Stocks’ Details

Fluence Corporation Limited

Investment Cooperation Agreement: Fluence Corporation Limited (ASX: FLC) is engaged in the delivery of innovative, cost-effective decentralized water, wastewater and reuse solutions for business and communities. The market capitalisation of the company stood at ~A$247.22 Mn as on 24^th September 2019. The company recently through a release dated 24^th September 2019 announced that it has inked an investment cooperation agreement for the establishment of a final assembly facility for its proprietary MABR products and a volume commitment by Liaoning Huahong to purchase Aspiral^TM as well as SUBRE products with a capacity of 52,500 m³/day through the end of 2021 and minimum revenue targets for 2019 and 2020. The investment cooperation agreement has been signed with The People’s Government of Xinglongtai District and Liaoning Huahong New Energy Co., Ltd. It was mentioned that the agreement would make FLC the preferred supplier for wastewater treatment equipment for Liaoning Huahong. The following picture provides an idea of the results for the half-year ended 30^th June 2019:


Revenue from Ordinary Activities (Source: Company Reports)

What to Expect:As per the half-year results, the company is in the process of arranging third party finance for the Government of Ivory Coast through a loan from Israel Discount Bank. It added that the project has a support of the state of Israel through its Export Credit Agency (ASHRA). The execution of the loan agreement is anticipated by the end of Q3 FY19, which would start the 24-month construction period. Subject to financial close by the end of Q3 as well as project commencement, FLC expects to recognise revenue up to US$20 million in 2019, US$80 million in 2020, and the remainder of the contract value in 2021.
Stock Recommendation:With respect to Latin America, the company stated that post successful discussions with its minority partners in the San Quintin, Mexico project, FLC expects to increase its ownership in the project from 51% to 94%. On the stock’s performance front, it produced returns of 9.52% and 22.67% in the time period of one month and three months, respectively. Therefore, in light of above-stated facts, we give a “Hold” rating on the stock at the current market price of A$0.500 per share (up 8.696% on 24^th September 2019). It looks like that the upside in the stock is primarily due to the signing of investment cooperation agreement with The People’s Government of Xinglongtai District and Liaoning Huahong New Energy Co., Ltd. 
 
 

CLINUVEL PHARMACEUTICALS LTD

Appointment of New Director:CLINUVEL PHARMACEUTICALS LTD (ASX: CUV) is in the development of SCENESSE®, its proprietary first-in-class-drug. The company has a market capitalisation of ~A$1.22 Bn as on 24^th September 2019. Recently, the company announced that it has appointed Susan (Sue) Smith as a Non-Executive Director of the group’s Board of Directors. It added that the appointment became effective on 23^rd September 2019.

In another release on ASX, the company announced that safety and effectiveness data from the treatment of erythropoietic protoporphyria (EPP) patients with SCENESSE® will be presented at the International Congress on Porphyrins and Porphyrias (ICPP). The data have been collected as part of a post-authorisation safety study within the European Union. CUV has provided limited financial support to the ICPP. The ICPP is a biennial four-day conference focused on the family of rare metabolic disorders known as porphyrias- caused by defects in the haem biosynthesis pathway -which includes cutaneous porphyrias, such as EPP. The following picture provides an idea of financial performance which has been extracted from the preliminary financial report for year ending June 30, 2019:


Financial Summary (Source: Company Reports)

Future Aspects:The company stated that the European business generatesa solid base of earnings to fund expansion in the areas of focus like (1) further growth in European distribution, (2) conditional on the US Food and Drug Administration (FDA) approving SCENESSE® for distribution to EPP patients, to enter the US market, and (3) progress its product development pipeline for a range of skin-related indications.The group’s strategy is to focus on developing and commercialising SCENESSE® as a preventative therapy to photoprotect patients with erythropoietic protoporphyria (EPP).

Stock Recommendation:Currently, the stock is trading at P/E multiple of 66.490x, which is higher than the industry average (Pharmaceuticals) of 8.0x. In the past one year, the stock has delivered a decent return of 26.14% and is trading towards the 52 weeks high price of $39.85. Hence, considering the above-stated facts and current trading levels, we advise the investors to closely watch the stock at the current market price of A$26.080 per share (up 4.32% on 24^th September 2019) and wait for better entry levels.
 

Arq Group Limited

Revised Earnings Guidance:Arq Group Limited (ASX: ARQ) offers cloud-based technology services that help organizations of all sizes to do business online successfully. The market capitalisation of the company stood at A$65.95 Mn as on 24^th September 2019.In the release dated 23^rd September 2019, the company advised the market of a change to its full-year guidance after a marked deterioration in trading conditions for its Enterprise division. It also announced the appointment of Macquarie Capital (Australia) Limited in order to undertake a strategic review to explore all avenues for shareholder value creation. With respect to Enterprise division, it was mentioned in the release that the guidance provided in June 2019 anticipated growth from existing and new accounts and unfortunately, this is tracking below expectations. It was mentioned in the release that CEO, Martin Mercer has resigned as a Director of the company and the search for a new CEO is underway. The following picture depicts an idea of key financial metrics for the half year ended 30 June 2019:


Key Financial Metrics (Source: Company Reports)

Future Guidance:The company stated that the market conditions in its Enterprise division have softened markedly, and it has become clear that forecast revenue growth for the 2H FY19 would not be achieved. It added that the cost reduction initiatives would be insufficient to offset the revenue shortfall. On the back of this, the company expects group underlying EBITDA in the ambit of $16.8 Mn to $19.3Mn in comparison to previous guidance for the Group of $27.0 Mn to $30.5Mn. ARQ anticipates underlying EBITDA for the Enterprise division for the 2019 financial year in the vicinity of $1 Mn to $2.5Mn in comparison to the previous guidance for the Enterprise division of $12Mn to $14.5 Mn. It stated that the SMB division is trading in accordance with previous forecasts of between $9.7 Mn and $10.7 Mn of core underlying EBITDA for the 2019 year.

Stock Recommendation:On the stock’s performance front, it generated negative returns of 10.00% and 62.50% in the span of one month and three months, respectively. As per ASX, the stock of ARQ is trading closer to its 52-week lower levels. Hence, considering the above-stated facts, we advise the investors to avoid the stock at the current market price of A$0.360 per share (down 33.333% on 24^th September 2019, owing to the release of trading update, CEO transition, and strategic review).

 
 Comparative Price Chart (Source: Thomson Reuters)

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