MedAdvisor Limited

MDR Details

This report is an updated version of the report published on 4 April 2022 at 3:32 PM GMT.

 Second Earn Out Payment for Adheris Acquisition: MedAdvisor Limited (ASX: MDR) develops and markets software for personal medication management via the MedAdvisor App and a PlusOne pharmacy platform. MDR recently notified that the top revenue earn-out level of ~US$32.5 million for the Adheris acquisition was surpassed for the 12 months ended on 31 December 2021, bringing the Adheris purchase consideration to ~US$34.5 million. Henceforth, MDR has now agreed to pay the second earn-out for the Adheris acquisition on 15 September 2021 instead of May 2022, agreeing with Syneos Health US, Inc. (Syneos). In November 2020, MDR had decided to purchase Adheris LLC, a developer of medication adherence programs for patients, for up to ~US$34.5 million from Syneos.

1HFY22 (Ended 31 December 2021) Financial Results:

• MDR reported growth in revenue from the US (up ~22% Y-o-Y) and Australia (up by ~33.0% Y-o-Y) business in 1HFY22. Annual recurring revenue (ARR) grew from ~$5.9 million in 1HFY21 to ~$7.7 million as of 1HFY22.
• The pharmacy network in Australia expanded from ~3,634 stores in 1HFY21 to ~4,042 in 1HFY22.

Growth in Operating Revenue, Highlights; (Analysis by Kalkine Group)

Key Risks:  The company risks change in technology, high competition, regulatory sanctions, growth in partner network, and supply chain disruptions, etc.

Outlook:

• The company intends to maintain sustainable growth in the US pipeline, expand the digital access to the US patient populations, and foster the adoption of the newly launched ‘Thriv’ (a new digital adherence solution) with enhancements expected during the rest of CY22.
• It expects to deliver revenue between ~$72 - $74 million and a gross margin between ~53-54% in FY22.

Valuation Methodology: EV/Sales 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 MDR gave a negative return of ~35.44% in the past three months and a negative return of ~13.55% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.230 - $0.415. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some premium than its peers’ median EV/Sales multiple, considering its sustainable growth in the US pipeline, acquisition synergies, robust top-line growth, etc. For this purpose of valuation, a few peers like Doctor Care Anywhere Group PLC (ASX: DOC), Total Brain Ltd (ASX: TTB), Somnomed Ltd (ASX: SOM) and others have been considered. Considering the current trading levels, rise in top line, ARR, AU pharmacy footprint, an indicative upside in valuation, decent outlook, the launch plans for new programs in the US, market entry in New Zealand, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.260, as of 4 April 2022, 10:45 AM (GMT+10), Sydney, Eastern Australia. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

MDR Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: 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.

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 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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