PainChek Ltd

PCK Details

PainChek Ltd (ASX: PCK) is involved in the development and commercialization of mobile medical device applications, that automate intelligent pain assessment of the people who are unable to communicate their pain with carers.

Result Performance – For the Third Quarter Ended 31 March 2021 – (Q3FY21)

For the third quarter ended 31 March 2021, contracted annualized recurring revenue (ARR), post-government trial, increased 14% to $3.5 million. 993 Residential Aged Care (RAC) facilities and 80,037 approved beds are under annual PainChek license as of 31 March 2021, reporting 69% and 61% increase respectively over 31 March 2020 and 35%+ domestic market share. Over 350,000 PainChek clinical assessments have been processed in aged care to date (Announced Q3FY21 result on 29 April 2021). The key product was granted CE Mark and was TGA cleared during March 2021 and was being released as an App and system upgrade to all existing clients. The consolidated cash balance as of 31 March 2021 was reported at $11.9 million.

Key Data (Source: Company Reports, Chart Created by Kalkine Group)

Recent Updates

• As per the release dated 28 June 2021, the company stated a key milestone of 127,000 licensed Australian Residential Aged Care (RAC) approved beds across over 1,600 Aged Care Facilities reflecting 60% of the Australian market. This includes 82,982 dementia-specific beds. These dementia-specific bed numbers are expected to fetch a $1.25 million milestone payment.
• As per the release dated 20 May 2021, the company announced that it has received the necessary regulatory approval for sales and marketing of its PainChek Infant offering in countries such as Australia, Europe, the UK, Canada, Singapore, and New Zealand.

Key Risks:

The company is exposed to a variety of financial risks: market risk, credit risk, and liquidity risk.

Outlook:

As per the management of the company, the product of the company has an outstanding run-in past, and further, it aims to make PainChek the universal pain assessment solution for adults as well as kids that are useable by every healthcare professional. The company has significant long-term value as it recorded double-digit sales growth for four consecutive quarters during a global pandemic. The management sees PainChek as a global business and the long-term business growth is in overseas markets, driven by strong response seen in the UK and New Zealand markets.

In the Australian market, it has penetrated over 35% of the aged care market. Further, receiving international regulatory clearances allows PainCheck to be sold and marketed in Australia, Europe, UK, Canada, Singapore and New Zealand, thereby, enabling the company to enhance its geographical presence.  

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

Technical Overview:

Weekly Chart –

Source: REFINITIV

Note: Purple colour lines are Bollinger Bands® with the upper band suggesting overbought status while the lower band oversold status, and yellow lines are Fibonacci retracement lines which measure price rebound and backtrack. https://www.bollingerbands.com/

The stock has been experiencing low volatility for a long time which is obvious from the narrow range of 20 periods SMA of $0.069, on the upside and the lower Bollinger band of $0.057 on the downside, in which it has been trading. It has on the first trading session of the ongoing week given a close at $0.061. The technical indicator RSI with a reading around 38 suggests weak momentum for the stock.

Going forward, the stock may have resistance around the upper Bollinger band of $0.069 whereas support could be around the lower Bollinger band of $0.057.

Stock Recommendation:

The stock declined by ~22.7% in 3 months.  It has made a 52-week low and high of $0.057 and $0.145, respectively.

Considering the aforesaid facts, we have valued the stock using an EV/Sales multiple-based illustrative relative valuation and have arrived at a target price  that reflects a rise of low double-digit (in % terms). We believe the company can trade at a slight premium to its peer average EV/Sales (NTM Trading multiple) as the company received the approval for sales and marketing of its PainChek Infant offering in Australia, Europe, UK, Canada, Singapore, and New Zealand. Also, the company is eyeing its growth through international expansion.

Considering the aforesaid facts, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.061 per share, down by 1.613% on 5^th July 2021.

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 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 analysis has been achieved and 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 uptrend may take a pause due to profit booking or selling interest.

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