Advanced Medical Solutions Group PLC (LON: AMS)

Advanced Medical Solutions Group PLC is an FTSE AIM UK 50 Index listed Company engaged in designing, manufacturing, and developing surgical equipment and advanced wound care products. The Company was founded in 1991 in Winsford,

Recent Trend of Dividend Payments

AMS will pay a final dividend of 1.37 pence per share on 17 June 2022, while the ex-dividend date will be 26 May 2022. It has taken a full-year FY21 dividend to 1.95 pence per share. In comparison, AMS had paid a total dividend of 1.70 pence per share for FY20. Thus, the total dividend growth remained 15.00%.

(Data Source: LSE Website, Research done by Kalkine Group)

Growth Prospects

• Acquisition Benefits: The Company is expected to complete the acquisition of AFS Medical GmbH ("AFS") by mid-2022, and it will strengthen the Group's direct surgical sales footprint and capabilities. Currently, the transaction is subjected to regulatory clearances.
• Significant Operational Progress: The final results for Seal-G® and Seal-G® MIST clinical study would be expected by the second half of 2022. Moreover, the Premarket Approval of LiquiBandFix8^® in the US is also expected by the end of H2 FY22.
• Encouraging Divisional Performance: The Woundcare Business Unit revenues increased by around 23% and the Surgical Business Unit revenues rose by approximately 34% during FY21.

Key Risks 

• Interest Rate Hike: The Federal Reserve announced a first interest rate hike (by 0.25%) in over three years and indicated seven rate hikes in 2022.
• Ukraine Tension: The mounting concern over the Russian invasion in Ukraine can continue to weigh on the equity market.
• Low Success Rate of Clinical Trials: Clinical trial failures could adversely affect the Company's ability to deliver shareholder expectations and damage reputation & relationship with veterinarians.
• Regulatory Risk: Any change in the regulations could impact the trials and operations of the Company.

Key Fundamental and Shareholders Statistics of Advanced Medical Solutions Group PLC. 

Octopus Investments Limited is the most significant shareholder as it holds nearly 26.01 million shares as of 31 December 2021.       

FY21 Financial Highlights (for the 12 months ended 31 December 2021, as of 10 March 2022)

(Source: Company Filings)

• Robust Top-line Business: The strong performances reported across all key product categories drove top-line revenue higher by around 25%, from £86.8 million in FY20 to £108.6 million during FY21.
• Profitability: The adjusted profit before tax increased by approximately 92% to £25.6 million during FY21.
• Net Cash: AMS further strengthened its net cash from £53.8 million during FY20 to £73.0 million during FY21.

Share Price Performance Analysis

(Source: Refinitiv, Research done by Kalkine Group)

On 17 March 2022 at 11:00 AM GMT, AMS’s shares were trading at GBX 279.00, down by around 1.78% against the previous day closing price. Stock 52-week High and Low were GBX 347.00 and GBX 228.00, respectively.

On a daily chart, the stock price is sustained between the lower Bollinger band and the middle Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI stood at ~45.41 levels.

Valuation Methodology: Price/Earnings Approach (FY22E) (Illustrative)

Business Outlook

AMS delivered an excellent performance in FY21, with revenue growth of 29.00% on a constant currency against FY20 and doubled its bottom-line profitability. Meanwhile, the Company made significant operational improvements by recent acquisitions and made progress on numerous strategic opportunities to strengthen its product portfolio and development pipeline. Overall, the Company would continue to make increased investment in R&D and expand the distribution network to deliver significant and robust long-term growth for the shareholders.

Please note markets are trading in a highly volatile zone currently due to certain macro-economic and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Considering the Company’s product pipeline, recent success in trials, continued market expansion,, solid dividend growth, robust profitability, and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Advanced Medical Solutions Group PLC at the current price of GBX 279.00 (as of 17 March 2022 at 11:00 AM GMT), with lower-double digit upside potential based on 30.93x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decisions should be made depending on the investors’ appetite for 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 is subject to the factors discussed above.

Note 3: Target Price refers to a price level that the stock is expected to reach as per the relative valuation method and or technical analysis taking into consideration both short-term and long-term scenarios.

Note 4: ‘Kalkine reports are prepared based on the stock prices captured either from the London Stock Exchange (LSE) and or REFINITIV. Typically, both sources (LSE and or REFINITIV) may reflect stock prices with a delay which could be a lag of 15-20 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.’

Note 5: Dividend Yield may vary as per the stock price movement.  

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 the 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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