ASX shares are trading at deep discounts from previous highs thanks to the coronavirus pandemic. This gives investors the chance to swoop in on some bargains.
So, let’s take a look at 5 ASX shares to buy across the technology and healthcare industries in the current market downturn.
Altium Limited (ASX: ALU)
The Altium share price is trading at a 30% discount to February prices. Altium provides software for the design of printed circuit boards that are used in electronic devices. With the internet of things prompting a rapid rise in the number of interconnected devices, Altium stands to benefit from this boom.
Used in everything from cars to consumer electronics, to mobile devices and computers, printed circuit boards are ubiquitous if largely unseen. Altium aims to dominate the printed circuit board design market, which will enable it to compel key industry stakeholders to support its agenda to transform electronic design.
In Altium’s H1FY20 report, Altium Designer, the company’s end-to-end printed circuit board design tool, recorded an increase of 19% in users. Altium’s subscriber numbers increased 16% to 46,693, putting the company on track to reach its target of 100,000 subscribers by 2025. It is confident of reaching the halfway mark of 50,000 subscribers by the end of FY20.
In its most recent half-year, Altium recorded a 19% increase in revenue, which grew to US$92.8 million. Profit before tax was up 23% to US$31.85 million. A dividend of 20 cents per share was declared, an increase of 25% over the prior year.
Full-year guidance is for revenue between US$205 million and US$215 million, with Altium aiming to hit US$500 million in revenue by 2025. The company is also in a strong financial position with a cash balance of US$80.7 million at 31 December 2019 and no borrowings.
Appen Ltd (ASX: APX)
The Appen share price is trading at a 22% discount to February prices. Appen develops human-annotated training data for machine learning and artificial intelligence.
The high growth artificial intelligence market relies on high-quality training data. Obtaining this data is identified as a major challenge. Appen’s leading technology and track record of quality and reliability position it strongly in this market.
In Appen’s most recent full-year results, the company recorded a 47% increase in revenue which reached $536 million. Underlying net profit after tax (NPAT) increased 32% to $64.7 million. An interim dividend of 5 cents per share, 50% franked, was declared, up 25% on the prior corresponding period (pcp).
Appen’s Chairman Chris Vonwiller said, “as we are getting bigger we are getting better, demonstrated by the Company’s ability to simultaneously deliver growth, margin expansion, and invest in future-proofing the business through technology, sales and marketing, and entry into new markets.”
Avita Medical Ltd (ASX: AVH)
The Avita Medical share price is trading at a 36% discount from February highs. Avita specialises in spray-on skin therapy for dermal applications. Its leading product, the RECELL system, is currently used to treat burn wounds but is also being assessed for use in the treatment of vitiligo, traumatic wounds, scar reconstruction, and for dermatological aesthetic indications.
The system was approved for use in the United States in September 2018, and more than 50% of US burn surgeons and centres have now been trained on the system. Avita estimates the US market alone to represent an opportunity valued at $2 billion.
Studies are also expected to commence this year examining the use of the system in soft tissue repair and the treatment of vitiligo. Positive results in the use of the system for treating skin injuries opens the door to possible future aesthetic uses. According to Avita, capturing just 5% of the skin rejuvenation market could represent a more than $500 million opportunity.
The company is also planning new generation products which enhance ease of use and support the adoption of new indications. Generation 2 systems should support office-based procedures and target applications in cell and gene therapy.
Cochlear Limited (ASX: COH)
A favourite of Australian investors, Cochlear has not escaped the coronavirus chaos unscathed, with shares trading at a 20% discount to February highs.
Cochlear is being impacted by the effect of coronavirus on hospitals, with many delaying surgeries to limit the risk of infection. Cochlear withdrew its FY20 earnings guidance as coronavirus spread, with the virus expected to have a significant but short-term negative impact on cochlear implant surgeries in the US and Western Europe.
Nonetheless, the company has seen a small but growing number of surgeries in China over the past few weeks as the country recovers from the worst of its outbreak. Despite the current short-term headwinds, Cochlear continues to see the long-term opportunity to grow the hearing implant market. Once hospitals resume normal operations, the company expects many delayed surgeries to progress. Cochlear may also get a tailwind from the recent product recall by competitor Sonova.
PolyNovo Ltd (ASX: PNV)
The PolyNovo share price is currently trading at a 40% discount to February prices. PolyNovo produces a range of bio-resorbable polymers that can be produced in many formats including film, fibre, foam, and coatings. The company’s premier product, NovoSorb BTM, is a dermal scaffold for regeneration of the dermis when lost through surgery or burns.
In PolyNovo’s half-year results, the company reported a 129% increase in revenue from sales of its NovoSorb BTM product. PolyNovo also reported strong sales performance in the US with growing account penetration. In December, NovoSorb BTM received CE Mark approval allowing for full Western European market entry.
Initial target markets are the UK, Ireland, Germany, Austria, and Switzerland, with surgeries and sales already occurring in the region. Further European Union expansion of NovoSorb BTM is planned for the second half of FY20. Approvals are in process in South Korea, Taiwan, Mexico, Kuwait, and Sri Lanka.
PolyNovo is building a factory in Port Melbourne to produce hernia products utilising the NovoSorb technology. The product will be used for abdominal wall repairs and US market entry is scheduled for June 2021. According to PolyNovo, the hernia market is worth some $2 billion and is growing at over 7% a year. PolyNovo’s product will repair the hernia and then dissolve away, avoiding issues associated with permanent meshes.
PolyNovo is also working on a design for a breast product, with that market worth some $2.5 billion to $3 billion. The company is also looking into generating drug-eluting polymers that can go under the skin and release controlled drug dosages. This could be a promising solution for treating chronic conditions where compliance of patients with medications regimes is an issue.
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Kate O'Brien owns shares of Altium, Appen Ltd, Avita Medical Limited, Cochlear Ltd., and POLYNOVO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Avita Medical Limited and Cochlear Ltd. The Motley Fool Australia owns shares of Altium and Appen Ltd. The Motley Fool Australia has recommended Cochlear Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.