Cochlear Limited
COH Details
Latest Developments: Cochlear Limited (ASX: COH) offers adults or children implantable hearing solutions and accessories. It operates via segments, namely cochlear implants, services, and acoustics. On 6 May 2022, COH issued ~101 shares under an employee incentive scheme at ~$229.75 per share.
Acquisition Details:
- On 27 April 2022, COH announced its decision to acquire Danish firm Oticon Medical for ~$170 million.
- As part of the deal, COH would provide cochlear and acoustic hearing implants to Oticon Medical’s patient base of more than ~75,000.
- The acquisition will add $75 - ~$80 million to yearly revenue and offer scale benefits. COH aims to generate ~18% net profit margin from the business in the long-term.
Key Metrics Growth in 1HFY22 (Ended 31 December 2021):
- The company posted ~7% Y-o-Y growth in cochlear implant units due to increased volumes aided by robust recovery witnessed in the emerging markets (~30% Y-o-Y) from COVID-19. Implant sales revenue rose by ~2% Y-o-Y in 1HFY22.
- On a constant currency basis, services revenue increased by ~21% Y-o-Y due to growth in the recipient base, better access to clinics after lockdowns, and greater resource allocation to services by clinics.
Key Metrics Growth; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of COVID-19 closures, restricted hospital access, risk of a turnaround in the performance of a loss-making business acquisition, and supply chain bottlenecks in the global markets.
Outlook:
- COH confirms the underlying net profit guidance between ~$265 - ~$285 million, up by ~13% - ~22% Y-o-Y in FY22. S.
- COH plans to fund the acquisition from available cash balances and expects deal closure in 2HFY22.
Valuation Methodology: P/E 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 COH gave a negative return of ~46.57% in the past three months and a negative return of ~49.35% in the past six months. The stock is currently trading lower than the 52-weeks’ average price level band of $178.545 - $257.760. The stock has been valued using the P/E-multiple-based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers’ average P/E multiple, considering the continuing impact of COVID-19 disruptions, and acquisition risk. For this purpose of valuation, a few peers like Resmed Inc (ASX: RMD), Fisher & Paykel Healthcare Corporation Ltd (ASX: FPH), Pro Medicus Ltd (ASX: PME), and others have been considered. Considering the current trading levels, decent growth in key metrics in 1HFY22, expected revenue growth in FY22, acquisition synergies, expanded user base, and an indicative upside in valuation, we give a ‘Buy’ rating on the stock at the closing market price of $214.560, up by ~2.862%, as of 13 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
COH Daily Technical Chart, Data Source: REFINITIV
Medadvisor Limited
MDR Details
Latest Updates: Medadvsior Limited (ASX: MDR) develops software for personal medication management. It offers MedAdvisor App and PlusOne pharmacy platform to pharmacies and individuals to manage all aspects of prescription medication use. On 9 May 2022, Director Robert Read purchased ~2.54 million shares in an on-market trade in MDR. He disposed of ~2.01 million performance rights on the same date and exercised ~535,713 unlisted employee incentive options.
Highlights of Q3FY22 (ended 31 March 2022):
- Annual recurring revenue increased from ~$6.3 million in Q3FY21 to ~$7.9 million in Q3FY22, up by ~24% Y-o-Y.
- Churn in pharmacy portfolio was maintained at less than ~2% annualised.
- MDR intensified efforts to diversify the customer mix in the past 12 months and reported a net influx of 11 new brands on a pcp basis.
- The patient base expanded from ~2.0 million as of 30 June 2021 to ~2.6 million as of 31 March 2022.
Cashflow Summary – Q3FY22 & YTDFY22; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of pharmacy network expansion, COVID-19 lockdowns, higher technological investment, and forex rate changes.
Outlook:
- The company is advancing to enter the New Zealand (NZ) market with the roll out of ~187 stores, depicting ~54% of the Green Cross Health pharmacies transferred to date.
- MDR launched two of the four THRiV programs contracted in Q3FY22 and has several more in the pipeline.
- MDR maintains revenue guidance between ~$72-$74 million and gross margin within ~53 – 54% for FY22.
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 MDR gave a negative return of ~46.57% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.180 - $0.415. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/Sales multiple, considering continuing negative net margin, negative ROE, and risk of COVID-19 disruptions. For this purpose of valuation, a few peers like Doctor Care Anywhere Group PLC (ASX: DOC), Total Brain Ltd (ASX: TTB), Atomo Diagnostics Ltd (ASX: AT1) have been considered. Considering the current trading levels, growth in operating revenue (YTD22), patient base, pharmacy network, improved liquidity, geographical expansion, an indicative upside in valuation, and associated key business risks, we give a ‘speculative Buy’ rating on the stock at the closing market price of $0.195, up by ~2.631%, as of 13 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
MDR Daily Technical Chart, Data Source: REFINITIV
Bionomics Limited
BNO Details
Q3FY22 (ended 31 March 2022) Financial Highlights: Bionomics Limited (ASX: BNO) is a clinical-stage biopharmaceutical firm engaged in the developing new drug candidates for the treatment of central nervous system disorders.
- BNO held ~$39.58 million cash balance as of 31 March 2022 versus ~$40.35 million as of 31 December 2021.
- The quarter saw the issuance of ~243,300 ADSs (American Depository Shares) at ~$12.35 per ADS upon the exercise of the underwriters’ option to buy additional ADSs concerning the US IPO and concurrent listing on the NASDAQ. BNO obtained $3.92 million, post share issue costs.
Key Financials 1HFY21 Vs. 1HFY22; (Analysis by Kalkine Group)
Key Risks: The company faces the risk of commercialisation of candidates, adequate funding for R&D, uncertain clinical trial outcomes, and required regulatory approvals.
Outlook:
- BNO continues to advance the Attune and Prevail studies. The Attune assesses the oral tablet formulation of BNC210 (versus placebo) in ~200 PTSD patients in the U.S with ~25 open clinical sites recruiting patients for the ongoing trial.
- The Prevail study aims to evaluate the oral tablet formulation of BNC210 versus placebo as an acute treatment for SAD (social anxiety disorder) in ~150 US patients. BNO started trials in January 2022 and expects top-line results by FY22-end.
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 BNO gave a negative return of ~30.52% in the past three months and a negative return of ~44.99% in the past six months. The stock is currently trading lower than its 52-weeks’ average price level band of $0.059 - $0.240. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers’ average EV/Sales multiple, considering its continuing net losses, negative ROE, and negative operating cash flows. For this purpose of valuation, a few peers like Imugene Ltd (ASX: IMU), Oncosil Medical Ltd (ASX: OSL), Pro Medicus Ltd (ASX: PME) have been considered which fall under healthcare sector. Considering the current trading levels, revenue potential from the CTx (Cancer Therapeutics CRC) contract, expansion of trial sites in the US, improved liquidity position, international visibility with the NASDAQ listing and investor base, an indicative upside in valuation, and associated key business risks, we give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.066, as of 13 May 2022. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.
BNO Daily Technical Chart, Data Source: REFINITIV
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: -
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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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