Date of Data Capture: 16/6/2016
Name: STARPHARMA HOLDINGS LIMITED (SPL)
Classification: Biotechnology & Medical Research
Current Price: $0.70
Market Capitalisation: $264M
Forecast EPS Growth: n/a (*improving 23%)
Gross Yield: n/a
Consensus Price Target: $1.02
# Covering Analysts: 3
Discount at Current Price: 42%
Price Target Trend: Flat
Signal Time Frame: Monthly/Weekly
Trend Bias: Up/Flat Long/Medium
Long-term: Positive Neutral
Set up Notes:
• Working against resistance at 80c to 75c any rally here could see that ceiling break and uncork a major uptrend, support is nearby ranging from 69c down to 65c.
• With good news flow expected - if the 80c structural resistance ceiling breaks into support - $1.00 seems like a natural target and also concurs with fundamental valuations.
• Good correlation with both long-term and medium-term signals - the latter has now turned positive again and the last two previous signals coincided with rallies of 45% and 36%.
Growth Focus: STARPHARMA HOLDINGS LIMITED (SPL)
Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.
Starpharma Holdings Ltd (SPL) is a biotechnology company with a diverse portfolio of novel and unique patents, looking to expand various products into commercial applications ranging from antiviral creams, antibody directed therapies, superior drug delivery systems and also some exciting prospects in the agrochemical space.
With deals in place with big global companies like Ansell, Adama and Astro Zeneca they are already moving in the right circles. Their involvement with the Chinese government and the RIO Olympics for their anti-viral treatments (able to protect against HIV and Zika virus) brings some needed attention to them at a potentially fortuitous time as we think their star may be on the rise.
It is not uncommon for biotech companies to stagnate as they trek towards maturity and commercialisation of their technologies. That is what we have seen so far and despite their massive potential SPL has been in downtrend from late-2012 through to mid-2015 and since then we have seen them range trade sideways between support and resistance. During this time the company has been developing its technology, taking their first steps in early-stage deals with global companies that should see positive cash flow by 2017/18.
The potential size of some of those deals and target markets cast a long shadow over the current market cap of $264M. Accordingly the fundamental view is coupled with very strong valuations and only positive recommendations being given on the stock by all three covering analysts. Attractively, they come together to provide an aggregate consensus price target some 42% higher than current market price.
This valuation combines well with our own technical viewpoint as we see a strong structural resistance target at $1.00 as well as the next dynamic resistance target placed around $1.02. But SPL needs to clear overhead resistance sitting between 75 and 80c first as that layer has rebuffed a number of rallies since May 2015. Once above 80c there remains no dynamic resistance to work through and only a few layers of weak structural resistance sit around 85 and 90c before opening up to $1. These latter points should prove little trouble to any burgeoning uptrend or rally capable of breaking through resistance hovering directly overhead, which would represent another clear buy signal all by itself.
Importantly, we have a key long-term signal turning positive in the last few weeks as the price continues to work against those resistance structures between 75 and 80c. With momentum building across long and medium-term timeframes (based on the well-correlated medium-term signal that captured the significant rallies of the past year) and if so the 80c barrier could well be about to crumble. Couple this with the pent-up potential created by them being held under 80c for so long, there could be a potential unwinding of price towards $1.00 in a pretty aggressive fashion - and with recent price peaks as high as $1.80 in 2012 - there is plenty of room to the upside.
Starpharma Holdings is well funded, with a full news schedule in front of it and we are looking to get some exposure now in the lead up to their emergence as a mature and cash flow positive biotech, before they live up to their name with a potentially stellar performance.