Stocks’ Details

Opthea Limited

Receipt of Tax Credit from Australian Tax Office: Opthea Limited (ASX: OPT) is engaged in the development of innovative, biologics-based therapies for the treatment of eye disease. The market capitalisation of the company stood at ~$719.22 million as on 10^th December 2020. Recently, the company has received a research and development (R&D) tax credit of $8.5 million from the Australian Taxation Office, which is related to research and development costs spent in the 2019/2020 financial year. In another update, the company announced the closing of the US IPO of 8,563,300 American Depositary Shares, which was announced on 12^th October 2020.  During FY20, the company raised $50 million via a private placement to institutional investors and the R&D tax incentive of $14.6 million was received in September 2019. The company has scheduled to deploy these funds for manufacturing ample OPT-302 drug product for pivotal Phase 3 clinical trials and commercial use in wet AMD, feasibility and start-up activities to allow recruitment of patients, which is likely to commence in early calendar 2021. During FY20, the company recorded revenue amounting to $808,405 as compared to $914,840 in FY19. In addition, loss for the year stood at ~$16.29 million against ~$20.91 million in FY19.

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Key Financial (Source: Company Reports)

Outlook: For FY21, the company is focused on the clinical development of OPT-302 to key commercial milestones via finishing the Phase 2a clinical trial with OPT-302 in persistent DME patient.

Valuation Methodology: Price to Sales based Market Multiple Valuation (Illustrative)

Price to Sales Based Market Multiple Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As on 30^th June 2020, the cash balance of the company stood at $62,020,382, up from $21,534,919 as on 30^th June 2019. In the last one and three months, the stock of OPT has corrected 6.30% and 24.36%, respectively. As a result, the stock is trading towards its 52-week low level of $1.165, offering decent opportunities for accumulation. On a technical analysis front, the stock has a support level of ~$1.823 and a resistance level of ~$3.287. We have valued the stock using the price to sales-based market multiple valuation and arrived at a target price with an upside of low double-digit (in percentage terms). For the said purposes, we have considered Mayne Pharma Group Ltd (ASX: MYX), Sigma Healthcare Ltd (ASX: SIG), Capitol Health Ltd (ASX: CAJ), etc., as peers. Hence, in light of the reduced net losses, rising cash position, decent outlook and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $2.100 per share, down by 1.409% on 10^th December 2020.

Volpara Health Technologies Limited

Decent Growth in Topline: Volpara Health Technologies Limited (ASX: VHT) is involved in the development of digital health solutions to enable personalised breast cancer screening software applications.  The market capitalisation of the company stood at ~$338.85 million as on 10^th December 2020. For the 1H FY21, the company recorded revenue of NZ$9.5 million, reflecting a rise of 38% over 1H FY20 and subscription revenue for the half-year soared by 71%. VHT witnessed a rise of 43% in gross profit to NZ$8.7 million. This indicates a Gross Margin of 92%, which was mainly generated by the high gross margins of legacy MRS products.

Revenue Growth (Source: Company Reports)

Outlook: For the remaining six months of FY21, the company would be focused on the release of refreshed branding, product naming, website, etc., continued sales growth and to increase multiple product sales into its existing customer base.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: The company closed 1H FY21 with cash and cash equivalents of NZ$64.3 million against NZ$31.4 million at the end of FY20. The increase in cash position was primarily supported by the successful capital raising of NZ$39.5 million. On a technical analysis front, the stock has a support level of ~A$1.261 and a resistance level of ~A$1.448. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of low double-digit (in percentage terms). For the said purposes, we have considered Pro Medicus Ltd (ASX: PME), Nanosonics Ltd (ASX: NAN), Telix Pharmaceuticals Ltd (ASX: TLX), etc., as peers. Therefore, decent improvement in gross profit and revenue, decent outlook, rising cash position supported by capital raising, we give a “Buy” recommendation on the stock at the current market price of A$1.330 per share, down by 1.482% on 10^th December 2020.

Mayne Pharma Group Limited

Launch of Four Generic Products: Mayne Pharma Group Limited (ASX: MYX) is in the development, manufacturing and marketing of branded and generic pharmaceutical products globally. The market capitalisation of the company stood at ~$638.04 million as on 10^th December 2020. On a reported basis, the company recorded revenue and EBITDA amounting to $457.0 million and $80.3 million during FY20, reflecting a fall of 13% and 28% over FY19. In the same time span, the company reported a net loss after tax of $93 million, which was mainly affected by a non-cash intangible asset impairment of the generic portfolio. During the year, the company rolled out four generic products and filed three generic products with the FDA. This including a potential first-to-market women’s health product.

