Stocks’ Details

Mesoblast Limited

Phase 3 Trial Results of DREAM-HF: Mesoblast Limited (ASX: MSB) is a developer of allogeneic cellular medicines using its technology platform based on mesenchymal lineage adult stem cells for inflammatory diseases. As on 13^th January 2021, the market capitalization of the company stood at ~$1.52 billion. On 12^th January 2021, Mesoblast presented the results and additional data from its DREAM-HF phase-3 trial of patients with chronic heart failure at the Investor Healthcare Conference BioConnect 2021. It also presented the key conclusions which stated that Rexlemestrocel-L (R-L) may reduce progression of heart failure and mortality if used early and may prevent heart strokes in high-risk patients. It has been observed that a single dose of R-L led can result in a substantial and durable decline in heart attacks/ strokes, and cardiac deaths.

September 2020 Quarter Results: MSB reported a decline of US$15.7 million in its top-line revenue for September 2020 quarter to US$1.3 million. During the quarter, the company spend US$19.3 million on research and development activities, up US$6.9 million on pcp, due to increased clinical trial costs relating to the Phase 3 trial for COVID-19 ARDS, non-cash sharebased payments to employees and consultants, and pre-commercial activities for remestemcel-L. The company had US$108.1 million cash on hand at the end of Q1FY21.

September 2020 Financial Results (Source: Company Reports)

Outlook: MSB and Novartis plan to undertake a phase 3 study in non-COVID-19 related ARDS after the results of the current COVID-19 ARDS study. MSB expects receiving payments from the Novartis partnership over the next 1 year subject to achieving certain milestones. It may also receive US$67.5 million via available financial facilities and other strategic collaborations over the next 1 year.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of MSB gave a negative return of 25.15% in the past three months and a negative return of 27.16% in the past six months. The stock is trading lower than the average 52-weeks’ price band, offering a decent opportunity for accumulation. The stock of MSB has a support level of ~$2.244 and a resistance level of ~$2.623. We have valued the stock using an enterprise value to sales based illustrative relative valuation method and have arrived at a target price of low double-digit upside (in % terms). For the purpose, we have taken peers like AVITA Medical Inc (ASX: AVH), Paradigm Biopharmaceuticals Limited (ASX: PAR), Telix Pharmaceuticals Limited (ASX: TLX) and others. Considering the current trading levels, expected payments from Novartis and other key collaborations over next 1-year, decent cash position, additional results from Dream-HF phase 3 trial, and valuation, we give a ‘Speculative Buy’ rating on the stock at the current market price of $2.440, down by 6.154% on 13^th January 2021.

88 Energy Limited

Purchase of Umiat Oil Field: 88 Energy Limited (ASX: 88E) is an oil and gas exploration firm with Icewine, Yukon leases and Peregrine projects. As on 13^th January 2021, the market capitalization of the company stood at ~$106.61 million. The company recently notified regarding a Purchase and Sale contract signed with Malamute Energy, Inc and Renaissance Umiat LLC to buy Umiat Oil Field. 88E will pay a 4% overriding royalty interest (ORRI) and has assumed liability of $1 million for the abandonment of Umiat-18 and Umiat-23H wells.

Exploration Update on Projects: For Project Iceweine, Talitha-A well will be drilled by Pantheon Resources PLC till mid-January 2021 and for the gas condensate in Torok Formation explored by Charlie-1 well in 2020. The company intends to scout for options to commercialise it. It has considered local power generation, compressed natural gas (CNG) or conversion to hydrogen as the probable uses of the condensate. In an update on Project Peregrine in December 2020, the company informed of closing the farm-out process with Alaska Peregrine Development Company LLC (APDC) and implementing the rig contract recently with All American Oilfield, LLC for drilling the oil wells – Merlin-1 and Harrier-1.

Q3FY20 Results: During Q3FY20, the company incurred an expenditure of $1.2 million on the exploration activities, mainly related to the expenditure on the Charlie-1 post well testing as well as Project Peregrine well planning and permitting. Over the quarter, the company acquired the remaining shares and listed options in XCD Energy, having reached over 90% of acceptances in the Offers. The net cash outflow from operating activities stood at $1.14 million. The company ended the quarter with a cash balance of $4.68 million.

Operating Cash Flow (Source: Company Reports)

Outlook: The company plans to commercialize the gas condensate from Charlie-1 well (Project Icewine) and will execute a formal feasibility study during FY21. The company is currently looking for farm-out of Project Icewine and planning a deal in 3Q21. On Project Peregrine, 88E will undertake digging of Merlin-1 and Harrier-1 wells in mid to late February 2021.

