Clinigen Group Plc – Expects net revenue growth of 5%-10% for FY21

Clinigen Group Plc (LON: CLIN) is the FTSE AIM UK 50 listed Company, which is the global pharmaceuticals company focused on providing ethical access to medicines.

Investment Highlights - Clinigen Group Plc – Speculative Buy at GBX 684.50

• The completion of Brexit trade deal between the UK and European Union might boost up investor sentiments in the medium term and stock price may shoot up further.
• The net revenue, adjusted EBITDA and adjusted earning per share of the Company had shown an improving trend during FY20.
• The Company had increased its full-year dividend payment by 14% during FY20.
• The valuation metrics of the Company such as EV/Sales, EV/EBITDA, Price/Cash Flow and Price/Book value are trading lower than the average of corresponding multiples of the Healthcare industry.
• From a technical standpoint, the Company is trading higher than its 20-day simple moving average price of 655.40, which indicates further upside potential of the stock.

Key Risks

• The Company may undergo significant delay due to disruptions caused by Covid-19
• The Company may implement a new process, which would increase the level of compliance risk.
• The Company is operating in a highly competitive market which could reduce its market share.

Trading Update (as on 26 November 2020)

• The Company had seen a good recovery of Clinical Services and Commercial Medicines.
• The Company had witnessed a rise in demand for its key asset Proleukin. 
• The Company is expecting the launch of Proleukin to take place during FY21.

Recent News

On 18 December 2020, the Company had appointed Numis Securities Ltd as Nominated Adviser and Joint Broker with immediate effect.

On 26 November 2020, the Company has updated that Anne Hyland will replace John Hartup as the Senior Independent Non-Executive Director effective from the same day.

On 10 November 2020, the Company has received FDA approval to broaden the indication for Totect® to cure the incidence and severity of cardiomyopathy associated with doxorubicin administration in women with metastatic breast cancer.

Financial Highlights (for FY20 ended on 30 June 2020 as on 16 November 2020)

(Source: Company result)

• The net revenue and adjusted gross profit of the Company grew by 15% and 21%, respectively, at constant currency during FY20 despite operational headwinds caused by Covid-19 pandemic.
• The adjusted Earning per share of the Company had demonstrated a growth of 20% from 54.4 pence during FY19 to 65.6 pence during FY20.
• Regarding its financial position, the Company had increased its net debt to £311.9 million as of 30 June 2020.
• The Company had increased its full-year dividend for FY20 by 14% to 7.61 pence per share to be paid on 02 December 2020.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

The Board has shown optimism towards the long term fundamentals and its outlook. The Company is expecting organic net revenue growth of 5%-10% for FY21. The Company intends to maintain its net debt in the range from 1.0x to 2.0x within 12-18 months. The Company is expecting accelerated growth in FY22 driven by the launch of its new asset Erwinase. Regarding its valuation metrics, Price/Cash Flow, EV/Sales, EV/EBITDA and Price/Book Value is trading lower than the average of corresponding multiples of the Healthcare industry. On the technical front, the Company is trading more than its 20-day simple moving average of 655.4, indicating an upside potential in the stock price. The stock made a 52-week low and high of GBX 350.40 and GBX 1,000.00, respectively.

Based on its resilient business outlook and the valuation method as discussed above, we have given the "Speculative Buy" stance on Clinigen Group Plc at the current market price of GBX 684.50 (as on 29 December 2020, before the market close at 12:30 PM GMT), with lower-double digit upside potential based on 2.58x EV/Sales (approx.) on FY21E sales (approx.).

Medica Group Plc – Acquired Global Diagnostics Ireland for £14.5 million

Medica Group Plc (LON: MGP) is the FTSE All-Share listed Company, which is the provider of teleradiology services.

Investment Highlights - Medica Group Plc – Speculative Buy at GBX 113.10

• The recent news of the completion of Brexit deal and rollout of Covid-19 vaccine may sparkle the investor confidence and the stock price may witness a rally.
• The Company had outperformed against its benchmark index, FTSE All-Share and delivered a higher return of ~ 9.70% during the last nine-months period.
• The lucrative acquisition of Global Diagnostics Ireland will expand the geographic reach of the Company and would have a positive contribution to the earnings of the Company.
• From a technical standpoint, the 14-day RSI of 40.45 is indicating an upside potential of the stock.

Key Risks

• The Covid-19 pandemic may cause several operational headwinds in its various business segments.
• The Company is operating in a highly regulated industry which may increase its compliance risk.
• The Company is exposed to cybersecurity risk regarding data breaching.

Financial Highlights (for six months ended on 30 June 2020 as on 17 September 2020)

(Source: Company result)

• The total revenue of the Company was plunged by 22.7% during H1 FY20 ended on 30 June 2020.
• Similarly, the adjusted operating profit also went down by 62.0% to £2.02 million during H1 FY20.
• The Company had a gross cash balance of £20.0 million as of 30 June 2020.
• The Company had maintained same interim dividend of 0.85 per share for H1 FY20.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

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

Conclusion

Medica Group had acquired Global Diagnostics based out in Ireland for a lucrative sum of £14.5 million on a cash-free and debt-free basis. The Company does not seek any furlough support from Government during Covid-19 pandemic reflecting the resilient financial position of the Company. The Company had robust liquidity, and hence they are further seeking profitable opportunities for penetrating more geographies in future.  On the technical front, the Company is trading at a 14-day RSI of 40.45, which indicates an upside potential in the stock price. The stock made a 52-week high and low of GBX 166.65 and GBX 88.00, respectively.

Based on its strong financial position and valuation method discussed above, we have given the "Speculative Buy" stance on Medica Group Plc at the current market price of GBX 113.10 (as on 29 December 2020, before the market close at 8:10 AM GMT), with lower-double digit upside potential based on 4.39x EV/Sales (approx.) on FY20E sales (approx.).

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

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

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