Consensus community valuation
Average Intrinsic Value
Undervalued by
Contributing Members
Sort by:
Create your free Strawman account to view member valuations
#FY21 Half Year Results
Added 3 months ago

While the pandemic probably helps Nanosonics longer term (increased awareness of infection control), it did knock the business around in the first quarter of FY21, sending revenue for the half down 11%.

In part, GE Healthcare (a major wholesaler) reduced purchases due to "impacts of covid on its inventory", which basically says lower sales through that channel. And that's due to a big drop in ultrasound proceedure volumes, with hospital resources -- particularly in US -- focused on the Covid-19 response.

Most of the damage was borne in the first quarter, though, with the company bouncing back strongly in the last few months of 2020.

The much stronger AUD also had an impact.

Geographically, it was North America that really floundered, with revenue dropping 38% in the first quarter, before largely recovering in the next. Interestingly, Europe & Middle East and Asia PAcific both saw growth over both quarters, with revenue in these regions up 50% and 8%, respectively, for the entire half. (though these segments represent only ~14% of total revenue.)

Despite the challenging half, Nanosonics continued to invest in its growth strategy, with operating expenses up 8% to $33m in H1. For the full year they are expected to come in around $75-$78m -- a ~20% increase on 2020.

Combined with the lower revenue, pre-tax profit was all but wiped out, coming in at just $0.2m vs $6.7m in the previous corresponding half.

Free cash flow also took a hit, down $2.4m compared to an inflow of $10m in the last first half, due appraently to timing effects of payments and receipts. Still, the company has a genuine fortress balance sheet -- almost $88m in cash with no real debt.

Part of the added costs were associated with R&D, something the company has invested over $50m in since 2017. It was up another 12% this year. That's fine, but we've been waiting for new products for a while now and it would be good to see some more progress here. There's a lot of intangible value to write down if they dont get a good return on all that money.

At any rate, it's good to see the impacts of covid appear to have been short-lived. Total revenue grew 48% in Q2 relative to Q1, and i-MED's 200+ unit upgrade will occur in the current half. GE has also resumed purchases. Revenue from consumables was up 29% in the same period, and in constant currency terms was a new company record.

Importantly, the Global installed base was up 12%, and 6% in the last 6m to just over 25,000 units. Q2 installs were up 38% on the first quarter.

Consumables sales are, of course, the best margin sales, and they were essentially flat with a 2% decline in US revenue being partly offset by an 11% increase in consumables revenue for Europe& Middle East. As procedure volumes continue to track up, there should be a return to growth in the current half.

Loking ahead, the company didnt give any guidance, other than to say they expect market conditions to continue to improve, and that the company remained focused on its strategy of (essentially) new products and new geographies, and cementing Trophon as the standard of care in hospitals.

Bottom line, it was a disappoing result -- especially for a business that is trading at 20x sales (traling 12m basis).

That being said, you can hardly blame management for COVID, and that really does seem to have had a legitimate impact on non-essential ultrasound proceedures, as well as a big interuption to sales cycles. The business appears to have recovered very well in the second quarter and has good momentum going into the second half.

I expect Nanosonics to be around and much larger in another 5-10 years. The company has been very good to me over the years, and i think there's still some value to be had for long-term investors.

But I would like to see an acceleration in the pace of growth from the core offering, especially outside of the US, as well as the release of some new products. We need to see some jutsification for all that investment.

Disc: held


Results here

Read More
#Business Update
Added 6 months ago

04-Nov-2020:  Nanosonics business update

I do not hold NAN, but I do note that their share price rose +12.5% (+64c to $5.76/share) today on the back of this update.

Here's what they had to say:

Update on new trophon installed base and end user consumable purchases for the first four months of FY21

Nanosonics (ASX: NAN), a leader in infection prevention solutions, provides an update on new installed base and end user consumable purchases for the first four months of FY21 in the context of current market conditions during the ongoing COVID-19 pandemic.

On 25 August 2020 the Company reported that in June FY20 global unit sales of consumables to end customers trended back to approximately 80% of FY20 Q1 to Q3 levels as hospital departments resumed activities. In addition, the Company reported that the number of new trophon units installed in Q4 of FY20 was 46% lower compared with the prior corresponding period.

