ASX:PHX
Pharmx Technologies Ltd
Investment Summary
The fund managers believe that Pharmx Technologies Ltd (PHX) is a compelling investment opportunity, particularly in light of its significant market presence, with 99% of Australian pharmacies using its platform for over $20 billion in annual orders. In their opinion, PHX's transition to a marketplace model will enhance its capabilities, providing both pharmacies and suppliers with greater efficiency and choice. They highlight that PHX generates healthy free cash flow exceeding $2 million EBITDA, crucial for funding growth initiatives. The involvement of experienced board members, particularly Dennis Bastas, lends credibility and industry knowledge critical for supplier relations. Moreover, the evolving role of pharmacies, demographic shifts, and the need for digitization within the sector are seen as driving forces for PHX’s growth. Despite challenges in pricing new services, the potential for increased revenue through diverse offerings appears promising. With an enterprise valuation around $40 million, the fund managers regard the risk/reward trade-off as favorable for long-term investors.
Commentary From The Managers
Naos Asset Management
31 Mar 2025
$0.08
- Naos Asset Management recognizes PHX as a significant investment, particularly due to its streamlined focus on a technology gateway for pharmacies.
- Competitive Advantage: PHX holds a strong market position with ~99% of Australian pharmacies using its services, facilitating over $20 billion in orders annually.
- The funding model is supplier-based, with suppliers paying a flat fee per month depending on active users.
- PHX plans to transition to a marketplace model similar to Ordermentum, enhancing access to a wider range of products for pharmacies.
- This model aims to provide lower prices, higher quality alternatives, and greater choice for pharmacies, while offering suppliers an effective marketing platform.
- Growth trends supporting PHX include:
- Expansion of pharmacy services (vaccinations, wellness products, etc.)
- Demographic shifts focusing on quality of life and wellness
- Essential digitization for supply chain management and data access - PHX's core business generates solid free cash flow with over $2m EBITDA and a strong balance sheet with ~$4 million in cash.
- Director alignment is evident with 10% ownership held by Dennis Bastas, whose extensive industry experience can facilitate partnerships with suppliers.
- Future success will rely on maintaining a diverse supplier base and ensuring seamless transactions on the platform.
- If operational goals are achieved, PHX could shift its pricing to include a blend of a flat and usage fee structure.
- With an enterprise value of approximately $40 million, Naos Asset Management believes there is long-term merit in the risk/reward trade-off.
- Challenges exist, but PHX's competitive advantages could lead to substantial growth if momentum is maintained over the coming years.
Please note: The completeness, accuracy or current status of the investments referenced are not guaranteed.