Upside Potential in Health Imaging Solution

M7T was previously identified as a potential Data Winner stock with Big Data used in health enterprises and with its recent drift in share price from its recent high of 31.5c has IMO become an opportunity for a decent upside potential.

MACH7 TECHNOLOGIES (M7T)
SUMMARY ANALYSIS
MCAP: $31.2M @ 24c
Business :
M7T is one of the world’s leading medical enterprise image management solution providers and is in the business of providing Enterprise Imaging Technology Solution for Global Health Enterprises with an application platform that is designed to solve the lack of interoperability of systems within hospitals (unlocks disparate archive silos, consolidates patient data) and simplifies sharing and access (allowing clinicians and other medical professionals to create, access, analyse and share patient specific information across multiple compatible devices ) with the overall aim of improving patient care outcomes.

Mach7 value proposition is best explained in the following video

Why Customers love Mach7
http://www.mach7t.com/why-mach7/



What to like about M7T?

• Under the Radar Stock.
• This $31m mcap stock (at 24c) is little known compared to Promedicus (PME) which has its Visage imaging platform that makes imaging management and access more manageable, faster and flexible. PME is already a $880m mcap business. Essentially both businesses offer great value propositions for the management of imaging data for global health enterprises
• Mach7 has a great value proposition to health enterprises to improve and optimise patient care outcomes by resolving the lack of interoperability issue of current legacy health systems and provide a cloud based archiving system which reduces healthcare management costs. Mach7 Enterprise Imaging Platform offers best-in-class software for improved patient outcomes providing the following value propositions (i) innovative platform with intuitive point and click interface and real time monitoring dashboard (ii) intelligently brings together multiple image formats into a cohesive workflow (iii) scalable with customer’s growth (iv) cloud medical image archiving system reduces IT expenses for customers
• A proven business foundation evidenced by

1. Its US and global deployment across >450 sites in >52 blue chip health enterprises across 11 countries including eminent health institutions such as Massachusetts General Hospital, University of Virginia Health System, University of Vermont Medical Centre, Qatar Health and Singapore General Hospital amongst others
2. 100% owned IP enterprise imaging technology with great functionalities
3. Already handling >1 billion images
4. Global Recognition received for being an innovative leader in delivering advanced clinical imaging and data services for health enterprises including “No 1 Leader US Healthcare Provider VNA/AICA Unstructured Data Platforms for Integrated Care” by IDC Marketscape 2016 and “Asia Pacific Medical Imaging Informatics Company of the Year” by Frost & Sullivan 2015
5. Secured contract wins generating strong double digits year-on-year revenue growth

• A large global addressable market of US$3.8 billion by 2020 with multiple market segments including VNA (virtual neutral archive), Image exchange, Department and Enterprise PACS, ECM (Enterprise Content management) and Enterprise Viewers within the healthcare sector
• New Management led by Mike Jackman previously with GE Healthcare and Kodak
• M7T received institutional support in the form of Oceania Capital Partners recently in Nov17 with an 8.8% equity stake acquired at 17.5c
• Target to achieve EBITDA positive outcome in FY18 which upon realization would provide catalyst for an sp re-rate outcome. M7T’s expense to revenue ratio has been on a year-on-year decline.
• FY17 Annual Revenue of A$10.3m growing at 76% and between 2013 to 2017, revenue grew at CAGR rate of 37% driven by customer wins in US market. Large sales pipeline of USD66m in Aug17. Recurring revenue becoming an increasing proportion as it moves into a SaaS model. M7T has cash of circa $2m but currently has a negative EBITDA of $4.2m.
• M7T has primarily focus much of its sales and marketing in the US which is the largest market but if its forward efforts via indirect channels in Europe gains traction, this would be positive for shareholder returns.
• M7T has very limited supply shares on sale (circa $120k out on sale) and if demand on a day surprises as the market becomes awaken to this stock's prospects, price could easily gap up.

Assuming that M7T can continue growing its annual revenue by 40%, FY18 could see annual revenues of circa A$14.5m which provides a mcap/revenue ratio of a mere 2.15x . A reasonable mcap/revenue ratio of 3.5x should now provide M7T a market cap of $50.75m or a more reasonable valuation price of 39c with an upside potential of 62.5%.

If I may compare M7T against Big Tin Can (BTH) (which has circa $13m annual revenue and similarly yet to be profitable) which I started coverage in Oct17 when it was 20c (mcap $35m), BTH now has a mcap of $82m and share similar business fundamentals as M7T. So if the market begins to recognize M7T’s fundamentals the same way it does with BTH now, $80m mcap could well be a benchmark target for the medium term especially if management secures more contract wins. A market cap of $80m equates to a 60c share price representing a 2.5x bagger. However, such an outcome IMO becomes more likely when M7T achieves EBITDA breakeven.

Disclaimer: The above represents the author's own personal views and opinions and should not be relied upon without DYOR.

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Data Winners Holdings: 3DP K2F* LNU BIQ* BTH IXU CT1* M7T* SKF
Other Potentials: GSW YOJ 4DS FFG OOK DUB FYI* TNT* PIQ* TTT

Summary Analysis for *stocks available at respective stock forums