MEDICAL DEVELOPMENTS INTERNATIONAL LTD

Transcription

1 MEDICAL DEVELOPMENTS INTERNATIONAL LTD No pain in Germany HOLD Pharmaceuticals, Biotechnology & Life Sciences / Pharmaceuticals 6 April 2018 COMPANY UPDATE Ticker MVP Stock Price $7.10 Target Price $8.08 Forecast Capital Return 13.8% Forecast Dividend Yield 0.6% Estimated Total Return - 12 Mth Forward 14.4% Company market data Market Cap. $419.8m Free Float (%) 66.5 Enterprise Value $425.0m 52 Week Range $ $8.00 Shares Out. 59.1m Avg. Daily Value Estimates changes $0.3m 2017a 2018e 2019e 2020e Core NPAT - old Core NPAT - new % Change Core EPS dil. ( ) - old Core EPS dil. ( ) - new % Change DPS ( ) - old DPS ( ) - new % Change All figures are in AUD unless otherwise specified. Share price performance Medical Developments International Ltd vs. AS51 (rebased index) EVENT Penthrox approved for sale in Germany: MVP announced that Penthrox has achieved marketing authorisation in Germany, bringing the total number of approvals in the EU to 15 nations. Since Germany is a large, important market for Penthrox, we see today s announcement as good news, with the timing of the approval coming through as expected. KEY TAKEAWAYS Global expansion strategy for Penthrox on track: We view the approval of Penthrox in Germany as further evidence of management s ability to deliver on its global roll-out strategy for Penthrox. With approvals in 15 countries in the EU we expect MVP will have approval for the remaining 11 EU nations by the end of FY19. Germany is a large opportunity for Penthrox: Given the large population and being the biggest spender on healthcare in Europe, Germany is an important market for Penthrox. If Penthrox is only used to treat acute trauma pain in ambulances and emergency departments, MVP could achieve in excess of 1m units sales of Penthrox p.a. First reimbursed sales in Germany, Italy and Spain will trigger milestone payment: First reimbursed sales in Germany will trigger a US$2m milestone payment from Mundipharma, with first reimbursed sales in Spain and Italy triggering another US$2m and US$1m milestone payments respectively. We expect MVP will receive the total US$5m in milestone payments during FY19. Pace of EU uptake and distributor appointment in the USA will be the next two share price catalysts. (1) Any indication of faster than expected uptake in established EU markets UK and France will provide important evidence that Penthrox can be successfully rolled out into the rest of the EU and later into the US. (2) With MVP expecting to open an IND (investigational new drug application) during 2H18 and FDA approval in 2020, we see the next share price catalyst as the appointment of a distributor in the US. This is expected by CY19. INVESTMENT VIEW Our earnings remain unchanged since the timing of the German approval was in line with our previous estimates. We continue to see a long runway of growth for MVP, with further approvals expected to come through over the next 12 months. Today s announcement was as expected and so we have retained our 12 month target price of $8.08/share. HOLD rating retained. Analyst Sarah Mann sarah.mann@moelisaustralia.com Y/E Jun a 2018e 2019e 2020e EBITDA EV/EBITDA 97.0x 92.1x 53.8x 35.2x Core NPAT Core EPS (Diluted) ( ) P/E 185.7x 206.0x 100.1x 58.8x EPS growth 1.9% (9.9%) 105.9% 70.2% DPS ( ) Yield 0.6% 0.6% 0.6% 0.6% DPS growth 0.0% 0.0% 0.0% 0.0% Dividend Payout Ratio 104.6% 116.1% 56.4% 33.1% All figures are in AUD. MOELIS AUSTRALIA SECURITIES PTY LTD AFS LICENCE

