Learn To Invest
Stocks Special Reports LICs Credit Funds ETFs Tools SMSFs
Video Archive Article Archive
News Stocks Special Reports Funds ETFs Features SMSFs Learn
About

News

Avita price spikes on fourth-quarter revenue upgrade

Emma Rapaport  |  22 Jun 2021Text size  Decrease  Increase  |  
Email to Friend

Morningstar analysts have maintained their fair value estimate for spray-on skin company Avita Medical (AVH) following an upgrade to its fiscal 2021 revenue guidance.

The dual-listed company lifted its fourth-quarter fiscal 2021 revenue guidance by 14 per cent to a revised range of US$9.5 million – US$9.7 million two weeks out from the fiscal year-end.

The revised guidance implies roughly 32 per cent sequential top-line growth in fourth-quarter fiscal 2021 over the more disappointing third quarter.

The news sent shares soaring 14 per cent as investors applauded the upgrade. After being on a downward trajectory since late January, shares are up 28 per cent since 10 June.

At last close of $5.50, Avita screens as undervalued for long-term investors, trading at a 21 per cent discount to Morningstar's $7.00 fair value estimate.

Avita Medical (AVH) | Price Chart YTD

AVH Price Chart YUTD

Investing Compass
Listen to Morningstar Australia's Investing Compass podcast
Take a deep dive into investing concepts, with practical explanations to help you invest confidently.
Investing Compass

Source: Morningstar

The new guidance range is made up of roughly US$6.1 million in RECELL commercial revenue and US$3.5 million in revenue associated with the Biomedical Advanced Research and Development Authority (BARDA), similar to government funding.

The upgrade follows earlier news of early approval of the spray-on-skin RECELL System for the treatment of excessive turns and paediatric patients.

Morningstar analyst Shane Ponraj now forecasts the company will report a US$28 million net loss for fiscal 2021, down from US$29 million previously, but retains his long-term estimates. He still expects Avita to burn cash until fiscal 2025 but anticipates no additional funding requirements in the lead-up to posting its first profit in fiscal 2024.

MORE ON THIS TOPIC: Avita still undervalued despite downgrade

As expected, the incidence of burns continues to normalise in the US, with more of the population returning to normal activities due to effective vaccination rollout.

"As people begin to return to normal activities after the confines of the covid-19 pandemic, we have seen an increase in burn accidents requiring treatment with the RECELL System in burn centres across the country," Avita Medical CEO Mike Perry said in an ASX statement.

In the near term (fiscal 2022), Ponraj anticipates reimbursement support for RECELL use outside of burn centres, and regulatory approval in Japan to begin distribution with its partner, Cosmotec. Longer-term, he expects the use of RECELL in vitiligo treatment and soft-tissue reconstruction to begin commercialisation in fiscal 2024 and fiscal 2025, respectively.

Morningstar's fair value uncertainty rating remains at "very high". Fourth quarter financial and operating results are expected on 25 August.

is the editorial manager for Morningstar Australia. Connect with Emma on Twitter @rap_reports. You can email Morningstar's editorial team editorialAU[at]morningstar[dot]com

© 2021 Morningstar, Inc. All rights reserved. Neither Morningstar, its affiliates, nor the content providers guarantee the data or content contained herein to be accurate, complete or timely nor will they have any liability for its use or distribution. This information is to be used for personal, non-commercial purposes only. No reproduction is permitted without the prior written consent of Morningstar. Any general advice or 'regulated financial advice' under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), or its Authorised Representatives, and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information, refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). Our publications, ratings and products should be viewed as an additional investment resource, not as your sole source of information. Morningstar’s full research reports are the source of any Morningstar Ratings and are available from Morningstar or your adviser. Past performance does not necessarily indicate a financial product's future performance. To obtain advice tailored to your situation, contact a licensed financial adviser. Some material is copyright and published under licence from ASX Operations Pty Ltd ACN 004 523 782. The article is current as at date of publication.

Email To Friend