Growth Focus: Medical Developments International Ltd (MVP)

by Patrick Taylor



Date of Data Capture: 21/6/2019

Name: MEDICAL DEVELOPMENTS INT LTD (MVP)

Classification: Pharmaceuticals

Current Price: $5.44

Market Capitalisation: $350 M

Forecast EBITDA Growth: 51.35%

Yield Estimate: 0.75%

Consensus Price Target: $5.96

# Covering Analysts: 2

Discount at Current Price: 9.56%

Price Target Trend (3-Month): Up-Flat +5.49%

Signal Timeframe: Monthly-Weekly-Daily

Trend Bias: Up-Down / Long-Medium

Indicators:
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• Penthrox ‘Green Whistle’ producer MVP has had a volatile run since US FDA approval was put on hold, but with good international growth and very strong forecasting, we think they are set to recover and believe this is a buying opportunity.
• Softer earnings performance last year showed growing pains for MVP as it pushes forward with its strategy of global expansion, but this dip leads into strong growth forecasts out to 2021 on robust sales, margins and earnings gains.
• The 2018 downtrend ended early-2019 with a linear resistance break before price rallied into current range, testing structural resistance at $5.50, we expect the stock to enter a new longer-term uptrend with multi-timeframe momentum.
Support ($): 5.00, 4.75, 4.50, 4.25 & 4.00.
Resistance ($): 5.50, 6.00, 6.50, 7.00 & 8.00.


Growth Focus: MEDICAL DEVELOPMENTS INTERNATIONAL LTD (MVP)

Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.

Even the most exciting growth stocks take the occasional hit – this can create buying opportunities in the right situations and we believe we have that here with Medical Developments, as the company moves into recovery.

Founded in Victoria 1971, MVP is a leading emergency medicine solutions company that manufactures and distributes pharmaceutical drugs along with medical and veterinary equipment. The company is best known for its well-regarded analgesia product Penthrox or the ‘Green Whistle’ which is non-opioid, non-addictive and inhaled to give strong and fast acting pain relief.

The company had a difficult last year, beset by the expenses and complications of aggressive global expansion, the company began to pull back from all-time highs reached in march 2018. The hits kept coming as US/FDA approval was delayed in July, followed by a capital raise within downtrend in August later that year. It was a hard fall for the previous high flyer, but it does create an opportunity if you think the broken stock is on the mend – and we do.

Performance was softer last year with expenditures increasing while sales and income growth were hampered by various trials and tribulations. These hardships overshadowed the significant gains that were made and the company continued to progress on a path to a stronger future. The US debut may still be on hold, but Penthrox was greenlit in additional 26 countries that year – up from 22 new markets the year before. If company forecasts are correct the current number of approved countries will increase from 38 to 77 by the end of 2020.

No matter what the scope of your growth prospects earnings matter, and with the clouds beginning to clear operationally we see forecasts rising aggressively out to 2022. That timeframe allows scope for the approved entrance into large markets like, China, Russia and the US, so robust growth should be expected. The company has also made advances in improving production efficiencies, which should add further strength to a strong recovery, with sales up 56%, revenue up 57% and gross margins up 32% YOY.

Pricing history reflects a previously strong leading stock that has fallen on hard times, but also one that is potentially about to emerge into a new long-term uptrend. The linear downtrend in place from March 2018 to March 2019 took the stock lower by more than 50%, before building base support and rallying up through resistance to pause under a $6 ceiling. Here we find them turning positive on all of our key timeframes and looking like an exceptionally high potential setup. If you are still hurting from missing the strong gains of 2017, MVP might just be about the help with the pain.

Disclaimer

This report was produced by Taylor Securities Pty Ltd, which is a Corporate Authorised Representative (Number 414063) of Bespoke Portfolio Pty Ltd (AFSL 341991). Taylor Securities and Patrick Taylor (Representative number 414064) have made every effort to ensure that the information and material contained in this report is accurate and correct and has been obtained from reliable sources. However, no representation is made about the accuracy or completeness of the information and material and it should not be relied upon as a substitute for the exercise of independent judgment. Except to the extent required by law, Taylor Securities and Patrick Taylor does not accept any liability, including negligence, for any loss or damage arising from the use of, or reliance on, the material contained in this report. This report is for information purposes only and is not intended as an offer or solicitation with respect to the sale or purchase of any securities or financial products. The securities or financial products recommended by Taylor Securities and Patrick Taylor carry no guarantee with respect to return of capital or the market value of those securities or financial products. There are general risks associated with any investment in securities or financial products. Investors should be aware that these risks might result in loss of income and capital invested. Neither Taylor Securities and Patrick Taylor nor any of its associates guarantees the repayment of capital. WARNING: This report is intended to provide general financial product advice only. It has been prepared without having regarded to or taking into account any particular investor’s objectives, financial situation and/or needs. Accordingly, no recipients should rely on any recommendation (whether express or implied) contained in this document without obtaining specific advice from their advisers. All investors should therefore consider the appropriateness of the advice, in light of their own objectives, financial situation and/or needs, before acting on the advice. Where applicable, investors should obtain a copy of and consider the product disclosure statement for that product (if any) before making any decision.