Cello Health Plc

Cello Health Plc (LON: CLL) is an AIM-listed healthcare-focused marketing advisory Company.  The Group provides market research, consulting and direct marketing services to the global pharmaceuticals, biotechnology, diagnostics, healthcare equipment and consumer health companies.

Recent News

On 9 July 2020, the Company announced the update on irrevocable undertakings. In this update, the Board members of Cello Health Plc (Cello) and Pharma Value Demonstration Bidco Limited (Bidco) announced that they have reached an agreement on the terms of a recommended all-cash offer for the whole issued and to be issued share capital of Cello acquisition to be made by Bidco (terms and conditions were stated in the announcement as on 1 July 2020).  Hence, Bidco has received letters of intent or irrevocable undertakings in respect of a total of 44,693,653 Cello Shares representing around 41.9% of the current issued share capital of Cello.

AGM Statement (as on 20 May 2020)

The Group delivered a decent first-quarter performance, with solid overall growth in net revenue. Cello Health division delivered strong overall net revenue and profit growth for the three months to March-end, along with decent like-for-like growth (LFL). Cello Signal unit comprised approximately 16% of the Group’s net revenue for the first quarter of 2020. Unit’s performance is likely to be impacted by more significant COVID-19 related work delays and cancellations.

Share Price Performance


1-Year Chart as on July-09-2020, before the market close (Source: Refinitiv, Thomson Reuters)

Cello Health Plc’s shares were trading at GBX 162.70 on 9 July 2020 (before the market close at 3:45 PM GMT+1), down by 0.18% against the last day closing price. Stock 52 week High and Low were GBX 165.00 and GBX 100.00, respectively.

At the current trading level, 14 days relative strength index of the stock was not favourable, and prices could fall further from the current trading level, representing overbought level.

Valuation Methodology


Key Risks

The Company operates in multiple geographies, and the profits can be impacted negatively due to foreign exchange rate fluctuations. The Group may face uncertainty in the medium-to-long term due to the ongoing COVID-19 mayhem.

Conclusion

The Company’s operations are impacted negatively due to uncertainty created by the Covid-19 crisis.  The Group is facing emerging headwinds and cost pressures. From a technical perspective, RSI is indicating a bearish setup for the stock, and it is not financially viable to take a fresh position currently. Presently, the Group is trading near the 52-week High, raising doubts at the upside potential at the current price level. The Company’s Price/Cash Flow, EV/EBITDA and Price/Earnings multiples are significantly higher as compared to the industry multiple, reflecting overstretched valuations.

Considering the risk factors and overstretched valuation multiples, we have given a “Sell” recommendation at the current price of GBX 162.70 (as on 9 July 2020, before the market close at 3:45 PM GMT+1).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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