Voxel: 1Q20 financials vs. forecasts

On June 25, after the market close, the Company revealed its 1Q20 financial results which exhibit a huge impact of the COVID-19 pandemic, albeit the reported operating results are better than our expectations (PLN 6.7 million of gain on the bargain purchase of Scanix). Nevertheless while adjusted they underperformed.

Accordingly, we downgrade both our LT fundamental Buy recommendation and ST relative Overweight rating for the Company to Hold and Neutral, respectively, and remove Voxel’s shares from our monthly portfolio.

Given yoy weaker results 1Q20 we would not be surprised by the net loss in 2Q20E which we had actually implied before. In January/February/March/April/May Voxel performed 20,200 (+27% yoy)/ 20,300 (+34% yoy)/14,200 (-23% yoy)/8,500 (-54% yoy)/12,100 (-38% yoy) tests. Only urgent tests were carried out on an ongoing basis. Besides, the Group run diagnostic units in 4 hospitals for infectious diseases with one acting as a hospital subcontractor which limited the Group’s resources additionally. Testing has been suspended in 2 facilities (in Warsaw and ŁaÅ„cut). The number of tests decreased due to disinfection procedures implementation and longer intervals required between tests.

Nevertheless, we would like to point out that the pandemic doesn’t curb needs for medical treatments in the society; on the contrary, it may contribute to their increase. The Group is operationally efficient and can run testing around the clock. Once the pandemic is contained, the deferred demand for medical procedures offered by the Company is likely to appear; in particular, additional demand for CT scans may materialize in the aftermath of the COVID-19 pandemic immediately after the primary care and specialist care providers issuing medical referrals start their operations, we believe.

We assume that the Company will delay investments to safer times and will focus on funds accumulating at the moment. It looks like Voxel is able to make up for the 3-month period of low activity in the following months without much harm to results. We have already lowered out financial forecasts to err on the side of caution and we uphold them while assuming they are still ambitious and high risk-laden. Additionally, we would like to note that unless the pandemic is finally contained with medicaments or vaccine development, it may recur as soon as in the autumn.