Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

<ul>
<li>M3’s shares have declined 53.2% over the last 12-months to JPY3,566 from JPY7,613 per share. Share price has lost 15% since 4QFY03/2022 earnings in April.</li>
<li>The company’s Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing.</li>
<li>However, with pandemic conditions easing off, m3’s earnings growth has begun to decelerate and we think there is further downside with weakening of core earnings.</li>
</ul>


M3’s shares have declined 53.2% over the last 12-months to JPY3,566 from JPY7,613 per share. Share price has lost 15% since 4QFY03/2022 earnings in April.
The company’s Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing.
However, with pandemic conditions easing off, m3’s earnings growth has begun to decelerate and we think there is further downside with weakening of core earnings.


M3: Valuation to Further Drop as Earnings Momentum Slows Down

<ul>
<li>
<a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 Inc (2413 JP)</a> reported 4QFY03/2022 and full-year FY03/2022 results yesterday. Revenue grew 18.8% YoY to JPY54.0bn (vs consensus JPY51.9bn) while OP dropped 32.2% YoY to JPY10.5bn (vs consensus JPY17.4bn).</li>
<li>OPM for the quarter declined to 19.5% vs 34.1% a year ago while core business, Medical Platform’s revenues declined 0.9% YoY for the first time since 2QFY03/2018.</li>
<li>M3’s shares are down 26.5% YTD and we think there is further downside with weakening of the company’s core earnings.</li>
</ul>



M3 Inc (2413 JP) reported 4QFY03/2022 and full-year FY03/2022 results yesterday. Revenue grew 18.8% YoY to JPY54.0bn (vs consensus JPY51.9bn) while OP dropped 32.2% YoY to JPY10.5bn (vs consensus JPY17.4bn).
OPM for the quarter declined to 19.5% vs 34.1% a year ago while core business, Medical Platform’s revenues declined 0.9% YoY for the first time since 2QFY03/2018.
M3’s shares are down 26.5% YTD and we think there is further downside with weakening of the company’s core earnings.


M3 4Q Results: Underwhelming Earnings and More Room to Fall

<ul>
<li>Medlive’s shares are currently trading at HK$8.15 per share and lost almost 70% YTD which we think was due to the ongoing regulatory crackdown on tech platforms in China.</li>
<li>Medlive's 2021 revenues grew 33.2% YoY to RMB284m while adjusted OP grew 19.0% YoY to RMB123m. Shares reacted negatively due to slowdown in top line growth.</li>
<li>Medlive is currently trading at FY2 EV/Revenue of 0.97x compared to 34.3x when we last wrote. We think shares are extremely cheap and offers a good entry point.</li>
</ul>


Medlive’s shares are currently trading at HK$8.15 per share and lost almost 70% YTD which we think was due to the ongoing regulatory crackdown on tech platforms in China.
Medlive's 2021 revenues grew 33.2% YoY to RMB284m while adjusted OP grew 19.0% YoY to RMB123m. Shares reacted negatively due to slowdown in top line growth.
Medlive is currently trading at FY2 EV/Revenue of 0.97x compared to 34.3x when we last wrote. We think shares are extremely cheap and offers a good entry point.


<ul>
<li>
<a href="https://www.smartkarma.com/entities/m3-inc" target="_blank" data-smartkarma-citation="entities:13316:1" rel="noopener">M3 Inc (2413 JP)</a> reported 3QFY03/2022 results on Wednesday. Revenue grew 16.0% YoY to JPY56.5bn (vs consensus JPY54.3bn) while OP grew 22.4% YoY to JPY22.6bn (vs consensus JPY20.6bn).</li>
<li>The company for the first time provided information on its US&amp;EU businesses. Pharma marketing &amp; research generates a majority of revenues followed by clinical trials in these regions.</li>
<li>M3 also has acquired MirVracha, a website providing marketing support services to pharmaceutical companies in Russia. MirVracha has approx. 400k members, around 60% of all physicians in the country.</li>
</ul>



M3 Inc (2413 JP) reported 3QFY03/2022 results on Wednesday. Revenue grew 16.0% YoY to JPY56.5bn (vs consensus JPY54.3bn) while OP grew 22.4% YoY to JPY22.6bn (vs consensus JPY20.6bn).
The company for the first time provided information on its US&amp;EU businesses. Pharma marketing &amp; research generates a majority of revenues followed by clinical trials in these regions.
M3 also has acquired MirVracha, a website providing marketing support services to pharmaceutical companies in Russia. MirVracha has approx. 400k members, around 60% of all physicians in the country.