2 Medical Developments International Market Cap: $420m Last Price: $7.10 Target Price: $8.08 Hold Y/E Jun 30 Profit and Loss ($m) 2016a 2017a 2018e 2019e 2020e Valuation Summary Revenue Current Mkt Capitalisation Growth 33.3% 18.8% 19.2% 38.1% 31.8% Shares on Issue 59.1 EBITDA Last Price 7.10 Growth 61.8% 3.0% 5.4% 71.0% 52.9% Dep'n & Amort (1.1) (1.3) (1.5) (1.4) (1.3) 12 Mth Target Price 8.08 EBIT Total Estimated 12 Mth Return 14.4% Growth 40.4% (3.6%) 1.9% 108.0% 66.3% 12 Mth Fwd Capital Return 13.8% Net Interest Expense (0.3) (0.4) (0.4) 12 Mth Fwd Dividend Yield 0.6% Profit Before Tax Tax (1.0) (0.8) (0.8) (1.8) (3.1) Valuation Ratios 2016a 2017a 2018e 2019e 2020e Tax Rate (%) 31.3% 26.5% 28.4% 30.0% 30.0% EPS (Underlying) ( ) Minorities Growth 41.7% 1.9% (9.9%) 105.9% 70.2% NPAT (Underlying) Growth 41.9% 3.5% (9.1%) 107.3% 71.3% P/E (x) 189.1x 185.7x 206.0x 100.1x 58.8x One-Off Items Small Industrials (ex Fin's) 16.7x 16.3x 14.5x 13.5x 0.0x NPAT (Reported) Premium / (Discount) 1,033.3% 1,037.9% 1,323.3% 640.4% nm EPS (Underlying) ( ) EV/EBITDA (x) 99.9x 97.0x 92.1x 53.8x 35.2x Growth 41.7% 1.9% (9.9%) 105.9% 70.2% Small Industrials (ex Fin's) 17.0x 10.4x 9.4x 9.0x 0.0x Premium / (Discount) 488.2% 831.0% 875.3% 500.1% nm Balance Sheet ($m) 2016a 2017a 2018e 2019e 2020e Cash DPS ( ) Inventory Growth - 0.0% 0.0% 0.0% 0.0% Current Receivables Yield (%) 0.6% 0.6% 0.6% 0.6% 0.6% PPE Payout Ratio (%) 106.6% 104.6% 116.1% 56.4% 33.1% Intangibles Franking (%) 100.0% 100.0% 100.0% 100.0% 100.0% Other Total Assets NTA (1.6) (2.4) (9.2) (16.9) (16.1) Current Payables NTA/Share ($) (0.03) (0.04) (0.15) (0.28) (0.27) ST Debt LT Debt Performance Ratios 2016a 2017a 2018e 2019e 2020e Provisions ROA 6.8% 5.4% 4.3% 7.1% 10.2% Other ROE 11.9% 11.1% 9.0% 16.5% 23.2% Total Liabilities ROIC 13.8% 13.1% 8.3% 13.6% 19.8% Net Assets Equity & Reserves Net Debt (Cash) ($m) (5.1) (1.3) Retained Profits Net Debt/EBITDA (x) (1.2x) (0.3x) 2.0x 0.7x 0.6x Shareholders' Equity ND/(ND + Equity) (%) (38.4%) (7.0%) 28.2% 17.2% 18.1% Minorities Interest Cover (x) 68.7x 169.4x 11.9x 15.3x 26.9x Total Equity Working Capital Cashflow ($m) 2016a 2017a 2018e 2019e 2020e Working Capital/Sales (%) 11.4% 16.5% 24.1% 23.6% 23.6% EBITDA Net Interest (0.3) (0.4) (0.4) Cash Flow Metrics 2016a 2017a 2018e 2019e 2020e Tax (0.4) (4.3) (0.8) (1.8) (3.1) FCF/Share ($) 0.14 (0.08) (0.18) 0.06 (0.03) in Working Capital (5.1) 2.8 (1.0) (2.0) (2.4) Price/FCPS (x) 51.7x nm nm 110.2x nm Other (1.8) 12.3 (1.1) Free Cash Flow Yield (%) 1.9% (1.1%) (2.5%) 0.9% (0.4%) Operating Cash Flow Gross Cash Conversion 284.0% 91.8% 15.2% 202.8% 41.6% Growth 259.4% (66.7%) (82.5%) 2,178.2% (68.7%) Capex/Sales (%) 9.2% 23.7% 9.3% 1.6% 1.4% Capex (1.4) (4.4) (2.0) (0.5) (0.6) Capex/Depreciation (x) 1.3x 3.3x 1.4x 0.3x 0.4x Acquisitions (2.0) Divestments Margins 2016a 2017a 2018e 2019e 2020e Other (2.7) (4.3) (9.2) (11.7) (6.1) EBITDA 27.5% 23.8% 21.1% 26.1% 30.2% Investing Cash Flow (6.2) (8.7) (11.3) (12.2) (6.7) EBIT 20.4% 16.6% 14.2% 21.3% 26.9% Equity Raised NPAT 14.0% 12.2% 9.3% 14.0% 18.2% Dividends Paid (0.6) (1.2) (1.2) (1.2) (1.2) Net Borrowings (0.6) (3.0) 2.0 Valuation Methodology Other 0.0 (0.1) WACC (%) n/a Financing Cash Flow (1.3) (3.2) 1.8 Discounted Cash Flow Valuation n/a FX / Non Cash Items Sum-of-the-Parts Valuation 8.08 Change in Cash 4.7 (4.0) (1.3) Average Valuation Mth Target Price 8.08 Free Cash Flow 7.9 (4.7) (10.6) 3.8 (1.7) Source: Company data, IRESS, Moelis Australia research estimates 6-Apr-18 2

