Stocks’ Details

CSL Limited

CSL Witnesses Revenue Growth Across all Key Regions: CSL Limited (ASX: CSL) is engaged in the development, manufacturing and marketing of pharmaceutical and diagnostic products, cell culture media and human plasma fractions. On 9 March 2021, CSL had announced a dividend distribution of USD1.0400 to its shareholders for which the Ex-date was 4 March 2021 and Payment date will be 1 April 2021.

1HFY21 Key Highlights: During the period, the company witnessed revenue growth across all the regions it operates. The major growth of 79% year over year came from Asia Pacific region followed by the US, which witnessed an increase of 11% year over year. Whereas, EU, North America and ROW have registered a single-digit growth over the prior corresponding period. Across Seqirus segment, the overall revenue grew by 38% to US$1,425 million. EBIT has risen by 24% and 112% for CSL Behring and Seqirus, respectively, in 1HFY21. The company exited 1HFY21 with a cash balance of US$2,423.4 million. Operating cash inflow in 1HFY21 came in at US$2,320.5 million. The company’s balance sheet remains in a decent position with net assets of US$8,154.3 million at the end of 1HFY21.

1HFY21 Key Highlights (Source: Company Reports)

Outlook: For FY21, the company expects to deliver net profit after tax in the range of US$2,170 million to US$2,265 million on a constant currency basis. CSL remains well-positioned for future growth and remains open to utilise its debt capacity to fund initiatives that are accretive for shareholders' returns. 

Key Risk: CSL is exposed to risks inherent in the worldwide pharmaceutical industry, and in specific the plasma therapies industry. Headwinds for the industry consist of government inspection of high drug costs, pricing and competitive stress, generic competition for best-seller treatments, along with major pipeline setbacks.

Valuation Methodology: EV/Sales Multiple based Relative Valuation (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. 

** 1 USD = ~1.31 AUD

Stock Recommendation: Over the last three months, the stock has corrected by 7.93%. The stock is currently trading below the average 52-weeks’ price level range of $242.00-$332.68. On the technical analysis front, the stock has a support level of ~$263.9 and resistance of ~$274.88. 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 mixed sales performance across Seqirus segment and an increase in operating expenses during 1HFY21. For the purpose, we have taken peers, Medical Developments International Ltd (ASX: MVP), Mesoblast Ltd (ASX: MSB), to name a few.  Considering robust 1HFY21 results, significant sales growth in various regions, positive outlook, dividend distribution, valuation, and current trading levels, we recommend a “Buy” rating on the stock at the current market price of $265.39, down by 0.774% as on 29 March 2021.

Sigma Healthcare Limited

Dividend Distribution: Sigma Healthcare Limited (ASX: SIG) is a full-line pharmaceutical wholesaler and distributor in Australia. The company operates Australia’s largest pharmacy network, across the brands Amcal, Chemist King, Discount Drug Stores, Guardian and PharmaSave.  SIG on 23 March 2021 had announced a dividend distribution of AUD 0.0100 to its shareholders, for which the Ex-date will be 6 April 2021 and the payment date will be 21 April 2021.

FY21 Financial Update: The company reported underlying EBITDA attributable to owners of $81.1 million in FY21, up 39.2% year over year. EBITDA margins were at 2.45% in FY21 as compared to 1.84% in FY20. EBIT margins were at 1.54%, up from 1% reported in the previous comparable period. Total sales revenues in FY21 came in at $3,400.4 million, depicting an increase of 4.8% year over year. The results were positively impacted by robust wholesale pharmacy growth. Further, the company’s businesses profited from decent PPE sales and a 15% increase in hospitals, which was partly offset by COVID-19 impact on MPS. The company exited FY21 with a cash balance of $16.1 million. Net debt at the end of FY21 came in at $50.3 million, down from $146 million reported at the end of FY20.

Key Highlights (Source: Company Reports)

Outlook: The company has a decent pipeline of products, going forward. The company targets ~ 10% per annum growth in Underlying EBITDA for the next two years and ~$100 million by FY23. The management has targeted a Dividend Payout Ratio of a minimum of 70% of underlying NPAT to enhance shareholders’ value.

