Do these Healthcare stocks look cheap – RHT, CYC, BOT, TTB, HLA

  • Feb 06, 2020
  • Team Kalkine
Do these Healthcare stocks look cheap – RHT, CYC, BOT, TTB, HLA

Towards the end of 2019, global stock markets rallied to reach all-time highs and the trend continued in January 2020. Despite the significant threat of coronavirus, markets across the world recovered driven by strong corporate earnings, easing of tension between the US and Iran, and improvement in the US-China trade relations.

The three US indices - S&P 500 Index, NASDAQ Composite and Dow Jones Industrial Average, Stoxx Europe 600 Index, Australia’s ASX, and India’s Sensex, among others, all hit record highs during January 2020.

The healthcare sector is one of the few sectors that has performed consistently over the last few years. Specifically, in Australia, the S&P/ASX 200 Health Care had a return of 41.25% in 2019.

In such a scenario, where markets seem to have hit their respective peaks and there are more chances of a downside than upside, an investor has to take a call whether it makes sense to look for stocks that are relatively cheap with a favourable earning potential to lower their risk level.

In this article, we will discuss some of the healthcare stocks that could have an exciting 2020 and are worth looking into.

Resonance Health Limited (ASX:RHT)

Resonance Health Limited focuses on developing and distributing medical imaging software and related services. The company provides technologies to diagnose and monitor human diseases, including non-alcoholic steatohepatitis (NASH) and non-alcoholic fatty liver disease (NAFLD).

Resonance Health and 3DR Laboratories sign a licence and royalty agreement

Resonance Health announced on 04 February 2020 that it has signed a licence and royalty agreement with 3DR Laboratories under which, 3DR will have the rights to sell Resonance’s FerriSmart service in the US.

Under the terms of the agreement, 3DR will have a licence to advertise and promote FerriSmart service and reports in the US. Also, Resonance will receive a royalty fee from 3DR for the sale of each report.

Q2 FY 2019/20 Report

On 29 January 2019, Resonance released its second-quarter report for FY 2019/20 with total revenue of $938K for the quarter ended 31 December 2019. Cash in hand increased by $135K over the previous quarter to reach $3.38 million. For the quarter, cash receipts from customers stood at $846K.

Resonance Health began preparing a dossier for FDA regulatory clearance for a new AI tool to assess liver fat automatically. Also, the company and Siemens Healthcare GmbH signed a Solution Partner Agreement for distributing its FerriSmart product through the latter’s Digital Marketplace.

For FY 2018/19, Resonance had reported a strong performance with total revenue growing by 25% and net profit after tax reaching $1.27 million. EPS rose from 0.06 cents to 0.31 cents. The company had cash in hand of $3.08 million, almost double the previous year figures.

The impressive results coupled with the expansion of its FerriScan in multiple markets and the company’s focus in the AI space indicate that the financial performance of the company will continue to improve further.

RHT’s stock was trading at $0.220 on 06 February 2020, reflecting a rise of 2.326% (at AEDT 1:33 PM). Resonance delivered positive returns of 147.13% and 190.54% in the last six months and last 12 months. RHT’s P/E ratio was noted at 69.350x.

Cyclopharm Limited (ASX:CYC)

Cyclopharm Limited, founded in 1986, engages in the diagnostic imaging field with expertise in lung health. The company markets its medical device and products under the trade name TechnegasTM.

Cyclopharm is not generating profits at present. In terms of sales revenues, the company delivered growth of 1.63% in FY2018 and growth of 2.54% for the first half FY2019. While the financials might not look attractive at present, Cyclopharm’s TechnegasTM is likely to expand its reach in multiple geographies driven by compelling clinical data. The company is expecting approval from the USFDA and beginning of sales in 2020 itself.

Cyclopharm has also been focussing on infrastructure development and hiring of personnel that is essential before entering the US market. Also, the company is aiming for EU registration of its medical device UltraluteTM. With promising products in the pipeline and a share price that has declined ~4.17% in the last 12 months, CYC could be a stock to look at in the future.

CYC stock last traded at $1.150 on 05 February 2020, an increase of 2.679% as compared to its previous close. Cyclopharm has delivered returns of 293.33% in the last 5-year period. CYC had dividend yield (annual) of 0.87%.

