PainChek Limited

PCK Details

Change in Directors’ Interest: PainChek Limited (ASX: PCK) is a developer of pain assessment technologies. The company has developed a smartphone-driven device, PainChek®, to measure pain levels and update the medical record on the cloud. Recently, the company announced that John Murray, a Director of PCK, has acquired 792,079 performance rights for a non-cash value consideration of $40,000.

Sneak Peek at FY21 Key Results:

• Top and Bottom-Line Details: Revenues from ordinary business stood at $215k, depicting a decline of 13% on pcp. The company’s losses for FY21 decreased to $6.06 million, compared to a loss of $39 million reported in FY20.
• Increase in Expenditure: In FY21, research expense increased to $2.65 million, compared to $2.27 million reported in FY20. Corporate and administration expenses rose from $2.58 million in FY20 to $3.61 million in FY21.
• Government Grants: The company’s PainChek® Adult App has received authorisation and has been clinically proven. Notably, in May 2021, the grant-funded by the Australian Federal Government were used to fund PainChek® Adult App for people with dementia or cognitive impairment. Federal Government grant payments to PainChek® totalled $4.3 million in FY20 and FY21.
• Increase in Number of Beds: As at 30 June 2021, the company’s active licensed beds in RACs stood at 46,843, up from 24,435 beds as at 30 June 2020. The company has established a robust base in Australia, with over 60% market share in Aged Care and contracts.
• Increase in Cash Balance: The company exited FY21 with a cash balance of $11.42 million, up from $6.12 million at the end of FY20.

Cash Balance Highlights; (Analysis by Kalkine Group)

Key Risks: The company is also exposed to risks associated with general global economic and market conditions. PCK operates in a highly competitive environment, which is subject to business consolidations, new strategic alliances, market pressures, and regulatory and legislative pressures.  

Outlook: PCK remains on track to expand internationally by increasing UK RAC (Residential Aged Care) beds penetration and developing the hospital, home, and infant markets. PCK will continue to evaluate new market entry opportunities in Asia, Canada, and Europe and seek US market clearance for the de-Novo application with the FDA.

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 PCK gave a negative return of 40.51% in the past six months. The stock has recently touched its 52-week’s low price level of $0.045. The stock has been valued using an 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 a slight discount than its peers, considering rise in expenditure, general global economic and market conditions, regulatory and legislative pressures, etc. For the purpose of valuation, few peers like Mach7 Technologies Limited (ASX: M7T), Beamtree Holdings Limited (ASX: BMT), Pro Medicus Limited (ASX: PME), and others have been considered. Considering the current trading levels, geographical expansion, decent liquidity position, increase in active, licensed beds, and RAC facilities in FY21, regulatory clearances, valuation, and key risks associated with the business, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.045 as on 28 September 2021, 3:30 PM, (GMT+10), Sydney, Eastern Australia. 

PCK Daily Technical Chart, Data Source: REFINITIV   

Adveritas Limited

AV1 Details

Letter to Option Holder: Adveritas Limited (ASX: AV1) is involved in offering advanced software solutions that leverage big data solutions to drive business performance. In a recent update, the company stated that Option holders may exercise all or part of their Options prior on or before 25 October 2021, at an exercisable price of $0.10 each. 

FY21 Key Result Highlights:  

• Increase in Annualised Revenues: In FY21, the company’s annualised revenue increased by whopping 111% to $1 million. Notably, from 30 June 2021 to 30 August 2021, new client wins drove ~40% increase in annualised revenue and drove 126% since March 2021.
• Client Expansion: During the period, the company signed Enterprise clients across key verticals (Gaming and tech) and witnessed client expansion across Europe, Asia, and Latin America.
• Successful Placement: In July 2021, the company underwent a successful $3.0 million placement to support further growth momentum by investing in sales and marketing. It also has the potential to raise up to $5.5 million in October 2021.
• Rise in Paying Customer Base: As at 30 June 2021, the company’s paying customer base reached 176, skyrocketing by 1,400% year over year.
• Healthy Balance Sheet: The company remains well capitalised with a cash balance of $3.2 million and nil debt as at 30 June 2021.
  

Freemium subscribers Highlights; (Analysis by Kalkine Group)

Risk Analysis:

• The company is exposed to interest rate risk, market risk, liquidity risk, and credit risk.
• Further, stiff rivalry from competitors developing similar product lines and services, technology upgradation, and forex headwinds adds to the woes.

Outlook: The company remains on track to expand into new verticals and further penetrate in key markets globally. The company is also re-shaping its sales team with talented sales representatives across Asia and Europe to scale up new global client wins. In addition, the company’s $3 million placement in July 2021 is expected to aid AV1’s growth momentum. 

Stock Recommendation: The stock of the company has been corrected by ~28.57% in the past six months. Currently, the stock is trading below the average of its 52-week high and low levels of $0.091 and $0.225, respectively. On a TTM basis, the stock of AV1 is trading at an EV/Sales multiple of 37.6x, lower than the industry average (Software & IT Services) of 65.6x, thus seems undervalued.  Considering the increase in the cash balance, zero debt as at 30 June 2021, higher annualised revenue, new client wins, robust product pipeline, positive outlook, valuation on TTM basis, current trading levels, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the current market price of $0.100 as on 28 September 2021, 11:30 AM, (GMT+10), Sydney, Eastern Australia. 

AV1 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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