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Allied Healthcare Group Rated ‘Outperform' By RBS Morgans, $0.061 Price Target

Allied Healthcare Group (ASX: AHZ) has attracted an "outperform" rating and a share price target over double its last traded share price.

RBS Morgans has given the company a share price target of $0.061, with near term news flow expected to push Allied's share price towards this target.

The following is an extract from the report.

Showing a lot of heart

AHZ's 1H13 result was broadly in-line with our expectations. The business is now well capitalised following a recent placement and SPP.

News flow expected over the next few quarters should see the share price move to our price target, particularly after a legacy shareholder has been removed from the register.

The key catalyst is marketing approval of CardioCel in Europe.

AHZ posted a 1HFY13 net loss of A$2.0m, (down 8.7% on pcp) and in line with our forecasts.

R&D spend was A$0.3m (pcp A$0.5m) and the loss from equity accounting increased to A$0.7m from A$0.3m due to the progression of Coridon's vaccine program.

The cash position is solid at A$2.0m, with a further A$2.9m raised post balance in a share purchase plan.

The funds will be used to advance the vaccine program, pursue the CardioCel registration and subsequent launch in Europe and the US 510k filing.

We have increased our forecast full year loss by A$1.3m to A$4.3m, reflecting a more conservative view of CardioCel sales post launch. We expect sales will commence in FY14 (previously forecast sales of A$1.4m in FY13).

Additionally we have revised down our medical device sales to A$7.5m (was A$8.9m). Our FY14 net loss has been revised down slightly to A$.18m (was A$1.4m).

CardioCel progresses towards CE Mark

The key milestone we are focussed on is the achievement of marketing approval for CardioCel in Europe (expected in mid CY13).

CardioCel has received approval on the Authorised Prescriber Scheme in Australia, allowing early access for the product into the market for use in cardiac repair and reconstruction.

HSV-2 Vaccine to enter Phase 1 trials

AHZ owns 46.8% of Cordion, Professor Ian Fraser's next generation DNA vaccine program.

During 2QCY13 we expect the start of Phase 1 study for Herpes Simplex virus (HSV-2).

Results of the trial are due 1QCY14.

Investment View

After adjusting for the raising capital and changing our FY13 and FY14 forecasts our price target has reduced to A$0.06, was A$0.067.

The key risk to our price target is a delay is gaining CE Mark approval for CardioCel.

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