CDY Details

Material Business Updates: Cellmid Limited (ASX: CDY) is a health and beauty tech business consisting of two segments: Diagnostic and Consumer Health. It is involved in the R&D of diagnostic and therapeutic products for the management of diseases like cancer and others with inflammatory conditions.

• Merger Update: As announced on 16 September 2021, Cellmid entered into a merger agreement with BLC Cosmetics Pty Ltd (BLC) to acquire 100% stakes to build synergies in health and beauty space. HGL Ltd (ASX: HGL), parent of BLC, is expected to receive $1 million in cash and $2 million in shares.
• Key Synergy areas likely include cross-selling of CDY's own brands into BLC's channels in ANZ region, customer base expansion, and cross promotion. Despite COVID-19 pandemic disruptions BLC expects to register ~$7 million in revenue in FY21, up by 20% YoY.
• Proposed Issue of Securities: On 16 September 2021, CDY proposed an issue of maximum 82,786,885 securities to cater the aforesaid merger.

Business and Financial Performance

• Chinese Distribution Agreement: Signed with Aeon International and Ourui Health Management in December 2020. The potential revenue lies in the distribution of Jo-Ju, Lexilis and Evolis, products in the hair segment.
• Divestment of Lyramid: An amount of $0.5 million and a royalty of 4% to be received in selling Lyramid (a subsidiary of CDY).
• Revenue Details: In FY21, the company reported revenue of $6.82 million, down 19% YoY, excluding the discontinued activities.
• Direct to Consumers (DTC) Focus: The company invested in developing a new e-commerce website in FY21 to boost its DTC sales.
• Improvement in Net Losses: Reported a reduction in Net Loss by ~31%, from $4.91 million in FY20 to $3.39 million in FY21.

Year-on-Year Financial Performance; Analysis by Kalkine Group

Key Risks: CDY is exposed to international and domestic regulatory framework, besides the compliance risk that the company must abide related to testing and ingredient sourcing. It is also exposed to various financial risks like liquidity and currency risks.

Outlook: Looking ahead with the market expansion in the US, China and Japan, and divestment of Lyramid, CDY progresses towards operational efficiency and operational profitability. However, potential threat of unsuccessful synergies, pursuant to the merger, may hold. CDY intends to focus on e-commerce and innovation & development of new products in anti-aging hair care.

Stock Recommendation: The stock of CDY gave a negative return of ~35.085% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.049 - $0.135. Considering declining top-line and cash flows, net loss registered, potentially aggressive call on merger, prices sustaining below resistance level, and other technical viewpoints mentioned below, we give a “Sell” recommendation on the stock at the market price of $0.064, as of 16 September 2021, 12:50 PM (GMT+10), Sydney, Eastern Australia.

Technical Overview:

CDY's prices are facing strong resistance of a downward sloping trendline at AUD 0.073 level and trading below the trend line resistance zone, indicating the possibility of a downside correction. In addition, prices are also sustaining below the horizontal trendline resistance level AUD 0.072. The momentum oscillator RSI (14-period) is trading in negative territory at ~48.86 level, further supporting a bearish stance. However, the prices are trading above the trend-following indicators 21-period SMA, which acts as a support level. An immediate resistance level for the stock is placed at AUD 0.073 while the key support level is placed at AUD 0.049.

CDY Weekly Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart shows RSI (14-period) and the yellow color line represents trend line. While the green color histogram indicates the volumes.

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 for 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 is subject to the factors discussed above alongside support levels provided.

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