IDT Australia Limited

Company Overview: IDT Australia Limited (ASX: IDT) got listed on ASX in 1991 and is based out in Melbourne, Australia. The company supplies products and provides research and development, and other technical services related to the pharmaceutical space, including medicinal cannabis. The company specializes in high energy manufacture of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF), clinical packaging, microbiological and analytical testing.

IDT Details

Latest Key Updates:

• MMI Collaboration Grant: IDT updated with the non-approval of Manufacturing Collaboration Stream Grant; however, it recently secured the sterile manufacturing license from the Therapeutic Goods Administration. The company stands positive and re-affirmed its working on various alternative strategic options, including Round 2 of the MMI translation stream application.
• Change in Substantial Shareholding: Bank of America Corporation and its related bodies corporate enhanced its substantial shareholding from ~6.41% to ~7.78%.

1HFY22 Financial Information:

• Expanding Top-line with Additional products in pipeline: The company increased its revenue to $8.56 million (~74% Y-o-Y on pcp basis) in the half-yearly. It also has plans to expand its range of proprietary medicinal cannabis products to distribute locally and internationally.
• Rising Bottom Line: With an increase of ~2% in EBITDA and ~8% in NPAT, IDT remains on a track of sustainable profitability. Moreover, it maintained its EPS (basic) of 0.5 cents in 1HFY22 same as last 1HFY21.
• Cash Flow: IDT reported a positive net cashflow of ~$6.39 million in 1HFY22, with ~$13.64 million on receipts from customers side and $7.52 million on the payments side.

1HFY22 Key Metrics (Source: Analysis by Kalkine Group)

Top 10 Shareholders: The top 10 shareholders together form around 50.57% of the total shareholding, while the top 4 constitute the maximum holding. Sandon Capital Pty Ltd and Regal Funds Management Pty. Ltd. are holding a maximum stake in the company at 12.12% and 10.94%, respectively, as also highlighted in the chart below:

Top 10 Shareholders (Source: Analysis by Kalkine Group)

Key Metrics: IDT turned around its negative net margins from 1HFY20 to positive net margins in 1HFY22. In addition, its liquidity game is also going strong with an increasing cash balance trend and closure of half-yearly accounts at $13.31 million at the end of 31^st December 2021.

Profitability Profile with Liquidity Balance (Source: Analysis by Kalkine Group)

Key Risks:

• Regulatory Risk: The company is exposed to a more complex regulatory environment; any failure in the same could lead the business to fines, penalties, etc.
• Clinical Trials: Healthcare and pharmaceutical companies run in an environment full of uncertainties where years might be taken for its clinical trials and ultimate disapproval, or failure might leave company, or might suffer from opportunity cost.
• COVID-19: Travel restrictions and lockdowns due to COVID-19 might hold down its operations and thereby affects its earnings, cash flow and financial position.

Outlook: IDT has the following goals in the pipeline:

• The company aims to utilize its flagship sterile facilities and efficiently play a role in Australia’s mRNA manufacturing ecosystem and provide other fee-for-service sterile manufacturing services.
• Australia’s first cGMP mRNA COVID-19 vaccine candidate, manufactured by IDT (associated with the Monash Institute of Pharmaceutical Sciences’ (MIPS’) / Doherty Institute developed Receptor Binding Domain), is intended to go under clinical trials in the near future.
• In the cannabis market, besides providing contract development and manufacturing services to the current and future customers, the company is progressing a pipeline of proprietary medicinal cannabis APIs. It is also planning to expand the stability data for its new products: flower-in-bottle and oil-in-bottle.

Technical Commentary: On the daily chart, IDT stock prices are sustaining above the rising trend line support level and hovering around the trendline. Moreover, the momentum oscillator RSI (14-period) is trading at (~54.726 level), indicating the positive momentum. Further, the prices are trading above the trend-following indicator 21-period SMA, which may act as a support zone. An important support level for the stock is placed at AUD 0.125, while the key resistance level is placed at AUD 0.235.

Stock Recommendation: The stock of IDT has corrected ~61.63% in the past six months and has recovered ~3.13% in the past one month, preparing a scenario that the stock seems rebounding from its support levels. Moreover, the stock is trading at a P/BV multiple of 1.4x as compared to the industry average (Biotechnology & Medical Research) of 3.3x on a TTM basis. Considering the current trading levels, the flagship sterile license, enhancement of shareholders’ interest in the company, rising half-yearly top and bottom line (1HFY22), indicative valuation on a TTM basis, its decent liquid position at zero debt, and key risks associated with the business, we recommend a ‘Speculative Buy’ rating on the stock at the closing price of $0.160, down by ~3.030%, as on 20^th May 2022.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

IDT Daily Technical Chart, Data Source: REFINITIV

Note 1: The reference data in this report has been partly sourced from REFINITIV

Note 2: Investment decisions should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the analysis has been achieved and subject to the factors discussed above alongside support levels provided.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

Disclaimer

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