Hamilton Thorne Ltd

Hamilton Thorne Ltd (TSXV: HTL) is engaged in providing precision instruments, consumables, software and services that reduce cost, increase productivity, improve results and enable breakthroughs in Assisted Reproductive Technologies (ART) and developmental biology research markets.

Key Highlights:

• Acquisition of Tek-Event Pty Ltd: On May 04, 2021, the company reported the successful acquisition of Tek-Event Pty Ltd, at a price consideration of USD 860,000 and an additional of USD 460,000 based on achieving certain financial targets in the coming quarters. The company is a manufacturer of the Cell-Tek Microscope Chamber, a specialized product for controlling temperature, air flow, humidification, and air-quality. With this acquisition, the group is expected to mark its presence across the ART laboratory segment, while the company would utilize the Hamilton Thorne sales resource for marketing of the newly added product. The management expects to achieve higher revenue and Adjusted EBITDA from the above collaboration. 

• Balanced portfolio: In terms of the FY20 revenue mix, the company’s revenue is evenly distributed among Consumables (~38% of total revenue), Equipment (~47%) and Services (~15%). On the other hand, most of the company’s revenue (~57%) is derived from the EMEA region, while Americas and the Asia Pacific serve ~23% and ~19%, respectively. The above trend suggests that the company’s operations would be less impacted due to the risk of concentration. 

• Appointment of new Board member: Recently, the company reported the appointment of Dr. Thomas Ebner and Cynthia Hudson to the company’s Scientific Advisory Board.

Q4FY20 Financial Highlights:

• HTL announced its quarterly result, wherein the company posted sales of USD 12.256 million, reflecting a 13% y-o-y growth over Q4 FY19. Increase Sales were driven by organic growth from the Planer acquisition, while performance from the human clinical market grew substantially on y-o-y basis, coupled with strong consumables sales, partially offset by tepid a performance from the animal breeding segment.
• Adjusted EBITDA stood at USD 2.539 million, grew 14% on y-o-y basis, supported by higher gross profit (USD 6.470 million v/s USD 6.121 million in pcp), coupled with a 3% y-o-y decline in operating expenses amounting to USD 5.021 million.
• The group reported its net income at USD 0.96 million, slightly higher than USD 0.93 million in pcp.

Q4FY20 Income Statement Highlights (Source: Company Report)

Risks: The company is focusing on inorganic growth in the recent past. IF the company is unable to achieve desired results from the acquisition, it may lead to lower performance and affect the overall financials.

Stock Recommendation:

For FY21, the company is focusing on increasing its sales and marketing through several cross-selling initiatives and would create direct sales channel growth in France and the UK. Moreover, launch of Gynemed media in the US would lead to improved business prospects for the firm. Also, to retain its value propositions, the company would continue to introduce new and innovative products and enhance its service offerings, which seems impressive. On the valuation front, the stock is available at a forward EV to Sales multiple of 4.5x, which is lower than the industry (Healthcare) median of 6.3x. Hence, considering the aforementioned facts, we give a ‘Hold’ rating on the stock at the last closing price of CAD 1.87 on May 12, 2021.

Technical Price Chart (as on May 12, 2021). Source: Refinitiv (Thomson Reuters)

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