Everyone loves a “specky” – a speculative stock that can deliver multiples of price appreciation if everything goes right for it. The traditional form of “specky” on the Australian Securities Exchange (ASX) has always been the resources explorer, and while there are still plenty of these, the exchange’s burgeoning life sciences and technology sectors are also home to a myriad of stocks that are shooting for big things in their business, and with a little luck could become respectable profit-generating small-cap companies, or even dividend-paying blue chips of tomorrow.
Here’s a look at four very interesting speculative situations on the ASX.
Cellmid (CDY, 3.2 cents)
Market capitalisation: $30 million
Cellmid is an Australian biotech that is generating revenue from its consumer health products while commercialising its intellectual property in midkine (MK) antibodies. MK has been extensively validated as a bio-market for cancer. Cellmid holds 82 patents covering the use of MK (and anti-MK agents) to treat or prevent auto-immune, ischemic and vascular diseases, and to diagnose cancer and arthritis.
The company recently set up dedicated subsidiaries, Lyramid Limited and Kinera Limited, to develop its assets: Lyramid is aimed at using therapeutic antibodies against MK, to treat cancer and inflammatory diseases, while Kinera applies the benefits of MK protein following ischemic injury, the most common form of which is heart attack.
Just this month, Cellmid received results from a pre-clinical collaboration with Complutense University in Spain that suggests that its MK antibodies can be used to treat glioblastoma, an aggressive form of brain cancer for which there is no effective treatment. Existing treatments only extend survival from three months to just over a year.
The study looked at cancer treatment involving medical cannabis: certain chemical components of cannabis called cannabinoids are potent anti-cancer agents, but tumours can develop resistance to cannabinoids. The Spanish study observed that MK antibodies, in combination with the cannabinoid THC, inhibited tumour growth in gliomas that are resistant to THC. Overcoming THC resistance would be a potential route to a treatment strategy using MK antibodies.
Cellmid has a diversification in its consumer health division, which currently sells hair growth products in Japan and Australia, developed using the FGF5 intellectual property, for which Cellmid owns global rights. Cellmid generated $4.6 million of revenue in FY16 – up 55% – but remains a loss-maker. (It also received an R&D tax credit of $1.12 million). News flow from the MK portfolio will be the driver for this stock.
Source: Yahoo!7 Finance
9 Spokes International (9SP, 14.5 cents)
Market capitalisation: $62 million
Listed in June, 9 Spokes has developed a cloud-based applications (apps) marketplace for small-to-medium-sized enterprises (SMEs). 9 Spokes identifies the world’s best business software applications for SMEs and integrates them into what it calls a “smart dashboard,” taking the data from the apps an SME customer uses and making sense of it, giving the SME the key information it needs to know on the performance of its operations.
9 Spokes acts as an app store for global SMEs, curating a menu of apps that work best for each industry: a business can feed its existing apps into the menu or join the template that 9 Spokes offers. Like other cloud-based Software-as-a-Service (SaaS) offerings, 9 Spokes is accessible from any device, anywhere. The product is available direct to small businesses or as a ‘white-labelled’ platform that channel partners can offer to their SME customer bases.
9 Spokes has already signed major channel partners, including Barclays, Deloitte and Suncorp, and the business is on track for all three contracts to kick off by the end of the year. In particular, the largest contract, with Barclays in the UK, will go live to the Barclays small business client base by the end of the year, as will Deloitte (UK) and Suncorp (Australia). The company expects at least $325,000 in minimum monthly revenue from this point, in addition to milestone payments. As well, 9 Spokes is in discussions with US banks that may lead to a material contract win in the next 12 months: the company is leveraging its recently signed IBM relationship to target potential clients.
Issued at 20 cents, 9 Spokes has slipped to 14.5 cents, but that could turn out to be a very effective entry point as the company starts to see revenue flow.