M3: Covid Related Trials and Vaccination Programs Drive Earnings; Core Business Growth Slowing Down

Equity Capital Markets

<ul>
<li>M3’s shares have dropped 37.3% over the last 12-months to JPY5,774 from JPY9,207 as the company’s earnings growth has started slowing down. </li>
<li>The Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing. Strong growth of Medical Platform helped offset declines in other businesses during pandemic.</li>
<li>M3’s share price has been on a correction as pandemic drove its valuations to all-time highs. M3’s recent earnings revealed that its earnings growth has started decelerating.</li>
</ul>


M3’s shares have dropped 37.3% over the last 12-months to JPY5,774 from JPY9,207 as the company’s earnings growth has started slowing down. 
The Medical Platform business was a key beneficiary of pandemic which saw accelerated transformation in pharma marketing. Strong growth of Medical Platform helped offset declines in other businesses during pandemic.
M3’s share price has been on a correction as pandemic drove its valuations to all-time highs. M3’s recent earnings revealed that its earnings growth has started decelerating.


M3: Share Price Heading into a Correction and Further 20-25% Downside Likely

Japan

JMDC Inc. offers information services. The Company provides medical data statistics, life insurance data statistics, health data platform management, and other services. JMDC provides its services throughout Japan.

Software Service, Inc. develops and sells medical information software for hospital uses.  The products include electronic medical carte and order entry system.  The Company also provides training and maintenance services.

Findex Inc plans, develops and maintains software products specialized in healthcare.  The Company also builds and provides medical net-work system for medical industry.

Medical Data Vision Co.,Ltd. was founded in 2003. The company's line of business includes developing integrated medical information systems, analysis of medical information, and business consulting for medical institutions.

ASAHI INTECC CO., LTD. manufactures medical tools as well as both medical and industrial-use stainless wire rope.  The Company's main products include catheters, guidewires, and miniature coils for endoscopic devices.

MEDIPAL HOLDINGS CORPORATION manufactures and sells medical tools and equipment, nursing equipment, and wholesales pharmaceuticals.

SYSMEX CORPORATION manufactures reagents and equipment for clinical tests including hematologic (blood) and immune tests. The Company also develops, manufactures, and trades particle analyzers such as blood coagulation analyzer and related software. Manufacturing and sales outside Japan include the United States, EMEA, China and Asia Pacific regions.

JEOL Ltd. manufactures electron optics instruments and analytical instruments including electron microscope, X-ray diffractometer and spectrometer and thermographs.  The Company also makes semiconductor manufacturing equipment, medical equipment and industrial equipment.

NIHON KOHDEN CORPORATION develops, manufactures, and sells medical equipment, transformers, and power switches and devices.  The Company's products include testing equipment for cerebral nerve such as electroencephalographs, circulatory systems, diagnostic equipment, catheters, biogenic monitoring systems such as electrocardiographs used into patient monitoring systems.

Alfresa Holdings Corporation is a holding company established through the merger of Azwell Inc. and Fukujin Co., Ltd.  The Company's subsidiaries mainly wholesale and manufacture medical related products including medicines, reagents, and medical tools and equipment.

Pro Medicus Limited develops and supplies proprietary software and IT solutions for large medical corporations and individual medical group practices.  The Group's services include billing and management systems for diagnostic imaging providers, clinical reporting systems, and appointment booking services.  Pro Medicus' e-mail system delivers encrypted diagnostic reports to group doctors.

Evolent Health, Inc. provides a purpose-built platform, powered by our technology, proprietary processes and integrated services, enables providers to migrate their economic orientation from fee-for-service, or FFS, reimbursement to payment models that reward high-quality and cost-effective care, or value-based payment models.

Winning Health Technology Group Co., Ltd. develops and sells medical software, and provides technology supporting services and comprehensive information technology solutions to the health care industry.

Winning Health Technology Group Co., Ltd. A (300253 CH)

Winning Health Technology Group Co., Ltd. A

NextGen Healthcare, Inc. develops and markets healthcare information systems. The Company's systems automate medical group practices, physical hospitals, management service organizations, community health centers, and dental schools. NextGen Healthcare offers its services throughout the United States.

Omnicell, Inc. provides an integrated suite of clinical infrastructure and workflow automation solutions for healthcare facilities.  The Company's solutions include pharmacy and supply systems, clinical reference tools, an Internet-based procurement application, and decision support tools.  Omnicell sells and leases its products and services to a range of healthcare facilities.

