Potentially undervalued Wellnex Life ‘demands rerating’: Report

Health and wellness brands company Wellnex Life should be worth more than three times its last traded price based on discounted cash flow metrics, according to Pitt Street Research.

Health and wellness brands company Wellnex Life should be worth more than three times its last traded price based on discounted cash flow metrics, according to Pitt Street Research.

In a report that was commissioned by Wellnex and released last Friday, Pitt Street Research said its base case for the company’s valuation is $0.253 per share, and as much as $0.394 under an ‘optimistic case’ scenario.

Both valuations sit well above the $0.068 per share that Wellnex was trading at when markets closed on Tuesday, 21st June.

Pitt Street Research pointed to four aspects of the business which, taken together, make the case for a rerating.

Two of these factors – Wellnex’s FY22 revenue growth ($8.56 million in the six months ending 31st December 2021, up 1099% on the prior corresponding period) and the recent shift to a fully integrated business model – are both products of the company’s acquisition of Brand Solutions Australia, in 2021.

Brand Solutions Australia had existing distribution networks through major retailers such as Chemist Warehouse, Priceline, Coles and Woolworths, and the acquisition kick-started Wellnex’s growth. 

Pitt Street Research also highlighted Wellnex’s distribution arrangement with Performance Inspired – a sports nutrition supplement manufacturer led by Hollywood A-lister Mark Wahlberg – and its own in-house growth plans and proposed product launches as further ground for a rerating.

“We believe Wellnex has significant scope for rerating over the next few years, if it can meet its potential,” the report said.

“The Australian health and wellness industry is currently worth over $10 billion and 72% of sales occur through pharmacy channels. 

“The industry is being driven by a rising elderly population in Australia, increasing consumer preference towards preventive health, and growing exports of complementary medicines in Australia. The company is set to capture the emerging market opportunity.”

Pitt Street Research said the valuation was based on a discounted cash flow (DCF) model, which used a Weighted Average Cost of Capital (WACC) of 15%.

The DCF model is a common way for analysts to estimate a business’s value based on the expected cash flows that business will generate in the future, and WACC is commonly used as a discount rate by companies because it factors in investors’ expected rates of return.

View the full report by Pitt Street Research here.

Plus, join Wellnex Life CEO George Karafotias for an online investor briefing next Thursday, 30th June at 1pm (AEST), where he will discuss the progress Wellnex has made and plans for future expansion. Book in here.

Reach Corporate provides Corporate Advisory Services, including managing investor communications on behalf of Wellnex Life Limited and will receive fees for its services.


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