I somewhat understand why some holders (particularly those who recently bought in) are feeling disillusioned with the lack of recent news flow etc but I really don't think things are as dire as some have made it out to me.
Comparing to the end of FY19 (30 June), we have seen positive developments on the following fronts:
- Share price - up 15% (29/06/20 closing share price of $0.15 vs. 30/06/19 closing share price of $0.13). This also ignores the extra shares issued as part of the capital raise)
- Market capitalisation - up 40% (29/06/20 closing value of $148.6m vs. 30/06/19 closing value of $106m)
- Enterprise value - up 29% (29/06/20 closing value of $132.7m vs. 30/06/19 closing value of $102.9m)
- Revenue growth - at the end of Q3, $17.2M in sold revenue to be recognised in FY2020, exceeding FY2019 full yearrevenue of $16.9M
- On market purchase by Managing Director and Chairperson - the former to the tune to $137,000
- Partnership signed with Healthscope for data and analytics - contract with a big private hospital operator (approximately 43 hospitals). It wasn't so much the $2.1mil contract number as it is the potential that it unlock
- Patientrack renewals, extensions etc - for example, NHS Fife extends Patientrack across Board and renews for five years
- PoC - Murrumbidgee LHD to expand and extend use of Miya Precision and Miya MEMRe
I am certainly not suggesting that everything is rosy but credit should be given to the management for the achievements to date, bearing in mind that
Brexit had slowed things in Q3 FY10. Covid19 further slowed things down as all available health resources were rightly diverted to the front line. Hence, procurement, sales and marketing etc has all taken a back seat. This delay is not specific to Alcidion but is consistent across the various health companies that I follow.
Based on current available information, the risk-reward proposition has definitely changed somewhat because of the following:
- some revenue recognition would be pushed back possibly into FY21 due to performance milestones being delayed at customers' request as they are focusing efforts on the covid19 front
- similarly, lengthening in the sales cycle for the above mentioned covid19 reason, cancellation of trade shows, restrictions in air travel etc
- growth in operational expenses exceeding revenue growth (due to Alcidion's expansion strategy and hence recent increased spending in new hires and boasting their sales and market capability)
But on the other hand, the current pandemic should also accelerate the structural tailwinds that were already in play, namely:
- increased uptake of technological solutions in the delivery of healthcare
- greater emphasis to maintain hospital capacity (via moving people out of the hospital system quicker where possible)
- focus on seeking greater operational efficiencies and/or effectiveness of healthcare delivery etc
- increased healthcare spending
At this point in time, Alcidion is probably a company that one should consider 'averaging up' as management further earn their stripes as opposed to 'averaging down'. I suspect this is probably the approach some smart investors are adopting in respect to Alcidion.
Some potential positive developments include:
- PoC results from the evaluation study and possibility of a statewide roll out (including remote monitoring). Also the possibility of accelerated growth in other states if PoC results are positive
- Accelerated revenue growth in FY21 or FY22 from resumption of procurement, purchasing etc
- Shorten sales cycle and greater uptake of the higher margin Miya platform business due to cross-selling and possibly lower customer acquisition costs
- Potential M&A (unlikely but I can't help but feel something is brewing in the background). My guess is that Alcidion growth would be driven by acquisitions, mergers and organically. I am thinking any acquisition (should there be one) would have to be around the >$30 million market to deliver a substantial impact
- Further developments on the Healthscope and Calvary fronts (remembering that the development of a data warehouse is always the first phase of a more substantive piece of work) and the private hospital segment
- Geographical expansion and/or announcement of distributors in new geographical markets
If one take a longer view (>5 years), I really think that Alcidion is at a sweet spot - intersection of technology and healthcare. It is more likely to be a 'growth at reasonable price' company rather than one that would experience explosive growth rates. I would be extremely happy to be wrong though!
I do feel for any shareholders who bought in at higher prices but there is how the share market works doesn't it? Share price does not always go up, its movement is driven by a combination of market psychology, technical, fundamentals, newsflow etc.
Rather than lamenting the lack of development, any shareholder can and should engage with the company via investor relations to ask questions and/or outlined their concerns. I suspect most investors would be pleasantly surprised that many developments are happening in the background and management has not been resting on their laurels...