Polynovo Limited

PNV Details

Q1FY22 Financial Performance: PolyNovo Limited (ASX: PNV) is engaged in the development and commercialization of innovative medical devices by using its NovoSorb technology in the treatment of burns, surgical wounds and negative pressure wound therapy.

• EU Sales: The EU sales edged up by 204%. The customer acquisition rate is expected to remain strong, backed by expanded sales team.
• UK and Ireland Sales: The UK and Ireland sales were up by 327% PcP. The improvement in sales resulted from surged access to hospital and surgeons and PNV teams’ meeting nurses and surgeons face to face.
• US Sales: The US sales surged by 56% PcP. 16 new accounts were commenced during the quarter. Total accounts in the US surged significantly by 65% to 135 as of 30 September 2021 relative to 82 as of 30 September 2020.
• Accounts in Direct Markets (excluding distribution markets): PNV’s direct market accounts spiked by 56% to 327 as on 30 September 2021 relative to 210 accounts as on 30 September 2020.

Sales Growth Trend, Analysis by Kalkine Group

Key Risks and Challenges

• Aggressive Competition: The company is exposed to significant risks arising from surged market share of competitors, primarily affecting operational growth of the business.
• Regulatory Constraints: PNV’s operations are highly susceptible to strict regulatory requirements.

Outlook

PNV continued to build sales infrastructure via expanding US sales team in FY21 and for Q1FY22 by expanding 5 new sales staff in the US, 1 in Australia and 2 in the UK. Moreover, executing distribution agreements with 12 new countries shall deliver favourable growth prospects for FY22. The Belgium 3PL is now operational and delivering products in Europe.

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 PNV gave a negative return of ~52.733% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $1.410 - $4.080. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price low double-digit (in percentage terms). The company might trade at a slight premium to its peers, considering directional focus on sales expansion. For valuation, few peers like Universal Biosensors Inc (ASX: UBI), Cyclopharm Ltd (ASX: CYC), Nanosonics Ltd (ASX: NAN) have been considered. Considering expansion in sales staff, rising number of distribution contracts being signed, current trading levels, and upside indicated by valuation, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.450, as of 26 November 2021, 02:26 PM (GMT+10), Sydney, Eastern Australia.

PNV Daily Technical Chart, Data Source: REFINITIV

RMA Global Limited

RMY Details

Q1FY22 Financial and Operational Performance: RMA Global Limited (ASX: RMY) operates an online platform that provides extensive data on residential properties. It provides sale results for individual real estate agents and agencies and in the process gives reviews of agent performance from vendors and buyers.

• Top Line Growth: Recurring revenue in Q1FY22 stood at $3.4 million, considerably up by 54% PcP. Subscriptions in ANZ region bulged subscription revenue of 8% sequentially and 29% PcP. US subscription revenue in the US surged by 47% QoQ and 293% PCP.
• Cash Flow Position: Cash receipts from customers surged considerably by 43% PcP, while down 3% sequentially due to seasonal drop in promoter revenue. Operating cash outflow stood at $2.1 million primarily due to surged investments in headcounts. Cash balance as of 30 September 2021 stood at $8.6 million.

Financial Snapshot; Analysis by Kalkine Group

Key Risks and Challenges

• Dependency on Highly Cyclical Real Estate Industry: The company’s business model is directly associated to the performance of real estate industry: any systematic risk can diverge revenue growth.
• COVID-19 Headwinds: RMY’s operational performance may be affected due to uncertainties from the pandemic, which may lead to a fall in agents’ count.

Outlook

• Monetizing User Base: RMY is seeking to monetize the user base in AU and NZ and targeting to become cash flow positive monthly in FY22.
• Platform Building: The company would continue to build out its platform and products to offer greater value to agents with a key focus on top-line growth.

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 RMY gave a negative return of ~33.962% in the past one year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.160 - $0.385 since a long haul. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price of high double-digit upside (in percentage terms). The company might trade at a slight discount to its peers’ EV/Sales average, considering business losses, negative ROE, and negative margins. For valuation, few peers like Rent.com.au Ltd (ASX: RNT), Hipages Group Holdings Ltd (ASX: HPG), Airtasker Ltd (ASX: ART) have been considered. Considering current trading levels, stability in real estate market as lockdown easing commenced, consistent growth in agents on the platform, sustainably increasing US subscription ARRR, upside indicated by valuation, and other associated risks, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.165, as of 26 November 2021, at 11:27 AM (GMT+10), Sydney, Eastern Australia.

RMY Daily Technical Chart, Data Source: REFINITIV

Note: The purple line at the bottom of the chart reflects the RSI (14-day period)

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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