Valuation Methodology: P/E Multiple based Relative Valuation (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: Over the last three months, the stock of SIG has provided a return of 9.67%. The stock is currently trading higher than the average 52-weeks’ price level range of $0.507-$0.735. On the technical analysis front, the stock has a support level of ~$0.623 and a resistance of ~$0.733. We have valued the stock using the P/E 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 median, considering the market risk, regulatory risk, interest rate risk and currency fluctuation risk. For the purpose, we have taken peers, Australian Pharmaceutical Industries Ltd (ASX: API), Cochlear Ltd (ASX: COH), to name few. Considering the company’s robust FY21 results, decent outlook, dividend distribution, reduction in net debt, valuation, and current trading levels, we recommend a “Hold” rating on the stock at the current market price of $0.685, down by 1.439% as on 29 March 2021.

Respiri Limited

Launch of Remote Patient Management Programme: Respiri Limited (ASX: RSH) is involved in the research, development and commercialisation of medical devices, and the development of mobile health applications. The market capitalisation of the company stood at $122.88 million as on 23 March 2021. The company recently announced that it is launching a telehealth and remote management programme in Australia to support asthma management beyond the clinic. The programme will allow RSH to use real-world data to establish a scalable patient pathway and will provide it with the basis of the patient model and programme for the US prescription/reimbursement market.

Appointment of Strategic Advisor: On 25^th March 2021, the company appointed Dr Andrew Weekes as a strategic advisor to the Respiri Board, which was effective from 15 March 2021. The appointed is in line with the company’s strategy to  take additional measures to unveil wheezo™ in the UK market in late 2021.

RSH Receives FDA Approval: Recently, the company informed the market that it has obtained 510(k) clearance from the United States Food and Drug Administration (FDA) for wheezo® and App for marketing and sale in the key US market.

Key Financial Highlights for the Half Year Ended 31 December 2020: During the period, the company reported total revenues of $1.2 million, down 44% year over year. Loss after income tax for the period stood at $6.39 million as compared to a loss of $1.42 reported in the year-ago period.  Net cash used in operating activities came in at $3.79 million as compared to $1.9 million reported in the year-ago period. This result has been accomplished after fully expensing all research and development costs.

Key Highlights (Source: Company Reports)

Guidance: RSH is focused on expanding its footprint in the USA, and the launch for the same is expected in Q3 CY22. The group expects to continue to increase revenue over the next 12 months, and this would be aided by an attractive revenue model of the company.  It also expects to begin generating revenue through wheezo® product sales in the coming years.

Stock Recommendation: As at 31 December 2020, the company reported cash and cash equivalents of $11.44 million. Current ratio of the company stood at 10.94x in 1HFY21 as compared to the industry median of 2.93x, which showcases that the company is well- placed to settle its short-term obligations. Debt to equity multiple stood at 0.01x in 1HFY21 as compared to the industry median of 0.13x. The stock of RSH has provided a return of 26.92% in the last three months. On a technical analysis front, the stock has a support level of ~$0.133 and a resistance level of ~$0.181. Thus, in the light of decent liquidity position, expansion plans in the USA, receival of FDA approval and decent outlook, we give a “Hold” recommendation on the stock at the current market price of $0.160 per share as on 29 March 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer - This report has been issued by Kalkine Pty Limited (ABN 34 154 808 312) (Australian financial services licence number 425376) (“Kalkine”) and prepared by Kalkine and its related bodies corporate authorised to provide general financial product advice. Kalkine.com.au and associated pages are published by Kalkine.

Any advice provided in this report is general advice only and does not take into account your objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your objectives, financial situation and needs before acting upon it.

There may be a Product Disclosure Statement, Information Statement or other offer document for the securities or other financial products referred to in Kalkine reports. You should obtain a copy of the relevant Product Disclosure Statement, Information Statement or offer document and consider the statement or document before making any decision about whether to acquire the security or product.

You should also seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice in this report or on the Kalkine website. Not all investments are appropriate for all people.

The information in this report and on the Kalkine website has been prepared from a wide variety of sources, which Kalkine, to the best of its knowledge and belief, considers accurate. Kalkine has made every effort to ensure the reliability of information contained in its reports, newsletters and websites. All information represents our views at the date of publication and may change without notice.

Kalkine does not guarantee the performance of, or returns on, any investment. To the extent permitted by law, Kalkine excludes all liability for any loss or damage arising from the use of this report, the Kalkine website and any information published on the Kalkine website (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine hereby limits its liability, to the extent permitted by law, to the resupply of services.

Please also read our Terms & Conditions and Financial Services Guide for further information.

On the date of publishing this report (referred to on the Kalkine website), employees and/or associates of Kalkine do not hold interests in any of the securities or other financial products covered on the Kalkine website.