Applied UV Inc. (AUVI, Financial) is a disinfection technology player that provides disinfecting furnishing solutions to the hotel industry. The company got listed on the Nasdaq earlier this month and saw a strong premium after listing given the increasing need for the elimination of surface-based infections in the current Covid-19 background.
It was formed with the acquisition of two companies – disinfection technology developer SteriLumen and furnishings manufacturer Munn Works. Today, the company uses SteriLumen's patented disinfection technology and Munn's manufacturing capabilities to supply its products to the hotels industry, but the goal of its fundraising through the initial public offering was to enter the hospitals market, which is an excellent target for it given the vast spread of health care acquired infections. The company made its first big breakthrough in supplying its products to a renowned medical facility in New York earlier this week.
Mount Sinai installations update
In a recent press release, Applied UV announced the installation of its SteriLumen Disinfecting System in the first of 17 patient bathrooms at Mount Sinai's Morningside Hospital adjoining Columbia University in New York. These installations were carried out in connection with a study to be conducted by Mount Sinai to further reaffirm the effectiveness of the system. The hospital has also agreed to provide the company with the results report by the second quarter of 2021, publish them in an academic, peer-reviewed journal and also present them at the Association for Professionals in Infection Control and Epidemiology Conference in 2021.
CEO Keyoumars Saeed said the fact that the company has been able to introduce its technology to a premier medical institution in the U.S. is a very big achievement. The company is confident in the reports from Mount Sinai coming out highly positive in the company's favor given the fact that the pathogen-destroying abilities of its mirrors have already been validated by ResInnova Laboratories over the years. In fact, Ressinova will also be assisting in the evaluation study at Mount Sinai.
SteriLumen's suitability for hospitals
There is a reason why Applied UV's management considers hospitals a low-hanging fruit after its successful penetration into hotels. Its proprietary SteriLumen Disinfection System and its products have attributes that are strongly suitable to hospitals. The technology is known to destroy 99.99% of common pathogens such as MRSA, C-diff, E.coli and candida auris in the bathroom vanity area and the sink area with at least two hours of continuous use. This is bound to help contain the spread of HAIs contracted by patients in a hospital who are being treated for an altogether different sickness.
The company's products have an automated operation with built-in programmable controllers so that there is no additional requirement in terms of the hospital's resources to operate them. They also have built-in motion detectors and sensors to automatically shut off the ultraviolet light when anyone enters the room, eliminating any concern over patient safety. The devices are easy to install, follow a fixed timing protocol and are continuously disinfecting the highly contaminated areas in hospital washrooms, destroying HAI pathogens. Their performance can easily be monitored using internet of things connectivity as the data is constantly transmitted over the internet for analysis and monitoring purposes. All these factors make Applied UV's products a highly compelling proposition for hospitals.
Strong IPO debut
Applied UV had a very interesting IPO debut this month. The company's offering was priced at $5 per share, valuing it at a sales multiple of 3.3, but the share price shot through the roof upon listing, hitting the $11 mark. There was a reasonable amount of profit booking since then and the stock has now stabilized between $6 and $7. It is worth highlighting that Applied UV is a profitable entity with a 28.72% net margin and a price-to-earnings ratio of 27.4, which is slightly above the furnishing industry median of 21.88.
The reason for this premium is the fact that Applied UV's ownership of the intellectual property associated with the SteriLumen Disinfection System could generate a significant upside in the long run, owing to its wide application. Interestingly, the demand for Applied UV's mirrors is so high that its inventory turnover is as low as 11.36 days, way below the furnishing industry median of 99.09 days, indicating how rapidly the company's inventory gets sold out. All these are big green flags in favor of the stock.
Final thoughts
It is worth noting that almost all of Applied UV's reported revenues so far have been from catering to the hotel industry, including key brands like Hyatt (H, Financial), Hilton Worldwide Holdings (HLT), Marriott (MAR, Financial) and Four Seasons. This is one of its first big breakthroughs within the hospital market, which is expected to be one of its largest addressable markets as the company's products serve the main purpose of destroying HAIs. In fact, the presentation of Mount Sinai's findings is expected to be in favor of its SteriLumen technology. The company is expected to launch a wide range of products, such as medicine cabinets, which are even more pertinent for the hospital market. Overall, it will be interesting to observe its journey through this market and also its further expansion in the hotels space.
Disclosure: No positions.
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