Volpara Health Technologies Limited

Weak Bottom line in 1HFY19:Volpara Health Technologies Limited (ASX: VHT) is a MedTech SaaS company that is engaged in developing a high-quality application for detecting breast cancer based on the parameters such as measurements of breast density, compression, and radiation dose. It is a research, development, and manufacturing company headquartered in Wellington, New Zealand holding certification to ISO27001 and ISO13485, and is also a US FDA–registered establishment.

On 21 December 2018, the company issued 168,000 new fully paid ordinary shares as a result of the exercise of options under the Company’s Employee Share Option Plan (ESOP) without any disclosure to investors under Part 6D.2 of the Corporations Act.

On 19 November 2018, the company announced its 1H FY2019 results with 99 SaaS customers and Annual Recurring Revenue (ARR) of NZ$4.8 million (up by 35%). The Total Contract Value (TCV) was reported at NZ$6.5 million (up by 65%) with a negligible churn rate of (<2%). The company forecast ARR for FY19 to be NZ$9 million of which it has achieved NZ$5.1 million as of October 2018. As per the management, 3Q and 4Q are traditionally the biggest quarter for the company as they are outside of the US summer and also because of its trade show in Chicago.

For 1H FY19, the company reported a gross margin of 71.1% and negative EBITDA margin, Operating margin and Net margin of (207.2%), (201.8%), and (192.3%) because of higher operating expenses primarily the salaries and benefits expense which was up by 75.73% being reported at NZ$4.156 million.And due to these losses, the company is unable to generate any return for its shareholders as the ROE was calculated as (41.1%). Also, it is unable to use its assets efficiently to generate revenue as the Asset turnover ratio stood at 0.17x.

The company has ~179.18m shares outstanding with the market cap of $194.59 million as at December 28, 2018 and a beta of 0.44x (5-years monthly basis).


Price Movement Chart (Source: Thomson Reuters)

The stock has generated a positive YTD return of 56.12% and is currently trading close to higher level. The stock is positioned near to the Simple Moving Average (SMA) level of the Bollinger band and is in the positive position of the Relative Strength Index (RSI). We, therefore, suggest the market players keep a watch over the stock at the current market price of $1.085.
 

Coles Group Limited

Strong Balance Sheet Post Demerger:Coles Group Limited (ASX: COL) is an Australian company falling under the consumer staple industry. COL got demerged from Wesfarmers on 28 November 2018, and it again got listed on ASX with Coles Supermarkets, Coles Express, Coles liquor division, and a half-share in FlyBuys. COL’s shares commenced its normal trading from 30 November 2018 with around 1,333.93 million fully paid ordinary shares on the issue. It has a strong balance sheet which will provide funding capacity to support the company’s strategy as well as operational objectives.
Further, on 29 November, the company was assigned a public credit rating of BBB+ from Standard & Poor’s and Baa1 from Moody’s, both with a stable outlook.


Top 10 largest shareholders as at 28 November 2018 (Source: Company Reports)

The total number of shares held by the first 20 shareholders sums up to 60.40% of the total issue.

Since the demerger took place on 28 November 2018, there is no financial update provided by the newly formed Coles Group. Also, the management has not provided any update on the earnings guidance.
Although the company has provided its FY18 proforma values with:

• Net working capital: $(270) million
•  
• Net borrowings: $1,905 million
•  
• Net assets: $2,935 million
•  
• Net tangible asset per share: $0.94
•  
• Gearing: 64.9%
•  
• Operating cash flow before interest and tax but after net capex: $1,684 million
•  

It reported a 20 bps lower EBIT margins than Wesfarmers, but the return on capital increased from 9.2% to 32.5% on account of derecognition of goodwill and intangible assets that arose from Wesfarmers’ acquisition of Coles in 2008.

Since it got listed again, it has given a negative return of 8.69% till date falling from $12.89 on 27 November 2018 to $11.77 on 27 December 2018. Today the price is up by 1.954% and is currently trading at $12.00. The stock is positioned near to the Simple Moving Average (SMA) level of the Bollinger band and is in the average position of the Relative Strength Index (RSI). Based on foregoing, we, therefore, suggest the market players keep a watch over the stock at the current market price of $12.00.
 

Disclaimer
 
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.