Micro-X Limited

MX1 Details

Recent Updates: Micro-X Limited (ASX: MX1) is engaged in designing, developing and manufacturing ultra-lightweight CNT based X-Ray products for global healthcare and counted IED imaging security markets.

• Issue of Shares: Recently, the company has issued 13,210 fully paid ordinary shares at nil consideration upon the exercise of Performance Rights issued in accordance with its Employee Incentive Plan, which was approved at its 2020 Annual General Meeting
• Received R&D Tax Incentives: As announced on 22 December 2021, MX1 has received a Research & Development (R&D) Tax Incentive of $2.1 million for FY21.

Q1FY22 Financial and Operational Summary:

• During the quarter, the company enhanced the commercialisation of each of its four product lines, evident by the execution of three contracts for up to $13 million of non-dilutive development funding for the Airport Checkpoint and Brain CT programmes.
• At the end of the quarter, the company had a cash balance of $25.7 million as compared to $30.13 million as on 30 June 2021.

Cash Trend (Source: Analysis by Kalkine Group)

Key Risks:  The company’s financial and operational performance could be impacted by the rising market share of its peers. In addition, it is exposed to a more complex regulatory environment; any failure in the compliances could lead the business to fines, penalties, etc.

Outlook:

• With respect to CT Imager, the company is expecting regulatory approval in the next four years. The company has an addressable market of over $30 billion for its four-product line, which may provide a decent opportunity for business growth.
• Looking forward, the company will be focused on executing commercialisation strategies and delivering on development milestones.

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 MX1 is trading near to its 52-week low levels of $0.225, offering a decent opportunity for accumulation. The stock has been corrected by ~14.75% and ~19.99% in the past three and six months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight discount to its peers’ average EV/Sales multiple, considering COVID-19 uncertainties and inefficiency in generating profits, etc. For the purpose of valuation, peers such as Atomo Diagnostics Ltd (ASX: AT1), Universal Biosensors Inc (ASX: UBI), Cochlear Ltd (ASX: COH), and others have been considered. Considering the expected upside in valuation, tax Incentives, advancement of product lines, decent liquidity position, huge addressable market, decent outlook, 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 $0.260 as on 12 January 2022, 10:30 AM (GMT+10), Sydney, Eastern Australia.

MX1 Daily Technical Chart, Data Source: REFINITIV  

Mach7 Technologies Limited

M7T Details

Q1FY22 Highlights: Mach7 Technologies Limited (ASX: M7T) provide enterprise image management systems that allow healthcare enterprises to easily identify, connect, and share diagnostic image and patient care intelligence.

• During Q1FY22, the company witnessed a solid growth of 368% in sales orders to $16.2 million as compared to $4.4 million in Q4FY21.
• M7T secured a major contract extension from Trinity Health and Advocate Aurora Healthcare. Contracted annual recurring revenue (CARR) for the quarter stood at $16.8 million, reflecting a rise of 6% over Q4FY21.
• The company had a cash balance of $17.2 million as on 30 September 2021 against $18.4 million as on 30 June 2021. In addition, the company was debt-free at the end of the quarter.

CARR Highlight (Source: Analysis by Kalkine Group)

Key Risks:

• Stiff Competition: The company operates in the industry, which is subject to increasing domestic and global competition that is fast-paced and fast-changing. The rising influence of the competitors could impact its growth.
• Technology Risk: M7T is exposed to risks arising from the change in new technology, which can change the way of doing business.

Outlook: For FY22, the company is on track to deliver annual recurring revenue (ARR) of $13.4 million. In addition, it expects to report an additional contribution of $3.4 million per annum in ARR during FY23 and beyond. In addition, M7T is on the way to deliver its near term stated revenue target of $27 million for CY21.

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 M7T is trading near to its 52-week low levels of $0.780, offering a decent opportunity for accumulation. The stock has been corrected by ~4.79% and ~15.87% in the past one and three months, respectively. The stock has been valued using an EV/Sales multiple-based illustrative relative valuation and arrived at a target price of low double-digit upside (in % terms). The company can trade at a slight premium to its peers’ average EV/Sales multiple, considering rising sales orders, and expected growth in ARR, etc. For the purpose of valuation, peers such as Volpara Health Technologies Ltd (ASX: VHT), Alcidion Group Ltd (ASX: ALC) and Beamtree Holdings Ltd (ASX: BMT) have been considered. Considering the expected upside in valuation, growing sales orders, contract extensions, decent outlook, 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 $0.790 as on 12 January 2022, 10:50 AM (GMT+10), Sydney, Eastern Australia.

M7T Daily Technical Chart, Data Source: REFINITIV 

Compumedics Limited

CMP Details

Business Updates for 1HFY22: Compumedics Limited (ASX: CMP) is engaged in the development and commercialisation of technology in computer-based patient monitoring and diagnostic systems.

• The company has recorded a rise of 33% in sales orders for 1HFY22 to $27.0 million as compared to $20.3 million in 1HFY21.
• The company secured a new and additional 10-year bank facility of $4.5 million under the Federal Government Coronavirus SME recovery loan scheme.
• For 1HFY22, the company expects to report unaudited revenue to be ~$17.0 million, reflecting a fall of 7% against 1HFY21. This fall is due to global supply issues, chip shortages/delays and other pandemic related factors.
• In addition, it secured a second MEG sale to Tianjin Normal University (TJNU), China, for ~$4.2 million and is expected to be complete in late CY22. This indicates CMP’s commitment to the potential future commercial opportunity of the MEG market.

Sales Order (Source: Analysis by Kalkine Group)

Key Risks:

• Geopolitical Risk: The company operates in many geographies, which leads the business to a more complex regulatory environment.
• Forex Headwind: CMP’s financial health could also be impacted by unfavourable movement in the foreign exchange.

Outlook: Looking forward, the company would continue to pursue other potential MEG sales from its current list of opportunities. CMP is also focused on the development of products which sold into the growing international sleep clinic and home monitoring markets. CMP has scheduled to release final 1HFY22 results on 24 February 2022.

Stock Recommendation: The stock of CMP is trading above its 52-week low-high average of $0.310 - $0.515, respectively. The stock has provided returns of ~6.25% and ~8.97% in the past one and six months, respectively. In addition, the stock is trading at a P/CF multiple of 52.2x as compared to the industry average (Healthcare Equipment & Supplies) of 32.7x on a TTM basis. Thus, it can be said that the stock is overvalued at the current trading levels. The stock has a support and resistance level of $0.39 and $0.49, respectively. Considering the valuation on a TTM basis, current trading levels, returns in the past few months, volatility in the healthcare market, and key risks associated with the business, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the current market price of $0.440, as on 12 January 2022, 2:10 PM (GMT+10), Sydney, Eastern Australia.

CMP Daily Technical Chart, Data Source: REFINITIV 

The Green colour line reflects the 50-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 50-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Blue colour line reflects the 21-period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period, then it shows prices are currently trading in a bullish trend, (Vice – Versa).

The Purple colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

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 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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