Mach7 Technologies: A solid 3Q result pumps up confidence

About the author:

Scott Power
Author name:
By Scott Power
Job title:
Senior Analyst
Date posted:
12 April 2021, 3:30 PM
Sectors Covered:
Healthcare, Life Sciences

  • Mach7 Technologies (ASX:M7T) has posted a solid 3QFY21 result which has restored investor confidence. M7T generated A$8.4m in cash receipts and net operating cashflow of A$3.3m for 3QFY21. The cash on hand is now A$18.0m and operating cashflow is A$1.2m for the nine months ended 31 March 2021.
  • Pleasingly A$12.8m in new sales orders were generated for the quarter (up from A$7.6m in 2Q) from both new and existing customers. This brings year-to-date total orders to A$23.6m.
  • We have made no changes to our forecasts. As a result our DCF valuation and target price remain unchanged (login to view). Management has guided to positive net operating cashflow for FY21.
  • We maintain our Add recommendation.

Solid 3Q result impresses investors

M7T posted a solid 3QFY21 cashflow report which has impressed the market.

Following a subdued 2Q report which was impacted by some timing issues, the 3Q report reversed this with cash receipts of A$8.4m and net operating cash inflow of A$3.3m.

This leaves M7T with cash on hand of A$18.0m and year-to-date positive net operating cashflow of A$1.2m.

New and existing customers step up

M7T generated A$12.8m (total contract value) of new sales orders for the quarter (up from A$7.6m in 2Q), taking total year-to-date orders to A$23.6m, including A$2.8m in annual recurring revenue (ARR).

Pleasingly, sales orders have been signed with both new customers (Metro Health) and existing customers (Adventist Health, Ambra Health and Hospital Authority of Hong Kong).

Of significance, the Adventist Health contract has already generated 8 new orders this quarter with more orders expected to be executed. M7T also noted its reseller partners are continuing to have success, calling out Allscripts closing two additional deals (Mercy Iowa City and Ascension Health).

Further comments were made around a number of contract renewals with three existing customers (Marshfield Clinic, Uni of California San Francisco and Duke University). Customer feedback suggests flexibility, scalability and deployment speed are key selling points.

No changes to forecasts

We have made no changes to our forecasts. Importantly, management has guided to positive net operating cashflow for FY21.

Investment view – Add recommendation maintained

Given we have made no changes to forecasts our DCF valuation remains unchanged. We have set our target price at the same level (login to view).

The downside risk is delays in securing contracts given the COVID-19 situation in the US. We maintain our Add recommendation.

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Disclaimer: The information contained in this report is provided to you by Morgans Financial Limited as general advice only, and is made without consideration of an individual's relevant personal circumstances. Morgans Financial Limited ABN 49 010 669 726, its related bodies corporate, directors and officers, employees, authorised representatives and agents (“Morgans”) do not accept any liability for any loss or damage arising from or in connection with any action taken or not taken on the basis of information contained in this report, or for any errors or omissions contained within. It is recommended that any persons who wish to act upon this report consult with their Morgans investment adviser before doing so.

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