Source: Yahoo!7 Finance
Volpara Health Technologies (VHT, 59 cents)
Market capitalisation: $37.2 million
Digital health is a very hot investment space, and the ASX has a thriving population of such stocks. New Zealand-based Volpara Health Technologies listed in April at 50 cents a share, and is making good progress with its suite of breast imaging analytics software, which makes a critical advance in that it measure breast density – which is both a key indicator in early breast cancer detection, and a flaw in current mammograms, because breast density can hide cancer in a mammogram.
Studies suggest that mammograms detect only 65% of cancers in women with dense breasts: Volpara’s software analyses breast density and also the probability of missing potential tumours, helping to determine whether further scans are required. The Volpara technology enables personalised, high-quality screening to give a better chance of early detection of breast cancer.
The Volpara technology is approved for sale by both the US Food & Drug Administration (FDA) and under the European Union’s CE Mark. It is sold in 34 countries and Volpara recently signed global distribution deals with GE Healthcare and Siemens Medical Solutions USA. With regulatory risk out of the picture, Volpara is focused on growing sales.
Volpara has also launched VolparaEnterprise, a cloud-based software solution that offers breast screening clinics an all-in-one tool to assess data from multiple X-ray machines. This month the company announced the first sale of VolparaEnterprise, to the Women’s Breast & Imaging Clinic in Perth, Western Australia.
Sales in the June 2016 quarter were NZ$764,000 ($721,162) and total operating and investing cash outflows were NZ$1.85 million ($1.74 million), and the company held NZ$8.39 million ($7.92 million) in cash at the end of the quarter. Volpara expects to reach cash breakeven stage within 18 months. US sales will be the key to moving into profit: Volpara has a market share of just 1% of the US market at present, but about 40 million mammograms are done in the US a year, at a cost of US$7.8 billion ($10.1 billion).
Source: Yahoo!7 Finance
Sky and Space Global (SAS, 3.9 cents)
Market capitalisation: $48 million
To space now, where Sky and Space Global Limited (SAS) has a plan to launch 200 Xbox-sized “nano-satellites” into earth’s low orbit, by the end of 2018, to offer affordable communication services to developing countries.
SAS’ technology is a classic disruptor, looking to bust open the market for digital communications as carried by the normal satellites. The business case is for a constellation of nano-satellites, each weighing less than 10 kilograms, placed in carefully selected orbits giving equatorial coverage of the Earth, creating a global communication network for voice, data and instant messaging, on a much cheaper basis than normal satellites.
SAS says there are more than four billion people in developing countries without any digital communication or phone coverage; and even in the developed world, current service pricing denies access to potential customers. Because launch and operating costs are significantly lower, the company says the nano-satellites potential offer affordable services to anyone, anywhere, anytime.
In September, the company struck a deal with Virgin Galactic for four launches of satellites for the planned network, with launches of multiple satellites on each of four LauncherOne missions. The LauncherOne launches will be launched from a rocket carried on a Boeing 747 carrier aircraft, and can thus be put into equatorial low-inclination orbits much more cheaply than by terrestrial rocket. Also in September the company struck a memorandum of understanding with a subsidiary of US technology manufacturer Flextronics to develop a line of affordable electronic hardware products tailored to the nano-satellites.
SAS has also been approved by the UK Ministry of Defence to use its UHF frequency until the end of 2019, with the possibility to extend this initial timeframe.
SAS has completed the critical design review of its nano-satellites with Danish satellite construction partner GomSpace: the first three “3 diamonds” demonstration satellites will be built by mid-January and launched in the second quarter of 2017 for in-space commercial testing. After a recent $4.5 million capital raising – which was over-subscribed – SAS says it is fully funded beyond this launch. In August the company signed its first wholesale customer, Sat-Space Africa, which has subsequently on sold bandwidth from the 3 diamonds satellites.
This is space-age stuff, but at the heart of the SAS business is a simple model: offering cheaper, more flexible essential communications services, in areas that are not well-serviced. There is heightened technical risk, but the sky is potentially the limit for Sky and Space Global.
Source: Yahoo!7 Finance
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