Admedus (ASX:AHZ) has received an Add rating from broker Morgans, with a target of $0.18.
Based on the last price of $0.074, this implies the potential for a 140.9% upside.
The following is an extract from the report.
Looking for the catalysts
AHZ posted a FY15 result behind our forecast with a tax adjustment the main reason.
The key catalysts to drive the share price higher include growth in CardioCel ® sales and the release of interim HSV-2 results.
AHZ appears in a solid cash position to achieve key milestones. Add.
FY15 result below forecast
AHZ posted a net loss of A$26.8m, which was higher than our forecast of a net loss of A$19.5m. Product revenue of A$9.9m was generated representing A$7.3m from medical products and A$2.6m from CardioCel®.
The main reasons for the difference were:
1) A tax expense of A$$2.9m arising from the reversal of a prior period temporary difference;
2) A loss from non-controlling interest of A$1.5m;
3) Lower revenue from medical products of A$0.9m resulting from some product life cycle management and move to more consumable based operations;
4) Lower interest receipts of A$0.3m;
5) A$0.5m in higher share based payments; and
6) $0.3m in higher amortisation charges.
AHZ has A$24.0m in cash reserves, which we think is sufficient to drive sales in the key regenerative medicines division (CardioCel® is lead product).
Changes to forecasts
We have made a number of changes to our forecasts, moving FY16 to a net loss of A$8.2m (from NPAT of A$1.5m) and reducing our FY17 NPAT to A$11.2m from A$21.0m.
The main changes include:
1) Lower medical products revenue to A$7.8m (was A$8.8m);
2) Lower CardioCel® revenue to A$7m (was A$10m) reflecting a more moderate sales ramp than forecast; and
3) An increase in the cost base to A$23.3m (was A$19.8m) to bring the base in line with FY15, reflecting a higher spend to build the regenerative medicines division and research spend on the vaccines project.
Investment view remains positive
As a result of changes to forecasts our DCF valuation has been revised to A$0.18 (from A$0.20).
The key catalysts we expect in the next six months include growing quarterly sales of CardioCel® and the interim results from the HSV-2 vaccine trial.
The downside risk includes failure of the vaccine trial to achieve its clinical outcomes of safety and lowering viral outbreaks.
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