Growth Focus: Polynovo Ltd (PNV)

by Patrick Taylor




Date of Data Capture: 26/03/2020

Name: POLYNOVO LIMITED (PNV)

Classification: Biotechnology

Current Price: $1.55

Market Capitalisation: $1.02 B

Forecast Sales Growth: 77.08%

Yield Estimate: 0%

Consensus Price Target: $2.46

# Covering Analysts: 6

Discount at Current Price: -58.71%

Price Target Trend (3-Month): Up-Flat +10.31%

Signal Timeframe: Quarterly-Weekly-Daily

Trend Bias: Up-Down / Medium-Short

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

Recommendation: Buy

Focus: Capital Growth

Set up Notes:
• Regenerative skin technology company PNV was a strong growth performer before pricing collapsed on Covid19 panic selling, but retains a strong outlook and directors have been buying.
• Set to become cashflow positive in the next year, PNV is expanding globally, winning major market approvals with aggressive forecasts for gains in revenue, earnings and profits to 2022.
• Technically the stock has broken down with pricing falling through a stop-loss cascade to find support some 60% lower from peak pricing a month ago, this could be a good buying opportunity into a previous growth hot shot.
Support ($): 1.50, 1.25 & 1.00.
Resistance ($): 1.75, 2.00, 2.50, 3.00 & 3.25.


Growth Focus: POLYNOVO LIMITED (PNV)

The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.

When investors get their fingers burned during adverse market conditions it can induce a psychological aversion to making further investments, and while this seems like simple common sense, it can also limit the ability to make the best out of a bad situation. Instead what we are looking to pick up previously strong, sector-leading companies with excellent growth prospects, bringing us unironically to Polynovo Ltd, as burns-care specialist begins its recovery after falling more than 60% since last month, but retains strong forecasting and excellent growth potential.

Australian-based biotechnology company Polynovo designs, develops and produces medical solutions for burns, hernia and other orthopedic applications, using its patented biodegradable polymer; NovoSorb. These products can be used for drug transfer, antimicrobial protection, and accelerating wound healing, are available in various formats like films, foams and coatings. NovoSorb is able to be applied within a matrix to physically close wounds, being applicable to even full-thickness burns, encouraging fresh dermal layer growth before the matrix degrades revealing new natural skin.

The company remains early-stage in so far that it is not expected to turn cash flow positive until next year, but this company is advancing fast. Reporting shows strong growth with sales revenue almost doubling in the last year, with this same robust sales expansionary trend seen since 2016 – and is expected to continue through to 2022. This kind of strength attracts favourable attention and we can see this reflected in the strong majority positive analyst sentiment and almost 60% discount to consensus price targets.

The company retains a good cash position as it approaches its crossover to positive earnings, and is engaged in a rapid product rollout with sales teams and facilities being built and expanded across Australia, New Zealand, Asia, the US and Europe. All of these markets are only just opening up and there remain opportunities for expansion internally within the stated regions, as well as externally through the many other global markets yet to be approached.

The price action of recent weeks looks as expected and is dominated by a cliff-drop selling collapse beginning late last month before cutting values in half before finding deep price support, and has rallied back up to minor resistance around $1.50. We expect it to test higher towards the major resistance structure around $2.00, with plenty of further targets above, stretching back towards old highs past the $3.00 ceiling. Right now we see good momentum in the short-term and if we are right it could be a good time to have some fake skin in the game.

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.