Hamilton Thorne Ltd.

Hamilton Thorne Ltd. (TSX: 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.

• Strong Bullish Signal: At the close, the stock has traded well above the crucial long-term as well as short-term support levels of 200-day, 100-day, 50-day and 30-day SMAs, which implies that the stock is hovering in a bullish territory. Further, over the last one month, its shares have surged approximately 18% and bagged ~5.1% on March 01, 2021, implies that bullish rally is still largely intact. Further, despite a spectacular rally over the last 1-month time, the leading momentum indicator is still hovering in neutral zone and mostly tilted towards the overbought zone, implies that a further headroom for price surge.

Technical Price Chart (as on March 01^st, 2021). Source: Refinitiv (Thomson Reuters).

• Solid Q3FY20 Performance: The group reported improved sequential performance and posted revenue of USD 9.79 million in the Q3FY20, which was approximately 34% higher against the quarter before reported revenue of USD 7.33 million in Q2FY20. Gross profit improved by 30% to USD 4.91 million in the third quarter under consideration on Q-o-Q basis. Moreover, the group returned to profit at operating level in the Q3FY20 and posted an operating income of USD 0.71 million, as compared to a loss of USD 0.29 million in Q2FY20.

Q3FY20 Financial Highlights:

• HTL announced its quarterly results, wherein the company posted sales of USD 9.793 million, higher than USD 8.870 million in the previous corresponding period (pcp). The increase was driven by strong growth from Services and consumables segment, coupled with improved revenue from Equipment sales segment.

Sales Break-up. Source: Company Report

• Gross profit stood higher at USD 4.909 million, as compared to USD 4.751 million Q3FY19, thanks to the improved sales, partially offset by higher cost of sales (USD 4.88 million versus USD 4.11 million in Q3FY19).
• Income from operations stood higher at USD 0.709 million, stood higher from USD 0.642 million in Q3FY19. The quarter was marked by lower general and administrative cost (USD 1.587 million versus USD 1.610 million in pcp), slightly higher sales and marketing costs (USD 1.891 million versus USD 1.859 million in pcp) and a higher research and development expense (USD 0.72 million versus USD 0.639 million in pcp).
• Net income stood USD 0.459 million, as compared to USD 0.326 million in Q3FY19.
• The company reported cash and cash equivalents of USD 19.977 million, while total assets were recorded at USD 66.752 million.           

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The technology is relatively new to the market and requrired costant upgradation and ainnovation in order to remain competitive within the industry. Hence, a higher research and development expense might spoil the margin and profitability of the company.

Stock Recommendation: The company’s reported EBITDA margin and Net margin in the third quarter of FY20, was above the industry median, as company’s EBITDA margin and Net Margin stood at 14.2% and 4.7% respectively whereas industry median stood at 13.6% and 2.9% respectively, which reflects relative outperformance of the company against the peer’s on margin profile. Further, its shares are hovering in a strong bull run, with its shares at the last close traded above all its support levels and 14-day RSI indicating a potential upside from the current price level. Hence, considering the decent performance of the company in the Q3FY20 and bullish technical trend, we give a ‘Hold’ rating on the stock at the current closing price of CAD 1.65 on March 01, 2021.

HTL Daily Technical Chart (as on March 01, 2021). Source: Refinitiv (Thomson Reuters)

Medical Facilities Corporation

Medical Facilities Corporation (TSX: DR) owns a diverse portfolio of surgical facilities in the United States. The group’s ownership includes controlling interest across four specialty surgical hospitals, which are located in Arkansas, Oklahoma, and South Dakota, and an ambulatory surgery center located in California.

Key Highlights:

• Bolstered Liquidity Profile: The company has significantly bolstered its liquidity with cash positions nudged by 161% to US$ 83.4 million at the end of September quarter 2020, against US$ 31.98 million reported at the end of the December 2109. This implies strong liquidity position and balance sheet strength.
• Strong Bullish Signal: Shares of the DR traded above the crucial short-term support levels of 30-day and 50-day SMA and taking a strong support at 50-day SMA. Further, its shares are trading considerably above the long-term support level of 200-day SMA of CAD 5.38, implies a long-term bullishness in the stock. Further, the 14-day RSI of 52.55 implies that momentum is still favorable in the stock.

Technical Price Chart (as on March 01, 2021). Source: Refinitiv (Thomson Reuters).

• Event Update: The company would disclose its fourth quarter FY20 result on March 11, 2021.

Q3FY20 Financial Highlights:

• DR announced its quarterly results, wherein the company posted total revenue and other income of USD 98.813 million, slightly higher than USD 96.536 million in pcp.
• The group reported an operating expense of USD 81.241 million, stood significantly lower than USD 103.475 million in Q3FY19. The decline was primarily attributed to inclusion of impairment of goodwill in Q3FY19 amounting to USD 22 million, partially offset by an increase in salaries and benefits expenses (USD 28.795 million versus USD 27.800 million in pcp), and higher drugs and supplies (USD 32.696 million versus USD 31.503 million in pcp).
• Income from operations stood at USD 17.572 million, as compared to a loss of USD 6.939 million in pcp. Meanwhile, the group reported an adjusted EBITDA of USD 24.550 million, as compared to USD 22.406 million in pcp.
• Net income stood at USD 9.822 million, higher than USD 8.651 million in Q3FY19.
• The group reported cash and cash equivalents of USD 83.446 million, while total assets were recorded at USD 471.99 million.

Source: Company Reports

Risks: Due to the restrictions imposed by the Federal Government, the company might witness a hindrance in its Facilities, which might take a toll on the overall company’s performance.

Stock Recommendation: The company reported decent performance in the third quarter of FY20, with revenue recorded an improvement of 2% on a YoY basis, with Net income for the period from continuing operations jumped by 14% to US$ 9.8 million, and Net cash provided by operating activities surged by 8% to US$ 63.596 million, respectively.

Further, its shares are hovering in bullish price zone, with stock traded well above the crucial short-term as well as long-term support level of 50-day and 200-day SMA. Further, RSI indicating further headroom for upside potential. Therefore, given the solid financial performance of the company and bullish technical pattern, we recommend a “Hold” rating at the closing price of CAD 7.01 on March 01, 2021.

DR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

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