The All Ordinaries Healthcare Share Price Under Discussion - SomnoMed

Summary

  • With a high prevalence that is expected to grow further, the obstructive sleep apnea (OSA) market is predicted to expand in the upcoming times.
  • Sydney-headquartered SomnoMed Limited, engaged in developing devices for OSA treatment, reported FY2020 group revenue of A$57 million, down 3% compared to FY19.
  • The core business of the Company generated a positive operating cash flow of almost A$5.6 million, compared to A$2.6 million in the FY19.
  • SomnoMed is well-capitalised with a determined management team and shall continue to invest in strategic projects that will boost its competitive benefit.

COVID-19 has shaken every aspect of life, bringing along numerous challenges, including sleep problems as well as mental health issues. The pandemic is damaging the mental health of people, with some studies suggesting that prescription of medications for mental health increased during the COVID-19 pandemic.

As per a survey by the International Labour Organization (ILO), approximately 50% of youth are possibly subject to any mental health conditions like anxiety & depression. These mental disorders are also causing sleep-related ailments.

There are millions of individuals suffering from terrible sleep due to several medical issues such as sleep apnoea. Medicinal treatment, along with the devices, collectively have a role in managing sleep disorders effectively and with a better clinical outcome.

The treatment market of sleep apnoea is considered as an emerging sector. The market is driven by a variety of factors, including the growing number of obese people, changing lifestyles, troubling work-related issues, increasing incidence of sleep disorders, and rising alcohol and caffeine intake.

ALSO READ: Sleep Disorders: A Look at Two ASX Stocks Providing OSA Treatment Solutions

As mentioned by SomnoMed, a constituent of the All Ordinaries index, based on an analysis published in The Lancet Respiratory Medicine 2019, approximately 1.36 billion patients suffer from obstructive sleep apnea (OSA) with nearly 936 million patients having mild OSA and 400 million patients with moderate & severe OSA.

With this backdrop, we will discuss an ASX-listed company, SomnoMed Limited, that is engaged in developing and commercialising devices for the treatment of sleep disorders.

About SomnoMed Limited

Healthcare sector player SomnoMed Limited (ASX:SOM) provides treatment solutions for sleep-related problems. The Company offers diagnostics as well as treatment solutions for Sleep-related Breathing Disorders such as snoring, OSA & bruxism. SomnoMed is a global leader in providing continuous open airway therapy (COAT). The Company is a major player in oral appliances with more than 565k patients treated across the world.

On 24 August 2020, SomnoMed updated the market with its results for the financial year 2020 and stated that results were severely affected due to COVID-19.

Highlights from the financial front:

  • SomnoMed Limited’s FY20 total group revenues were A$57.3 million, dropping by 3% as compared to FY19.
  • The EBITDA for FY20 stood at A$4.7 million equating to a 5% fall over the prior year’s underlying EBITDA.
  • The core business generated a positive operating cash flow of almost A$5.6 million for the year, compared to A$2.6 million in FY19.

Source: Company's presentation

Exceptional growth was witnessed in North America to March 2020. The acceptance of the digital SomnoDent Avant™ was beyond anticipations within a wider and increasing customer base because of its design, comfort, efficacy, and profile. The COVID-19 impact during the fourth quarter was profound overall but had a less impact during June 2020.

In Europe, the Company demonstrated consistent growth to March 2020, as some European nations went into earlier lockdown. During the fourth quarter of FY20, SomnoMed’s business was heavily impacted owing to COVID-19 pandemic. However, the Company highlighted that it witnessed a better-than-expected sales trend since the early June trading update.

Asia Pacific region struggled through the 3rd quarter resulting in a lower than anticipated growth to March 2020, which became worse in the fourth quarter through the COVID-19 experience in Australia, South Korea, and Japan.

ALSO READ: Stocks redefining Growth/ Value: SOM, MSB, BBN, AD8, DTC, SDF

Highlights from the operational front:

  • SomnoMed’s digital manufacturing platform was further enhanced during the COVID-19 time, with the design and development of the digital Herbst Advance Elite™ product.
  • Last year’s launch of the fully digital SomnoDent Avant™ product was well accepted and adopted by customers.
  • Currently, the Herbst Advance Elite™ is being launched and will add to the digital range delivering improved compliance, comfort, as well as clinical effectiveness.

Outlook-

  • Trading during 1H FY21 is anticipated to be challenging & mostly inconsistent across the 28 nations the Company operates in, with predicting accuracy expected to remain affected by ongoing COVID-19 restrictions and their implications.
  • However, during 2HFY20, there would be stronger signs of growth and continued margin expansion. The long-term opportunity for SomnoMed remains encouraging with solid underlying market fundamentals.
  • The Company is well-capitalised and has a united, more determined management team, is dedicated to its customers, and shall continue to invest in strategic projects that will boost its competitive benefit.

However, SomnoMed is not providing any guidance currently.

Stock Information-

Despite the FY20 performance being considerably affected by the pandemic, SomnoMed mentioned that long-term opportunity for the Company remains encouraging with solid underlying market fundamentals, and it will continue to invest in strategic projects.

On 25 August 2020, SomnoMed share price was up 1.948% at A$1.570 (at 02:05 PM AEST). With a market capitalisation of ~A$127.45 million, the Company has almost 82.76 million share trading on ASX. The stock has delivered a positive return of 57.14% in the last three months.

Comment


Disclaimer

Ad

GET A FREE STOCK REPORT


Top Penny Picks under 20 Cents to Fit Your Pocket! Get Exclusive Report on Penny Stocks For FREE Now.


   
We use cookies to ensure that we give you the best experience on our website. If you continue to use this site we will assume that you are happy with it. OK