Cleanspace Holdings Ltd (ASX: CSX) shares have endured a rough start to 2021. Shares in the ASX respirator company – which only listed on the ASX in October – took a sharp nosedive in late March following the release of a disappointing trading update.
The Cleanspace share price, which opened the year trading at $6.61, has shed close to a whopping 70% of its value and is now priced at just $2.05.
Company background
Founded in Australia in 2009, Cleanspace develops workplace respirators for the industrial and healthcare industries. The company sells a range of durable, lightweight respiratory protective equipment suited for many unique (and even dangerous) settings, including for use in potentially explosive environments.
While it originally targeted the industrial sector, Cleanspace began expanding more actively into healthcare during the pandemic.
What's been impacting the Cleanspace share price?
The Cleanspace share price tumbled 50% on 30 March after the company reported that sales for the quarter ending 31 March 2021 were expected to be just $7 million. Compare that against the $39.7 million in revenues Cleanspace generated over the first half of FY21. This leaves the company with a Herculean task over the second half of the financial year if it wants to show any half-on-half growth in FY21.
Also putting pressure on Cleanspace shares is the shifts in demand for respirators being seen in the US. By the company's own admission, "acceleration of vaccine rollout programs, spending constraints and a backlog stockpiling of low-tech disposable masks" are all combining to impact respirator sales in North America.
The question investors will be asking themselves is whether the company's first-half FY21 results were an anomaly borne out of the pandemic, and the lower third-quarter sales represent a normalisation of the company's revenues.
For its part, Cleanspace attempted to reassure investors that there was still plenty of room for growth beyond the COVID-19 pandemic. It values its addressable market at $6.3 billion and states that "a strong US hospital pipeline underpins sales in the medium to longer term."
But it also conceded that "volatility is likely to continue for some time" and declined to commit to any earnings guidance for the second half of FY21.
Performance versus competitors
Cleanspace is up against some pretty stiff competition, particularly in the healthcare sector.
The two respirator heavyweights currently trading on the ASX are Fisher & Paykel Healthcare Corp Ltd (ASX: FPH) and ResMed CDI (ASX: RMD). To get a sense of the size of these two companies compared with Cleanspace, New Zealand-based Fisher & Paykel brought in over NZ$900 million in operational revenues for the six months ended 30 September 2020, while ResMed generated US$800 million in revenues in the December quarter alone.
Despite these differences, shares in all three companies have had a rocky start to 2021 as market analysts and investors try to price in revenue projections beyond the pandemic. After starting the year at $27.50, the ResMed share price fell almost 15% to below $24 before recovering some of that ground more recently. Currently, Resmed shares are down a little over 3% year to date at $26.59.
Fisher & Paykel shares have followed a similar trajectory, falling over 15% from their 2021 opening price of $30.77 to around $25.46 by early March. They have staged a more significant recovery than ResMed, and are currently slightly above water year to date at $30.79.
So far, the Cleanspace share price has not experienced the same rebound as either ResMed or Fisher & Paykel – but it doesn't yet have the brand recognition or proven track record of its two established competitors. This means Cleanspace shares will undoubtedly be facing significant investor scrutiny for the remainder of this year.
