NXS Details

Share Repurchase Plan: Next Science Limited (ASX: NXS) is a medical technology company headquartered in Sydney, Australia. It is engaged in developing and commercialising its proprietary Xbio technology to reduce the impact of biofilm-built diseases in human health. Recently, the company informed the market regarding the opening of its Share Purchase Plan Offer, which was earlier announced on 24 February 2022. The SPP follows the successful completion of an $6 million placement at an issue price of A$0.90 per share. A $4.0 million commitment was made by a significant shareholder, Mr. Lang Walker, with completion subject to shareholders’ approval.

A Quick Look at FY21 Highlights:

• Top & Bottom-Line Details: The company reported revenue of US$8.9 million in FY21, up 160% year over year. The company has delivered underlying EBITDA loss of US$8.69 million in FY21 against a loss of US$11.49 million in FY20. The top line was positively impacted with recovery in surgical procedures and wound care clinics volumes.
• Cash Rich Company: At the end of 31 December 2021, the company’s total cash balance stood at ~US$7.4 million. Cash receipts in Q4FY21 stood at US$2.9 million, up 53% quarter over quarter.

Revenue Trend; Analysis by Kalkine Group

Key Risks:  NXS’s has incurred a consistent net loss in the past few years. Hence, these mounting losses may throw tough challenges at the company’s overall functioning and may dampen margins in the future. The company is exposed to a complex regulatory landscape in the healthcare space.

Outlook: Given regulatory pathways, the company expects to commence its first sale of TorrentX^TM, XPerience^TM, and SurgX^TM in Singapore, Malaysia, Thailand, Hong Kong in 2023. With these launches, a dedicated ordering portal, and an integrated supply chain system, the company expects to bolster its top-line growth, going forward.

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 the company has been corrected by ~28.11% in the past three months. Currently, the stock has a 52-week high and low level of A$2.06 and A$0.87, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount as compared to its peers, considering the foreign currency risk, COVID-19 led uncertainties, consistent losses, and strict regulatory approval, etc. For the purpose of valuation, peers such as Nanosonics Ltd (ASX: NAN), Mayne Pharma Group Ltd (ASX: MYX), Cleanspace Holdings Ltd (ASX: CSX), and others have been considered. Considering the aforesaid fact, rise in top-line, enhanced product distribution in the US, healthy balance sheet, geographical expansion, decent long-term outlook, current trading levels, indicative upside in valuation, and key risks associated with the business, we recommend a “Speculative Buy” rating on the stock at the closing market price of A$0.87, down by ~2.794% as on 21 March 2022.

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.

NXS 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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