Revolutionary products from SINJIA LAND, QT VASCULAR

DBS Vickers' unrated report says QT Vascular (53.5 cents) is trading at stretched valuations

Analyst: Alfie Yeo

Develops and markets products for vascular diseases.  QT Vascular’s (QTVC) flagship product is the Chocolate PTA, a percutaneous transluminal angioplasty (PTA) Balloon approved for the treatment of Peripheral Artery Diseases (PAD).  

Its products are distributed through Japan’s Century Medical, China’s Weihai Weigao and Johnson & Johnson.  Market penetration and adoption of its balloon catheters will drive growth going forward. 
 

Stock catalyst in product approvals. QTVC is awaiting approvals for some of its products in Japan and China.  If approved for sale, these products could positively impact its future earnings and stock price.  
 
QT Vascular's Chocolate PTCA Balloon Catheter: The balloon has rings positioned along its tract to prevent it from expanding into a uniform shape. This prevents the balloon from inflating in the shape of a bone, with the edges being larger than the center of the balloon. Additionally, the valleys that are formed allow large bits of particularly hard calcification to snuggle within them rather than being pushed into the blood vessel wall where they can cause damage. 

Risks.  Factors that may cause the company’s earnings to underperform include competition from stents and other balloons, failure to attain product approvals, poor take-up rates from commercialisation of products, adverse clinical trial data on QTVC’s products, and loss of distributorship.  

QTVC’s product concentration is high and it is important for it to diversify away from balloon catheters.  Persistently higher-than-expected cash burn rate to fund clinical research and development could also weigh down on its balance sheet and share price.

Trading at 15x P/S, above peers.  It is not meaningful to value QTVC on earnings and EV/EBITDA multiples since the company is loss making.  This leaves P/S multiple as the most relevant valuation matrix, albeit its short listing history.  

QTVC’s P/S multiple is way above its peers’ average of 4-5x.  We attribute the lofty P/S to its low revenue base and believe current valuations appear stretched.  However, upside risks to the stock includes a potential buyout for QTVC, product approvals and better than expected sales.