Advanced Medical Solutions Group Plc

Advanced Medical Solutions Group Plc (LON: AMS) is a FTSE AIM UK 50 Index listed Company. It is engaged in designing, manufacturing, developing, and distributing advanced wound care products, medical-grade materials, and surgical dressings.

On 17 March 2021, the Company will announce the year's preliminary results ended 31 December 2020.

Rationale for Valuation – Speculative Buy at GBX 228.00

• As per valuation metrics, Price/Book and EV/Sales multiples of the AMS are currently lower than the corresponding multiples of the Healthcare Equipment & Supplies industry. It reflects, shares are undervalued against industry.
• The Company recorded a lower debt-equity ratio of 0.05x (H1 FY20) against the industry median, reflecting that AMS is less leveraged than the industry.
• AMS has decent fundamental metrics as it has maintained a Net margin above than the industry median.
• In 2020, the Company seemed to be well-positioned both operationally and financially and expects strong finances in 2021.
• The Board stays positive about the medium to long-term prospects.
• From the technical standpoint, shares were trading well above the short-term support level of 100-day (around GBX 227.1) simple moving average price, which reflects an uptrend in the stock.

Key Risks

• The business's growth trajectory could be impacted due to existing and emerging risks and uncertainties.
• Also, the increased competition can lead to the market share decline and income short fall.
• Moreover, the Brexit implications are causing higher costs, customer delays, longer lead times for customers, and longer product approvals.
• Foreign exchange fluctuations can lead to a shortfall in profits and loss of income.

Recent News

On 12 January 2021, the Company has appointed Grahame Cook, as a Non-Executive Director, with effect from 1 February 2021.

Trading Update (for the year ended 31 December 2020, as on 12 January 2021)

• FY20 trading has been in line with earlier issued guidance.
• The Company expects revenue to be marginally below and adjusted profit before tax to be slightly ahead of the previous market expectations.
• While it maintained a strong balance sheet, with the acquisition of Raleigh Adhesive Coatings.
• In 2020, the Company met the demand of its healthcare partners, despite the challenges presented by the Covid-19 pandemic.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

In US LiquiBand®, the Company is on track and expects a strong recovery in 2021, with an increased share of end-market volumes in Q1 FY, strong order book, commercial launch of LiquiBand® Rapid™ in 2021 and the planned launch of LiquiBand® XL in 2021. Overall, it expects in 2020 to report financials in line with market expectations. Despite the severe Covid-19 disruption, the Company has performed well both financially and operationally. Looking forward in 2021, the Company remains strong with a healthy order book in place. As per Raleigh's recent acquisition, the Company is expected to drive further commercial benefits from 2022. It has many value-accretive projects in the pipeline, with lower risk and higher capabilities. The Company is confident towards the business model and management team to tackle the uncertain times. The stock made a 52-week low and high of GBX 190.00 and GBX 299.50, respectively.

Based on the decent growth prospects and support from the valuation as done using the above method, we have given a “Speculative Buy” recommendation on Advanced Medical Solutions Group at the current price of GBX 228.00 (as on 15 January 2021, before the market close at 8:00 AM GMT), with lower-double digit upside potential based on 6.80x EV/NTM Sales (approx.) on FY20E sales (approx.).

Medica Group Plc

Medica Group Plc (LON: MGP) is a Health Care Equipment & Service company providing teleradiology services. The Company presently offers three services to hospital radiology departments, including routine plain film (Routine PF), Routine cross-sectional (Routine CS) and NightHawk.

Rationale for Valuation – Speculative Buy at GBX 127.00

• In H1 FY20, the Company delivered a resilient performance, with a strong financial position and expected an improvement in revenues in the second half of the year.
• Medica acquires GDI to expand the geographic reach and customer base.
• As per valuation metrics, EV/Sales multiple is currently lower than the Healthcare industry.
• The Company has decent fundamental metrics as it has maintained a Gross margin above 40% for the last three years.
• The debt/equity ratio was 0.33x in H1 FY20, lower than the industry median. Hence, the Company is less leveraged as compared to the industry.
• From the technical standpoint, shares were trading well above the short-term support level of 50-day (around GBX 118.9) simple moving average price, which reflects an uptrend in the stock.

Key Risks

• The Company operates in a highly regulated landscape, and failure to comply could lead to a significant financial or reputational loss.
• Also, the overdependence on technology can lead to loss of data and significant service interruptions.
• The Company may face the loss of output due to disaster or disruptive event at logistics facility or manufacturing facility.

Financial Highlights (for the six months ended 30 June 2020 (H1 FY20), as on 14 September 2020)

(Source: Company Website)

• The Company has a strong cash position, with an interim dividend per share of 0.85 pence.
• MGP is focused on advanced projects to support the new strategy revealed in March 2020.
• It witnessed improvements in reporting activity at the end of H1 FY20, both NightHawk and Elective have shown a recovery in activity levels.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

MGP expects revenue improvements in the second half of 2020. In November 2020, Medica acquired Global Diagnostics Ireland (GDI) and expected the acquisition to be strongly accretive to earnings. It has launched a new website in September 2020 and increased engagement with staff and radiologists. Moreover, the Company has a strong liquidity position and is looking to expand geographically with new business lines and selective M&A in the mid to long-term period. The stock made a 52-week low and high of GBX 88.00 and GBX 160.00, respectively.

Based on the decent growth prospects, and support from the valuation as done using the above method, we have given a “Speculative Buy” stance on Medica Group at the current market price of GBX 127.00 (as on 15 January 2021, before the market close at 8:00 AM GMT), with lower double-digit upside potential based on 4.52x EV /NTM Sales (approx.) on FY20E sales (approx.).

*All forecasted figures and Peer/Industry information have been taken from Refinitiv, Thomson Reuters.

*Dividend Yield may vary as per the stock price movement.

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.

References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.

This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.

The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.

Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.