Research notes

Tissue Repair (TRP) expects the Phase 3 trial for venous leg ulcers (VLU) to start recruiting in 4Q24 and top-line results to be reported late CY25. The National Institute of Health estimates the cost of treating VLUs at between US$2.5bn and US$3.5bn in the US. Following a review of our research universe, we revise our coverage approach for TRP. While we will continue to monitor and provide updates, we will cease providing a rating, valuation and forecasts. Thus, our forecasts, target price and recommendation should no longer be relied upon for investment decisions.

CBL has completed a capital raising that will provide funds for new product commercialisation and approvals together with working capital to drive sales of the current products. Cashflow has been an ongoing issue with CBL and the capital raising provides some runway to deliver on the strategy set by new CEO Jeremy Steele, although it will be tight. After diluting for the capital raising our valuation has reduced to A$0.058 (from A$0.09). We maintain our Hold recommendation and will closely monitor the quarterly cashflow reports for signs of sales growth and cost control.

We expect GQG to close FY23 (Dec-23) with ~US$118bn in FUM, +13.4% in 2H23. Flows momentum has been solid in recent months, which we expect continued in Dec-23. We estimate ~US$1.2bn net inflows for Dec-23 (US$10.2bn for CY23). GQG commences FY24 with group FUM ~8.7% above average 2H23 levels and ~16% above average FY23 FUM. We mark-to-market earnings on recent FUM moves leading to EPS upgrades. We continue to view GQG’s valuation as attractive (~10.7x FY24 PE); with executing on the broader diversification strategy likely required for a further and sustained valuation re-rating. Add maintained.

MTO have guided to 1H24 underlying EBITDA (pre-AAS16) of A$14-16m, down ~17% on the pcp (A$18.1m); and 36% below 2H23 (A$23.3m). The lower-than-expected guidance has been attributed to slowing sales demand within its wholesale new vehicle segment (Mojo) and increasing competitive pressures impacting margins. While we remain positive on the MTO business and broader strategy, Mojo’s diversified earnings base in mitigating a softer consumer backdrop had been a key element to our investment case. Given the guidance commentary and sharp deterioration in recent trade, the near-term outlook for the division is less certain. We lower our recommendation to a Hold, as we look for improved confidence and greater stability in the near-term earnings outlook of the combined business.

SNT is undertaking a A$10m equity raising via a two-tranche placement as well seeking to raise an additional A$2.2m via an SPP. The funds will be used towards the completion of three Phase 2 clinical trials in myelofibrosis, scarring and Parkinson’s disease. Following a review of our research universe, we revise our coverage approach for Syntara (SNT.AU). While we will continue to monitor and provide updates, we will cease providing a rating, valuation and forecasts. Thus, our forecasts, target price and recommendation should no longer be relied upon for investment decisions.

PXA has finalised its acquisition of Smoove and given a financial update. The trading update was soft overall with numerous headwinds across PXA’s operations. The financials for Smoove had been disclosed previously, and while this business provides a new avenue for growth, it is currently loss making. We lower our PXA FY25F/FY26F EPS by ~13%-17% factoring in revised FY24 guidance commentary and the inclusion of Smoove into our numbers. We lower our PXA price target to A$11.65 (from A$13.36) and move to a HOLD rating.

We expect AVH will have significant share price moving newsflow when they update the market in February. In particular we are focused on updated quarterly revenue guidance, full year revenue guidance (we forecast growth of ~40%), a regulatory update on RECELL GO and most importantly a pointer to which quarter in CY25 the company plans to achieve positive cash flow. AVH is one of our key healthcare picks in 2024. We have made no changes to forecasts, valuation or target price and transfer coverage to Emily Porter. We maintain our Add recommendation.

MVF has announced it is growing its presence in Western Australia through the acquisition of Fertility North for an up-front cash payment of $12.0m. Recent industry cycle volumes as reported by Medicare show industry cycles for November were up 16% on the previous month and up ~4% on a four-month average on last year. We expect MVF will continue to gain market share benefitting from contributions of its acquisitions (PIVET medical and ART Associates). We have upgraded our FY24 forecasts to incorporate recent 1H24 guidance and have upgraded FY25/26 to include the benefit of the acquisition. Our target price has increased to $1.50 (from $1.29) and we maintain our Add recommendation.

As planned, EBO has increased its shareholding in Transmedic to 90% (from 51%). The additional shareholding will be funded through existing debt facilities and is priced in line with the original acquisition of LifeHealthcare. A recent trading update noted underlying EBITDA growth of 8.8% for the first four months of FY24. We are siting slightly ahead of this growth rate and are comfortable with our forecasts. We have made no changes to our valuation and have ~19% upside to our target price. We have an Add recommendation and see EBO as a quality growth company.

Avada Group (AVD) is a founder led, ASX-listed traffic management services company with an extensive network of operations in Australia and New Zealand. A market leader, operating in a highly fragmented industry, AVD has a long-runway of potential accretive M&A opportunities ahead. Through 1Q24, AVD delivered group revenue growth of 30% (vs pcp), which comprised strong inorganic (+17%) and organic (+13%) contributions. In FY23, AVD delivered A$183.3m revenue, A$38.4m gross profit, A$16.1m in underlying EBITDA and A$4.7m NPATA. Within the result, the group noted 7% of LFL revenue growth (ex-acquisitions) and gross margin improvement HoH (~22% in 2H; ~20% in 1H).