports)

Key Risks: The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company. The company operates in multiple countries. Any severe movement in foreign exchange prices may result in financial losses for the company.

Outlook: The company has made its presence in the US markets after it has submitted its clinical IND submission to the FDA during 1HFY21. The company has got an approval from FDA to NanaBis to continue its presence in the US in 2HFY21. 

Valuation Methodology: EV/Sales based Relative Valuation Method (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: In the last one month, MDC has decreased by ~23.07% and by ~41.17% in the last three months. The current market capitalisation of MDC stands at ~$65.61mn as of 26 April 2021. The stock is currently trading below the average 52-weeks’ price level range of ~$0.135-~$0.420. On the technical analysis front, the stock has a support level of ~$0.182 and a resistance of ~$0.225. We have valued the stock using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). We believe that the company can trade at a slight discount as compared to its peer average, considering the company has registered losses in 1HFY21, decline in total assets along with global uncertainties. For this purpose, we have taken peers Adalta Ltd (ASX: 1AD), Genetic Signatures Ltd (ASX: GSS), to name a few. Considering an increasing presence in the US markets, increase in revenues, raising money for research & development purpose, valuation, current trading levels, and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.20 as on 26 April 2021.

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

Althea Group Holdings Limited

AGH Details

An Update on Launch of Latest Product: Althea Group Holdings Limited (ASX: AGH) is engaged in providing medicinal cannabis in Australia. The Company holds licenses and permits for the importation, cultivation, production, and supply of medicinal cannabis in Australia. Recently, the company has announced regarding the launch of its innovative product with the name of ‘Flexi’ 20ml cannabis oil product. The rationale behind launching the product in smaller quantity is to provide the medicine to the patients at a lower price point, with an option to try the medication for initial few weeks. 

1HFY21 Financial Highlights: The company has registered an increase in revenues to $5.09mn in 1HFY21 as compared with $1.85mn in 1HFY20. The company has posted a loss of $8.27mn in 1HFY21. The company has posted a decline in its cash and cash equivalent situation to $8.64mn as on 31 December 2020 as compared with $10.14mn as on 30 June 2020.

Revenue Growth in 1HFY21 (Source: Company Reports)

Key Risks: The company requires regulatory approvals to carry out its business efficiently. Any delay in regulatory approval may result in financial losses for the company. The company is operating in multiple countries and exposed to price movement in foreign currency. Any severe movement in foreign currency prices may lead to financial losses for the company. 

Outlook: Looking forward, the company is expanding its operations in Germany. The company is expecting to grow to A$12.2bn by 2028 in the German markets through distributing its medicinal products. 

Stock Recommendation: In the last one month, AGH has decreased by ~10.57% and increased by ~1.08% in the last three months. The current market capitalisation of AGH stands at ~$125.93mn as of 26 April 2021. The stock is currently trading slightly below the average 52-weeks’ price level range of ~$0.310-~$0.670. On the technical analysis front, the stock has a support level of ~$0.457 and a resistance of ~$0.525. On a TTM basis, the stock of AGH is trading at an EV/Sales multiple of 14.5x, lower than the industry median (Pharmaceuticals) of 17.2x. Considering an increase in revenues and total assets, expanding globally, FDA approvals for new products, valuation, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.465, down by ~3.125% as on 26 April 2021.

AGH 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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