Botanix Pharmaceuticals Ltd (ASX:BOT)

Botanix Pharmaceuticals, a cannabinoid company, is engaged in developing novel therapies in order to treat severe skin diseases, including psoriasis, acne, and atopic dermatitis. The company’s licenced drug delivery technology, Permetrex™ is designed to administer drugs through the skin in a more efficient manner.

Quarterly Activities Report and Quarterly Cash Flow Report

On 31 January 2020, Botanix released its Quarterly Activities Report and 4C Quarterly Cash Flow Report with key updates on clinical development. The highlights include of the following:

  • Phase II efficacy and safety data of BTX 1503 gives the confidence to advance with the FDA end-of-Phase II meeting and get ready for a Phase III study
  • Recruitment for the Phase II study to assess BTX 1204 in atopic dermatitis was completed; data estimated in the current quarter
  • Obtained ethics approval for Phase Ib study evaluating BTX 1702 for papulopustular rosacea; study start expected in Q1 CY2020
  • Advanced antimicrobial development program with trial to start in late Q1 CY2020

 

Separately, in November 2019, US Drug Enforcement Administration (DEA) indicated that the synthetic CBD the company uses doesn’t come under controlled substance, which is expected to lower the overhead costs and lead to an improvement in pace and cost of developing its products.

With an impressive pipeline and the likelihood that the CBD industry has a positive outlook, BOT could just be a surprise stock.

BOT’s stock was trading $0.091 at 06 February 2020, reflecting a decline of 2.151% (at AEDT 2:42 PM). Botanix has delivered returns of 365.05% in the 5-year period ended 05 February 2020.

Total Brain Limited (ASX:TTB)

A San Francisco-based company, Total Brain Limited, is a brain performance monitoring platform focussed on enhancing mental health and fitness. The company’s SaaS platform assists individuals in assessing and enhancing their respective brain capacities.

On 31 January 2020, Total Brain released its Quarterly Update for the period closed 31 December 2019. Highlights include of the following:

  • Successful completion of an initial field test in collaboration with IBM Mental Fitness

        360 through the GRIT application;

  • Closed five contracts with ~$800,000 (minimum value) with a potential to earn more depending on usage;
  • The company accumulated $700,000 in cash receipts, in line with September quarter, adjusting for AARP’s upfront annual payment;
  • Both user registrations and brain profiles grew 4% q-o-q and 19% y-o-y, respectively.

 

       

A favourable sales momentum coupled with new collaborations and new contracts, will likely put the company in a good position.

TTB was trading at $0.705 on 06 February 2020, with a rise of 8.462% (at AEDT 2:47 PM). Total Brain has delivered returns of 160.00% and 171.87% in the last six months and last 12 months, respectively.

Healthia Limited (ASX:HLA)

Healthia Limited is a consortium of health-based companies offering health services including physiotherapy, podiatry, and hand therapy. The company’s portfolio includes Allsports Physiotherapy, My FootDr, DBS Medical Supplies, Extend Rehabilitation, and iOrthotics.

Healthia launches iOrthotics US Laboratory

On 28 January 2020, HLA announced the launch of a laboratory in New York that manufactures 3D printed orthotics. iOrthotics USA LLC, Healthia’s 58% owned subsidiary, will operate the facility. An HP Fusion Jet 3D printer will be installed at the facility and is expected to generate ~US$1 million at full capacity. The facility has the space for two additional printers.

Impressive FY 2019 Results with organic revenue growth of 2.0%

Healthia reported a strong FY 2019 (year ended 30 June 2019) with revenue from continuing operations of $76.6 million, 6.6% more than prospectus estimate. The EBITDA margin noted a change of ~90 basis points that was forecasted 14.3%, and the net profit after tax and before amortisation stood at $4.9 million, 2.2% higher than the expectations.

A strong performance for the first full-year post listing on the ASX coupled with a significant opportunity in the allied health clinics space is a big positive for the company. Also, with ~$11 million in the kitty, Healthia is in a decent position to move ahead without having to raise additional funds.  

HLA was trading at $1.290 on 06 February 2020, with an increase of 0.781% (at AEDT 2:57 PM). Healthia has delivered returns of 21.90% and 23.08% in the last six months and last 12 months, respectively.


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