Microbix is a Buy ahead of quarterly earnings, says iA Capital

Chelsea Stellick of iA Capital Markets stands solidly with Microbix Biosystems (Microbix Biosystems Stock Quote, Chart, News, Analysts, Financials TSX:MBX), maintaining a “Buy” rating and target price of $1.70/share for a projected return of 142.9 per cent in an update to clients on Thursday.

Founded in 1988 and headquartered in Mississauga, Microbix Biosystems develops and commercializes proprietary biological and technological solutions for the healthcare industry in North America, Europe, and internationally.

Stellick’s updated analysis comes as a preview to the company’s financial results for the first quarter of 2022.

“MBX is expected to continue rapidly growing its business as an essential player in domestic testing for the omicron variant and other pathogens,” Stellick said. “Q1/F22 is expected to be solid for the VTM segment and we expect continued progress in QAPs while the antigens segment maintains its gross profit. Testing will remain a priority in Q1 due to the combination of flu season and COVID-19.”

Microbix reached an agreement with the Province of Ontario on December 24 of a second order of $4.7 million for its viral transport medium DxTM, an 11 per cent increase in capacity from its April order. Stellick expects approximately $1.75 million in revenue from this transaction to come in this quarter, approximately $1.6 million in the second quarter, and the remainder in the third quarter.

Stellick also expects Ontario to do a reorder sometime in the second half of 2022 given the current public health climate.

According to Stellick, the company is also targeting new markets for its quality assessment products including diagnostics OEMs and previously untapped laboratories and clinical laboratories, with Stellick expecting automation to materialize sometime this year.

With 2021 now in the rearview mirror, Stellick has modified some of her financial projections, forecasting revenue of $22.7 million for 2022 (previously $24.3 million) to imply a year-over-year increase of 22 per cent, followed by a smaller projected increase to $24.5 million in 2023 (previously $27.3 million), indicating year-over-year growth of 7.9 per cent.

Stellick’s reductions are partially on account of lengthened timelines for the company’s antigens segments to start growing again thanks to reduced testing for non-COVID diseases.

Meanwhile, after a $5.3 million positive turn in 2021, Stellick expects the company’s EBITDA to continue growing to $7.3 million in 2022 (previously $7.6 million) for an implied margin of 32.2 per cent, then moving to a projected $8.1 million in 2023 (previously $8.8 million) for a margin of 33.1 per cent.

In terms of valuation multiples, Stellick expects a spike in the company’s EV/Revenue multiple from the reported 1x in 2021 to a projected 4.7x in 2022, then going down slightly to a projected 4.3x in 2023. Meanwhile, the EV/EBITDA multiple remains on a downward trend, with Stellick projecting a drop from 20.5x in 2021 to 14.5x in 2022, then to 13x in 2023.

Microbix Biosystems has seen mixed results with its stock price, up 51.1 per cent over the last 12 months despite being down 16.1 per cent in 2022. Christmas Eve yielded Microbix’s 52-week high of $0.84/share, while its low for the same time period was $0.45/share a year ago today.