Key Financials (Source: Company Reports)

Outlook: The company stated that anticipated dermatology opex savings of US$7 million in FY21 is likely to enhance the profitability of the business. The company is expecting to launch NEXTSTELLIS™ in FY21 with an estimated cost of US$20 million. In addition, the key strategic priority of the company revolves around returning to growth via repositioning the business into sustainable products, distribution channels and therapeutic areas.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: During FY20, the net operating cashflow of the company fell by 6% to $100 million. In addition, net debt position decreased by $32 million to $248 million. The 52-week low-high range for the stock stands at $0.195 - $0.485, respectively. On a technical analysis front, the stock has a support level of ~$0.283 and a resistance level of ~$0.476. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price, which is offering an upside of low double-digit (in percentage terms). For the said purposes, we have considered Opthea Ltd (ASX: OPT), Nanosonics Ltd (ASX: NAN), Sigma Healthcare Ltd (ASX: SIG), etc., as peers. Hence, considering the recent launch of four generic products, expected opex savings, reduction in net debt position and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.365 per share, down by 3.948% on 10^th December 2020.

Ramsay Health Care Limited

Decent Performance in Q1 FY21: Ramsay Health Care Limited (ASX: RHC) owns and operates a range of healthcare facilities throughout Australia, France, Indonesia, Malaysia and the United Kingdom. The market capitalisation of the company stood at ~$14.97 billion as on 10^th December 2020. For the quarter ended 30^th September 2020 (Q1 FY21), Ramsay Australia recorded a rise of 1.5% in total revenue, which indicates a rise of 1.7% in surgical admissions (ex-Victoria up 8%) as well as low non-surgical activity. Ramsay Santé also witnessed a growth of around 5.4% in surgical volumes on the pcp in combination with low non-surgical activity. During FY20, the company reported core net profit after tax of $336.9 million, indicating a fall of 44.5% over FY19.

Key Financial (Source: Company Reports)

Outlook: Considering the near-term uncertainties in the market, the company is not in a position to provide guidance for FY21. However, the company believes that the fundamentals of health care industry would be positive over the medium to long term in spite of current challenging environment. In addition, the company is well-placed to capitalise on the shifting industry dynamics in each of its key markets. The company is scheduled to release its 1H FY21 results on 25^th February 2021.

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation: As on 30^th June 2020, the company had available undrawn debt capacity and cash headroom of around A$3 billion. The 52-week low-high range for the stock stands at $46.120 - $80.930, respectively. On a technical analysis front, the stock has a support level of ~$61.135 and a resistance level of ~$70.536. We have valued the stock using the price to earnings multiple based illustrative relative valuation and arrived at a target price with an upside of high single-digit (in percentage terms). For the said purposes, we have considered Cochlear Ltd (ASX: COH), Sonic Healthcare Ltd (ASX: SHL), Ansell Ltd (ASX: ANN), etc., as peers. Hence, considering the decent performance in Q1 FY21, returns in the past months, and positive fundamentals of the health care industry, we give a “Hold” rating on the stock at the current market price of $64.190 per share, down by 1.911% on 10^th December 2020.

Ansell Limited

Delivered Strong Financial Results Despite COVID-19 Pandemic: Ansell Limited (ASX: ANN) provides superior health and safety protection solutions that enhance human well-being. The market capitalisation of the company stood at ~$4.49 billion as on 10^th December 2020. During the financial year 2020, the company recorded robust financial performance with strong growth in sales and earnings combined with robust cash flow generation and strengthened return on capital employed in spite of challenges posed by COVID-19 pandemic for the company as well as the global economy. ANN recorded sales amounting to US$1,613.7 million, reflecting a rise of 7.7% on the previous year. EBIT for the period witnessed a rise of 8.3% (YoY) to US$219.7 million, which was fueled by sales growth, Transformation benefits, and net favourable raw material costs. In addition, ROCE for the period improved by 85 bps to 14%. The company has paid a final dividend of US28.25¢, which took the full-year dividend to US50.0¢, indicating a growth of 7% over the previous year.

Key Financials (Source: Company Reports)

Upgraded Guidance: Despite the ongoing uncertainties from COVID-19, the company recorded decent performance in the first four months of FY21. Hence, the company upgraded its guidance and now expects to report double-digit organic growth. ANN is likely to record EPS in the ambit of 135¢ - 145¢

Valuation Methodology: Price to Earnings Multiple Based Relative Valuation (Illustrative)

Price to Earnings Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:  The company seems to be well-placed for attaining future growth on the back of investments in new capacity & capabilities. In addition, the company’s rising productivity and lower production costs are improving the competitive strength of the business. On a technical analysis front, the stock has a support level of ~$27.689 and a resistance level of ~$41.825. We have valued the stock using the price to earnings multiple based illustrative relative valuation and arrived at a target price with an upside of high single-digit (in percentage terms). Thus, considering the increasing returns to shareholders, decent performance in FY20 and upgraded guidance, we give a “Hold” recommendation on the stock at the current market price of $34.470 per share, down by 1.317% on 10^th December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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