Integral Diagnostics Limited

IDX Details

FY20 Financial Update: Integral Diagnostics Limited (ASX: IDX) provides diagnostic imaging services. The market capitalisation of the company as on 31 December 2020, stood at ~$843.81 million. IDX reported decent financial performance in FY20, with an increase in statutory NPAT by 9.5% to ~$23 million when compared to the prior year. There was a growth of 18.7% in operating revenues to $274.1 million, driven by new sites, investments in high-end modalities and an eight-month contribution from Imaging Queensland. The company had a debt to equity ratio of 0.54x as on 30 June 2020.

IDX has made a decent start in FY21 and has delivered organic revenue growth of 4.2% in Q1FY21, compared to pcp.

FY20 Financial Performance (Source: Annual Reports)

Outlook: The integration and performance of Imaging Queensland and Ascot Radiology have been in line with the company's expectations. IDX will continue to focus on strategic capex investments. It will also look to accelerate the use of digital and AI technology to further improve the patient experience.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative)

P/E Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The company continued its focus on cost reduction and was able to achieve an operating margin of 23.3% in FY20. IDX gave a return of 5.08% in the past three months and a return of 0.93% in the past one month. The stock of IDX is trading above its average 52 weeks’ trading range of $1.780-$4.710. On a technical front, the stock of IDX has a support level of $4.059 and a resistance level of $4.612. We have valued the stock using a P/E multiple-based illustrative relative valuation and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers such as Sonic Healthcare Limited (ASX: SHL), Capitol Health Limited (ASX: CAJ), Healius Limited (ASX: HLS) to name a few. Considering the current trading levels, resilient business performance and synergy from acquisitions, we recommend a ‘Hold’ rating on the stock at the current market price of $4.34, up by 2.117% as on December 31, 2020.

IDX Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Asian American Medical Group Limited

AJJ Details

Completion of Sale: Asian American Medical Group Limited (ASX: AJJ) provides specialised medical services. The market capitalisation of the company as on 31 December 2020, stood at ~$22.60 million. As per a recent update, AJJ completed the sale of entire shareholding in Asian American Radiation & Oncology Pte Ltd to Dr. Daniel Tan Yat Harn, for a cash consideration of SGD 693,000 for 350,000 ordinary shares.

FY20 Financial Update: IDX had witnessed a drop in revenues from SG$7.67 million in FY19 to SG$7.21 million in FY20, owing to COVID-19 restrictions and a reduction in inbound medical tourists. The company started trading in medical supplies from March to June 2020 in order to mitigate the impact of COVID-19 on its core businesses. Patient transactions were 47% lower from 4,505 in FY19 to 2,386 in FY20.

FY20 Financial Performance (Source: Company Reports)

Outlook: The company’s performance has been severely impacted by the disruption and lockdowns brought in by the COVID-19 virus. However, as the condition improves and economies start to function in pre-COVID levels, the company expects to benefit from the inflow of outstation patients.

Stock Recommendation: The company recently opened its first multi-speciality medical centre in Hainan, China. AJJ gave a return of 116.66% in the past three months and a return of 85.71% in the past one month. The stock of AJJ is trading above its average 52-week trading range of $0.024-$0.082. On a technical analysis front, the stock of AJJ has a support level of $0.052 and a resistance level of $0.072. On a TTM basis, the stock of AJJ is trading at an EV/Sales multiple of 4.3x, higher than the industry median (Healthcare) of 2.3x. Considering the muted financial performance, steep price movements and uncertain business environment, we give an ‘Avoid’ rating on the stock at the current market price of $0.065, as on December 31, 2020.

AJJ Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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