3 RESEARCH & SALES RESPONSIBILTIES Equities Equities Research Simon Scott Head of Equities Real Estate Elliot Leahey Operations Manager Hamish Perks Sarah Sagvand Desk Assistant Edward Day Jacqui Irons Corporate Broking Ronan Barratt Industrials Equities Sales & Trading Sean Kiriwan John Garrett Sarah Mann Angus Murnaghan Brendon Kelly Ian McKenzie Keiran Hoare Bryan Johnson Andrew Harvey US Distribution Partner - Weeden & Co. Sam Clark Mitchell Hewson - Head of Execution Matthew McCloghry Aaron Payne - Real Estate mmccloghry@weedenco.com firstname.lastname@moelisaustralia.com DISCLOSURE APPENDIX ANALYST CERTIFICATION The Analyst, Sarah Mann, responsible for the content of this research report, in whole or in part, certifies that with respect to the companies or securities that the individual analyses, that (1) the views expressed in this report accurately reflect his or her personal views on the subject companies and securities, and (2) no part of his or her compensation was, is, or will be directly or indirectly linked to the specific recommendations or views expressed in this research report. This report was prepared solely by Moelis Australia Securities Pty Ltd. ASX did not prepare any part of the report and has not contributed in any way to its content. The role of ASX in relation to the preparation of the research reports is limited to funding their preparation, by Moelis Australia Securities Pty Ltd, in accordance with the ASX Equity Research Scheme. ASX does not provide financial product advice. The views expressed in this research report may not necessarily reflect the views of ASX. To the maximum extent permitted by law, no representation, warranty or undertaking, express or implied, is made and no responsibility or liability is accepted by ASX as to the adequacy, accuracy, completeness or reasonableness of the research reports. RATING DEFINITIONS All companies under coverage are assigned a rating of Buy, Hold or Sell based on the expected 12 month total return estimated by the analyst(s). The total return is a combination of the estimated capital gain or loss, in addition to the estimated 12 month forward dividends or distributions. In relation to all companies that Moelis Australia Securities conducts research coverage on the relevant total return bands that derive the ratings are: Buy: >15% Hold: 5% to 15% Sell: <5%. RATINGS DISTRIBUTION TABLE Distribution of Ratings as at 6 April 2018 SELL HOLD BUY 1.7% 32.2% 64.4% 3

4 Rating and Price Target History: Medical Developments International Ltd (MVP) as of 5/04/2018 GENERAL TERMS OF USE FOR MOELIS RESEARCH REPORTS Research reports have been prepared by Moelis Australia Securities Pty Ltd ( Moelis Securities ), ACN , AFS Licence , a Participant of the ASX Group and Chi-X and the intellectual property relating to the content vests with Moelis Securities unless otherwise noted. GENERAL DISCLAIMER AND DISCLOSURES Disclaimer The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified. Therefore, its accuracy is not guaranteed, and except to the extent that liability cannot be excluded, Moelis Securities does not accept any liability for any direct or consequential loss arising from relying upon the content in this document. This document is not an offer or solicitation of an offer to buy or sell any security or to make any investment. 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5 Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on the information provided in this research report should do so only through Weeden and not through Moelis Australia Securities. Weeden accepts responsibility for the contents of this research report, to the extent that it is delivered to a U.S. person other than a major U.S. institutional investor. The analyst whose name appears in this research report is not registered or qualified as a research analyst with the Financial Industry Regulatory Authority ("FINRA") and is not an associated person of Weeden and, therefore, is not be subject to applicable restrictions under FINRA Rule 2711, including restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. 5

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