HealthStream, Inc. offers a Web-based solution to the continuing education and training needs of the healthcare community.  The Company distributes numerous hours of continuing education and training content to doctors, nurses, allied health professionals, and other healthcare workers through its network of distribution partners.

Allscripts Healthcare Solutions, Inc. develops and markets clinical software. The Company's products include electronic health records, electronic prescribing, revenue cycle management, practice management, document management, medication services, hospital care management, emergency department information systems and homecare automation.

Allscripts Healthcare Solutions (MDRX US)

EMIS Group Plc is a healthcare information technology company. The Company computerizes patients' medical records and allows primary, secondary and community healthcare practitioners to view and contribute to a patient's core medical record.

Craneware plc engages in the development, licensing, and ongoing support of computer software for the United States healthcare industry. The company offers access management and strategic pricing products comprising InSight Medical Necessity, which provides medical necessity validation and advance beneficiary notice creation; and Patient Charge Estimator software, which simplifies the process of providing patient bill estimates for inpatient and outpatient services. It also provides charge capture and pricing solutions include Chargemaster Toolkit that automates chargemaster management processes for capturing optimal legitimate reimbursement for hospitals; Physician Revenue Toolkit, a software for managing physician group charges, codes, RVUs, fee schedules, and related information; Pricing Analyzer software that simplifies the price modeling process; Reference Plus, a platform for hospitals to perform chargemaster analysis; Pharmacy ChargeLink, which improves charge capture, pricing, and cost management; and Supplies ChargeLink that optimize reimbursement for codable supplies by identifying missing or invalid charges, as well as offers supporting modules. In addition, the company offers coding integrity solutions consisting of Bill Analyzer, which automates claim and coding reviews to identify missed charges, billing errors, and categorize areas of risk. Further, it provides revenue recovery and retention solutions, including InSight Audit, a Web-based audit management tool to manage claim audits and workflow from one central location; InSight Payment Variance Analyzer, which identifies, tracks, and helps eliminate revenue lost in the form of underpaid claims; and InSight Denials that analyses, tracks, trends, and reports on denial data. Additionally, the company offers companion implementation and consulting services. Craneware plc was founded in 1999 and is headquartered in Edinburgh, the United Kingdom.

Simulations Plus, Inc. develops drug discovery and development simulation software, which is licensed to and used in the conduct of drug research for pharmaceutical companies worldwide.  The Company's other businesses are based on its proprietary software technologies and provide support for the emerging pharmaceutical enterprise.

M3, Inc. supplies medical information services for doctors through the Internet. The Company also supports marketing of pharmaceutical companies and medical equipment manufacturers.

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M3 Inc (2413 JP)

M3: Valuation to Further Drop as Earnings Momentum Slows Down

M3’s shares have declined 53.2% over the last 12-months. Earnings growth has begun to decelerate with Covid conditions easing off. We think there...

Shifara Samsudeen, ACMA, CGMA

M3 4Q Results: Underwhelming Earnings and More Room to Fall

m3's core business Medical Platform's earnings have started normalising while recovery in other domestic businesses has been driven by Covid-19...

Shifara Samsudeen, ACMA, CGMA

Medlive - High Conviction Update 2022

Medlive is currently trading at a FY2 EV/Revenue of 0.97x and we think Medlive’s shares are extremely cheap at the current valuation and offers a...

Shifara Samsudeen, ACMA, CGMA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

M3: Valuation to Further Drop as Earnings Momentum Slows Down

M3’s shares have declined 53.2% over the last 12-months. Earnings growth has begun to decelerate with Covid conditions easing off. We think there...

Shifara Samsudeen, ACMA, CGMA

M3 4Q Results: Underwhelming Earnings and More Room to Fall

m3's core business Medical Platform's earnings have started normalising while recovery in other domestic businesses has been driven by Covid-19...

Shifara Samsudeen, ACMA, CGMA

Medlive - High Conviction Update 2022

Medlive is currently trading at a FY2 EV/Revenue of 0.97x and we think Medlive’s shares are extremely cheap at the current valuation and offers a...

Shifara Samsudeen, ACMA, CGMA

M3: Covid Related Trials and Vaccination Programs Drive Earnings; Core Business Growth Slowing Down

m3's 3QFY03/2022 earnings were driven by Covid-related clinical trials and vaccination projects that will come to an end once pandemic ease off....

Shifara Samsudeen, ACMA, CGMA

M3: Share Price Heading into a Correction and Further 20-25% Downside Likely

M3’s share price has been on a correction as pandemic drove its valuations to all-time highs. M3's earnings growth has started decelerating our...

Shifara Samsudeen, ACMA, CGMA