This report is an updated version of the report published on 28^th April 2022 at 08:16 AM GMT+1

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 at around 15.00%.

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

Growth Prospects

• New Launches: The Company had submitted a filing for the innovative high gelling product, with anti-biofilm activity for 510(k) approval with the product on track for a US launch in late 2022.
• Commercial Opportunities: AMS had expected the Premarket Approval of LiquiBandFix8^® in the US is also expected by the end of H2 FY22. Moreover, the Company had also made an accelerated progress regarding the commercial launch of Seal-G® and Seal-G® MIST, as the results of the clinical study would be expected by the second half of 2022.
• Solid 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 

• Federal Reserve Meeting: Federal Reserve Chairman, Jerome Powell, had hinted at an 0.5% increase in interest rates in the next Federal Reserve meeting due in early May 2022.
• Record UK Inflation: British inflation hit a 30-year high of around 7.0% in March 2022, which may cause a further interest rate hike.
• Weak Global Growth Forecast: The World Bank has reduced its global growth forecast for 2022 from 4.1% to 3.2%.
• Intellectual Property Risk: Any failure to protect and register Intellectual property rights may adversely impact the AMS’ future business performance.

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. 

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 27 April 2022, AMS’s shares were closed at GBX 274.00, down by around 2.49% against the previous day closing price. Stock 52-week High and Low were GBX 347.00 and GBX 253.50, respectively.

On a daily chart, the stock price is sustained around the lower Bollinger band. Hence, there could be an uptick in the stock price in the near term. Also, the 14-days RSI stood at ~36.21 levels.

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

Business Outlook

AMS delivered an excellent performance in FY21, with significant growth in top-line revenue growth and more than 100% increase in bottom-line profitability. Meanwhile, 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. On a positive note, the Company expects elective surgery volumes to reach pre-pandemic levels. Overall, the Company would continue to make increased investment in R&D and expand its portfolio to deliver strong growth in revenue, profitability, and cash generation. 

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 solid profitability growth, significant improvement in net cash position, consistent dividend payments, 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 closing market price of GBX 274.00 (as of 27 April 2022), with lower-double digit upside potential based on 31.32x 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 scenario.

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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