Key points for first four months of FY21

  • Unit purchases of consumables (Sonex/NanoNebulant) by end customers in the four months to 31 October 2020 were up 4% compared with the prior corresponding period, which preceded the COVID-19 pandemic.
  • Unit purchases of consumables (Sonex/NanoNebulant) by end customers in the four months to 31 October 2020 were up 25% compared with the last four months of FY20, during which the major impacts of COVID-19 were experienced.
  • In the four months to 31 October 2020, the number of new trophon units installed was 91% of the prior corresponding period with North America at 90% and EMEA at 119%.
  • The number of new trophon units installed in first four months of FY21 was up 16% compared with last four months of FY20. During this period, North America was up 14% and EMEA was up 64%.

“While we continue to face uncertainties and the potential for further lockdowns and disruptions associated with the COVID-19 pandemic, it is pleasing to see the rate of recovery in the first four months of FY21, demonstrating the ongoing strength in the underlying fundamentals of the business”, said Michael Kavanagh, Nanosonics’ Chief Executive Officer and President.

“During the second wave of COVID-19 in North America, we have observed that hospitals in that region appear better equipped to manage the impact of the pandemic. Accordingly, ultrasound procedure volumes requiring high level disinfection did not seem to be impacted to the same degree as in the first wave. However, this does not guarantee that future waves will follow the same pattern in North America or other regions.

“Purchases of consumables (Sonex/NanoNebulant) by end customers continued to recover in the first four months of FY21 as hospital departments reopened and ultrasound procedure volumes increased towards pre Q4 FY20 levels. Purchases of consumables by end customers were up 25% compared with the last four months of FY20, which was the peak impact period associated with the first wave of COVID-19. Unit purchases of consumables by end customers in the first four months of FY21 were also up 4% compared with prior corresponding period, which preceded the COVID-19 pandemic.

“Improvements in access to hospitals together with remote customer engagement resulted in a positive recovery in the number of new trophon units installed in the first four months of the year compared with the last four months of FY20. The number of new trophon units installed globally was up 16% in the first four months of FY21 compared with the last four months of FY20. This recovery was experienced in both North America, which was up 14% and Europe, which was up 64%.

“As reported on 25 August 2020, the number of new units installed globally in Q4 of FY20 was 46% lower than prior corresponding period. Importantly, in the first four months of FY21, the number of new units installed globally reached 91% of prior corresponding period, with North America at 90% and EMEA at 119%.

“Despite ongoing periods of uncertainty we remain optimistic about the future and investments in our growth agenda continue across the business as we look to further expand our geographical footprint and product portfolio. We remain committed to doing everything we can as an infection prevention company to support all of our customers during these unprecedented times.”

A more detailed business update will be provided at the Company’s Annual General Meeting, which is scheduled for 24 November 2020.

Michael Kavanagh

CEO / President

--- ends ---

Read More
Added 7 months ago

Profit is down and so is share price - but the overall market has been falling so it is dragging most stocks down. Two observations:

1/ NAN used to be the darling of shortsellers and day traders few years back. That time is over and it seems it might be coming back - see the attached chart

2/ Directors have been buying at the level of $6 which means that is where they price it, but they have positive bias. Market might not be so nice to them.

My straw: I do not know have enough industry information to recommend but based on the two observations above I see buying opportunity between $5 and $5.50 when it falls there, after that the inflation kicks it up. However, if shortselling kicks in the price will be going sideways for a while...

Disclaimer: I have never held NAN.

Read More
#FY20 Results
Added 9 months ago

Nanosonics has reported the following results for FY20:

  • a 19% lift in full year revenue to $100.1 million
    • (revenue growth was 26% for the first 3 quarters, with covid impacts allowing only a 1% increase in the last quarter of FY20.)
  • The installed base was up 13%
  • Consumables and services up 36%, at 70% of total sales.
    • again, a noticable impact to sales in the last quarter, but overall have held up relatively well in my opinion
  • Capital revenue was 9% due to covid and impact of prior year inventory management from GE (a new version of their Trophon product was released)
  • Operating expenses up 28%, including a 37% rise in R&D. Total operating expenses are expected to rise a further 20%-odd in the current year.
  • As a result, operating profit was down 26% to $12.4 million. If costs had been steady, operating profit would have grown around 50% on prior year.
  • Cash of over $90 million (massive)
  • $20m in free cash flow

All told I'm pretty happy with these results, which highlight just how attractive the business model is. Despite the impact to capital sales, the higher margin consumables revenue growth was very solid in a tough environment.

The slow down in ultrasound examinations resultant from the impacts of covid will be temporary (are already recovering), and overall I dare say the entire saga will only heighten awareness towards infection control.

