Micro-X Limited

MX1 Details

Q2FY22 Operational Performance: Micro-X Limited (ASX: MX1) is engaged in designing, developing, and manufacturing ultra-lightweight CNT based X-Ray products for global health and counted IED imaging security markets. On 06 January 2022, MX1 issued 13,210 fully paid ordinary shares after the Performance Rights exercise issued in line with the Company’s Employee Incentive Plan.

• Major Growth in Mobile DR: Micro-X received exceptionally positive feedback and interest in the RSNA 107^th Scientific Assembly and annual meeting in Chicago. Over 20 new dealer and distributor contracts were processed in North America and EMEA regions. Regulatory testing on next-generation Rover stands on track for global commercial launch by February 2022.
• First Customer Demonstrations and Sales in IED X-ray camera, named ‘Argus’: Sales pipeline for Argus is growing followed by Argus showcase at US bomb technician meeting in Florida. The product received seven requests for demonstrations from state and federal law enforcement and the military.
• Financial Update: As of 31 December 2021, MX1 clocked a cash balance of $19.94 million. The company witnessed an operating cash outflow of $5.26 million. Net cash outflow for the period stood at $5.71 million, and cash receipts stood at $0.5 million.

Annual PcP Change; Analysis by Kalkine Group

Key Risks and Challenges

Speculation in Healthcare Equipment & Suppliers industry is highly sensitive to market updates on clinical trials and regulatory clearances. Moreover, sunk costs for the companies in this industry are very high, owing to cash outflows on research and development.

Outlook

The positive feedback was received from multiple highly regarded industry conferences in the US for MX1’ innovative technology and product range. The company is focused on executing agreements with dealers and distributors engaged during RSNA meetings. Rover Mark II will receive certification in Q1FY22.

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 MX1 gave a negative return of ~31.429% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.220 - $0.450. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ EV/Sales multiple averages, considering the trend of negative bottom-line and potential market competition. For valuation, few peers like Polynovo Ltd (ASX: PNV), Somnomed Ltd (ASX: SOM), Universal Biosensors Inc (ASX: UBI) and others have been considered. Given favourable guidance on Rover Mark II, first customer demonstrations and sales for Argus, growth prospects in Mobile DR, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $0.230, as of 04 February 2022, at 02:43 PM (GMT+10), Sydney, Eastern Australia.

MX1 Daily Technical Chart, Data Source: REFINITIV

Next Science Limited

NXS Details

Q4FY21 Financial and Operating Performance: Next Science Limited (ASX: NXS) is engaged in commercializing and developing its Xbio technology.

• XPERIENCE™ US Distribution: NXS signed the XPERIENCE™ US distribution agreement with Zimmer, Inc. The agreement delivers sales coverage with 2000+ sales representatives serving Zimmer’s knee and hip replacement market. NXS entered in XPERIENCE™ distribution agreement with TELA Bio, Inc for US reconstructive and plastic surgery market.
• Growth in NXS Products: XPERIENCE™ adoption is gathering pace in 93 US hospitals and 160 surgeons as of December 2021. BlastX™ customer pace has continued its pace under the direct sales model.
• Financial Update: In Q4FY21, the unaudited revenue clocked US$2.9 million, up by 32% sequentially, and cash receipts from customers surged by 53% to US$2.9 million, sequentially. The full-year revenue was registered at US$8.9 million, up by 160% YoY. As of 31 December 2021, cash at the bank stood at US$7.4 million.

Sequential Revenue Growth; Analysis by Kalkine Group

Key Risks and Challenges: NXS operates in a highly competitive space; hence the potential risk of substitution or risk of market share loss could constrain operating metrics to grow. The client base of NXS is extensively undiversified; therefore, any breach of contract from the client’s end can pose a substantial top-line risk.

Outlook: The execution of the Zimmer agreement for XPERIENCE™ has provided a paradigm shift in product representation to the orthopaedic market. Zimmer labelled product is estimated to launch in H2FY22, favoring positive sales impact of XPERIENCE™. The surged use of Bactisure™ has delivered a strong revenue stance in FY21.

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 NXS gave a negative return of ~7.531% in the past year. The stock is currently trading lower than the 52-weeks’ average price level band of $0.990 - $2.060. The stock has been valued using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in percentage terms). The company might trade at a slight discount to its peers’ EV/Sales multiple averages, considering COVID-19 uncertainties and an undiversified client base. For valuation, few peers like Polynovo Ltd (ASX: PNV), Somnomed Ltd (ASX: SOM), Universal Biosensors Inc (ASX: UBI) and others have been considered. Given the execution of Zimmer agreement, growth in BlastX™ and XPERIENCE™, surged use of Bactisure™, current trading levels, upside indicated by valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the current market price of $1.100, as of 04 February 2022, at 02:51 PM (GMT+10), Sydney, Eastern Australia.

NXS 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: - 

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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