Advanced Medical Solutions Group PLC

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.

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.

Investment Rationale for Valuation – Speculative Buy at GBX 262.50

• 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.
• Commercial Opportunities: AMS had expected the Premarket Approval of LiquiBandFix8^® in the US by the end of H2 FY22. Moreover, the Company had also made 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.
• Strong Dividend Growth: The Company had shown a solid 15.00% year-on-year growth in the total dividend attributable for FY21.
• Technical Indicator: The price of the stock is trading around the lower Bollinger band with a low 14-day RSI level of ~34.61.

Key Risks

• Weak UK GDP Figures: According to the Office for National Statistics, the UK GDP grew QoQ by just 0.8% during Q1 FY22. Moreover, it had declined by 0.1% in March 2022.
• Bank of England Warning: The Bank of England has trimmed its economic growth forecast for 2023 and is expected to show a contraction of 0.25% from a previously estimated growth of 1.25%. Moreover, it had also warned of UK inflation reaching around 10% very soon.

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

(Source: Company Filings)

• 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.

One Year Share Price Chart

(Source: REFINITIV; Analysis done by Kalkine Group)

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

Conclusion

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. Overall, the Company would continue to make an increased investments in R&D and expand its portfolio to deliver strong growth in revenue, profitability, and cash generation.

The stock made a 52-week high and low of GBX 347.00 and GBX 253.50, respectively.

Based on the solid fundamentals, strong net cash position, 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 262.50 (as of 12 May 2022) with lower double-digit upside potential based on 29.94x Price/NTM Earnings (approx.) on FY22E earnings per share (approx.).

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.

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

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

Note 3: Dividend Yield may vary as per the stock price movement.

Note 4: Target Price refers to a price level which 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 5: ‘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.’

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 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 unfavorable movement in the stock prices.

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