And it was great to see so much free cash flow and a growing mountain of cash, both of which hit record levels. Nanosonics really does have a fortress balance sheet with oodles of capital to support growth (or a cash return to shareholders). 

The company reckons it has about 20% of the global addressable market, so there's a lot of runway ahead.

But some things are concerning.

Disappointingly, new products slated for release in the current financial year will now likely be delivered the following year (pending regulatory approvals and project milestones). With shares on 20x sales, i was hoping they could commercialise new product lines more quickly. 

Also the cost base is expanding rapidly. A lot of this is R&D, but also a load in infrastructire and people. Whether or not this is a good thing all depends on what return they can get on this spend, and how effectively they can scale their resources. Nanosonics will need to grow sales by more than 20% this year just to record a flat operating profit given the increased cost base.

And there's no guarantee that new products or new geographies will emulate their earlier success.

The company did not provide any guidance for FY21 due to the uncertainties of Covid, but the business expects an ongoing impact to capital sales.

All told, I really like Nanosonics and continue to hold a small parcel. My only issue -- as with so many of the good stocks right now -- is the valuation.

I'm not one to over think price for high quality, fast growing businesses -- especially ones that have a big market opportunity and attractive operating leverage. But at a PE of 200 and a P/Sales of 20 there's very little that can go wrong for shareholders to get an attractive return from here.

Results presentation here

Read More
#Bull Case
Last edited one year ago

Firstly infection control is possibly going to be huge.  Apart from my thoughts with NAN being a one trick pony, there COULD be other products in the pipeline which they might then be able to onsell to their users.

Saving costs, time and bed space will likely be a focus moving forward and there is still a big market to saturate.

Most of its revenues come from the US...from my calculations 99%, so at least they have already broken that market so it might make more sales easier as its already proven tech.

This gives some overseas exposure.



Read More
#Bear Case
Last edited one year ago

Firstly the funding for hospitals might be cut.  Which would make selling to more hospitals harder.

They appear to be a one trick pony, which has been great, yet there might need to be a better product range or solution range to keep growth happening.

They might buy another company out which might solve the above.

Perhaps the hospitals might think "HPV is around with sexually active people anyway so this new improvement is a sales pitch", which might make it harder to sell.

Did I say budget restrictions?

Another might be their patented technology.  Patents dont last forever, and it might be only a few years away before competitors can  Think Nespresso and the amount of generic pods available to their older machines.  If hospitals do not upgrade to the latest machines the same might happen to NAN.

I admit I have not looked at their competitors but I think there is likely bucketloads of bigger, better capitalised ones to steal the market..

Why do all of the companies I research have bigger bear cases than bull ones!!!!  Jeez!!!


Read More
Last edited one year ago

Michael Kavanagh is the CEO.  He owns 1018363 shares which is about $6250000 worth on 10/4/20.  He was Senior Vice President Of Cochlear for 10 years.... Sales focused and sales background.

Steven Sargent is Deputy Chairman, Lead Independant Director.  He had a 22-year career with General Electric and has extensive global experience across a range of industries including financial services and healthcare. He was Vice President and Officer of GE, a member of GE’s Corporate Executive Council and CEO of GE Australia NZ. Mr Sargent is currently a director of Origin Energy, Chairman of OFX Group.

Steven Farugia is Cheif Technology officer.  Prior to Nanosonics, Steven held a range of senior executive roles with ResMed, including VP of Technology and VP of Product Development. He is an inventor of almost 300 granted and pending patents and is an Adjunct Professor of Engineering at The University of Sydney.

David Morris is Chief Strategy Officer.  He was Senior Vice President of Strategy and Business Development, Global President for the Cochlear Bone Anchored Solutions Business based in Sweden and Chief Strategy Officer. Most recently, David was Chief Executive Officer and Managing Director for Monash IVF Group Limited. David joins Nanosonics as an Executive KMP.

These are the stand outs and I think if any of these guys left I would likely sell.  They all own a heap of shares.

Read More
#COVID-19 update
Added one year ago

Nanosonice said it has seen a "Significant" increase in Q3 sales and that sales of cosumables have been in line with pre-covid-19 expectations.

That being said, access to hospitals is obviously restricted at this time and that is likely to impact sales for the final quarter. However it is hard to quatify, and the company is taking measures to reduce expenditures.

Nanosonics reiterated its (incredibly) strong balance sheet, which has ~$82m in debt, and said that a weaker AUD is helping.

ASX announcement is here 

Read More