Hey all, having recently invested into QTM and noticing the lack of discussion, I thought I would start a new thread myself with an initial report I have conducted to assist new investors in the face of a lack of available information (I have compiled this using my access to resources via the University of Sydney). I definitely believe that QTM has mutli-bagger potential for reasons stated below. Feel free to share your own views on this stock. Cheers
OverviewQuantum Health Ltd (ASX: QTM) is a rapidly growing, yet profitable, ASX listed healthcare stock that has largely remained under the radar of investors (evident in a PE ratio of 8, and a lack of discussion/ramping on HC). In the last year the share price has remained very stable, making it more favourable for the conservative investor. However, despite its stability it is up 100% year today, and as a result, is significantly outperforming both the XJO and XHJ. It is involved in the distribution of medical products in the field of radiology, nuclear medicine, oncology and women’s health; and the manufacture and distribution of energy-efficient water sterilisation and hot water systems for use in hospitals, aged care facilities, domestic and commercial installations internationally. The business operates in two primary segments; the medical division and environmental division.
- The medical division is a high-end medical distribution business which provides sales, services and support for a range of diagnostic imaging equipment.
- The environmental division involves the manufacturing and distribution of energy saving heat pump technology, hot water and heat/cooling systems to domestic and commercial customers.
Substantial Shareholders
The composition of ownership in this company is what makes this stock a particularly compelling investment. Holding more than 90% of shares on issue the top 20 holders of this company clearly make up a large proportion of the total shareholders. Moreover, the majority of the top 20 are insiders, with Drew Townsend holding 28.4%, John Walstab holding 47.8% and Phillip Sidney holding 28.09%. While this evinces the high level of confidence insiders and larger investors having in this company, this obviously means reduced liquidity, making it less attractive to the day trader. However, this fact is what gives way to some of the biggest rallies seen in the ASX penny stock domain while simultaneously reducing day to day volatility (as experienced in most penny stocks). Consider some of the stocks that have rallied 1000% and more. Any other day they’d have few, if any, transactions. However, as soon as the volume comes in liquidity is not even a concern. As Peter Lynch espouses: “In stocks – as in romance – ease of divorce is not a sound basis for commitment.” This stock will require commitment to weather the days of inaction and boredom. However, it’ll be that one day, that one announcement, that changes everything.
Financials
QTM has seen some volatility in its revenues, perhaps indicative of the fact it is largely reliant on forming new deals at the moment. Nonetheless, it has experienced growth even while the over all sector has been in decline this year due to the implications of Covid-19. The net profit margin (net profit/sales*100) is perhaps more impressive, increasing from 5% to 9% from 2019 to 2020. Its gross gearing (debt/equity*100), is only 27%. However, its current ratio (current assets/current liabilities) is 1.3:1 which would be better if it were a bit higher, though not a major concern at all. At current cash burn, there is about 3-4 quarters of cash remaining until additional capital will need to be sourced. However, in this amount of time it is a very probable that a substantial deal could be made, thus entailing an additional stream of revenue. Cash levels have also seen a substantial appreciation, from $4m in 2019 to $9m 2020 over the recent period, indicating that the calculation regarding the periods until additional capital will need to be acquired could be a significant underestimation.