Stock Recommendation: The stock of 88E gave a positive return of 66.67% in the past three months and a positive return of 100% in the past six months. The stock is inclined towards its 52-weeks’ low level of $0.004. The stock of 88E has a support level of ~$0.006 and a resistance level of ~$0.013. On a TTM basis, the stock is trading at price to book value multiple of ~1.7x as compared to industry (Oil & Gas) average of ~4.9x. Considering the current trading levels, decent cash position, opportunity to commercialize gas condensate under Project Icewine, and valuation on TTM basis, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.010 on 13^th January 2021.

Note: 88 Energy Limited (Company) is a client of Kalkine Media Pty Ltd (Kalkine Media), an affiliate of Kalkine. However, under no circumstances have Kalkine or its related entities been, directly or indirectly influenced in making any related insights concerning Company as contained in this report, and no form of compensation is or will be received by Kalkine, Kalkine Media or Kalkine’s other related entities for the publication of this report.

Nuheara Limited

Launch of HP Elite Wireless Earbuds: Nuheara Limited (ASX: NUH) develops and markets proprietary wearables and offers customized hearing devices through retail and direct-to-customer (DTC) channel worldwide. It has an advanced offering for higher hearing disorder such as autism/APD which it channels through government supply agreements. As on 13^th January 2021, the market capitalization of the company stood at ~$86.14 million. On 12 January 2020, NUH announced the launch of HP Elite Wireless Earbuds at the Consumer Electronics Show (CES) 2021. The product is being developed using NUH’s technology/IP under an initial 3-year Hardware Product Purchase contract with HP. It is expected to be delivered to HP from April 2021 and will reflect co-branding with Nuheara. As per the terms, there is no minimum or maximum value of contract. After the product launch, NUH will receive manufacturing volumes and keep investors informed through quarterly results. To fund the manufacturing as per the contract with HP, sales through DTC and overall sales expansion initiatives, Nuheara has raised $11.5 million via a placement of 287.5 million new fully paid ordinary shares at $0.04 per share. With the $11.5 million raised through shares, NUH has closed all due obligations to The Lind Partners (TLP) by issuing a buy-back notice for the pending $850k convertible note balance into shares at the $0.04 price of the placement.

Highest DTC Sales in November: The company recorded a 300% YoY increase in the invoiced revenue for YTD21 (July-November 2020). During October to November 2020, NUH has sold 2,891 new MAX units, through DTC online sales platform exceeding Q1FY21 sales of 2,111 units. MAX average selling price went up on the $406 lifetime ASP for all Max sales to $430.

YoY Revenue Growth, FY17-FYTD21 (Source: Company Reports)

Outlook: The company has estimated the hearing loss market close to 30 million in the US and targets over-the-counter category for its smart hearing MAX units in early 2021. Regarding HP Elite wireless earbuds, NUH is progressing on-track to deliver till April 2021.

Stock Recommendation: The stock of NUH gave a negative return of 2.04% in the past three months and a positive return of 20% in the past six months. The stock is currently trading above its 52-weeks’ average price level band of $0.01-$0.066. The stock of NUH has a support level of ~$0.042 and a resistance level of ~$0.053. On a TTM basis, the stock of NUH is trading at Price to Book Value multiple of ~13.9x as compared to industry (Computers, Phones & Household Electronics) mean of ~7.4x. Considering the negative ROE, and Valuation on TTM basis, we are of the view that most of the positive factors have already been factored at the current levels. Hence, we suggest investors to wait for better entry levels and give an ‘Expensive’ rating on the stock at the current market price of $0.048, down by 4.001% on 13^th January 2021.

Thor Mining Plc

Significant Magnetic Targets Identified at Ragged Range Project: Thor Mining Plc Limited (ASX: THR) is engaged in the exploration and development of base and precious metals in Australia (ANZ), and specialty & energy metals in the USA. It is operating 100% owned tungsten projects at Molyhil (ANZ), and Pilot Mountain (US), Ragged Range gold project (ANZ), Uranium & Vanadium project (US) and copper projects at Alford-East, Kapunda, Alford-West in South Australia. As on 13^th January 2021, the market capitalization of the company stood at ~$22.73 million. The company recently notified regarding a number of key magnetic targets identified at its 100% owned Ragged Range Project in Western Australia, significantly increasing the potential of the project to host gold mineralisation. In November 2020, THR acquired a new Alford East copper (AEC) gold project with 80% direct interest under a binding term sheet from Spencer Metals Pty Limited and increased its equity interest in EnviroCopper Limited (ECL) to 30%.

September 2020 Quarter Highlights: During the quarter, the company raised UK£1.06 million via issue of 177.58 million ordinary shares placed to its institutional investors and directors subject to shareholders approval. Its net cash outflows from operations stood at $0.25 million. THR’s net cash inflows were $1.22 million, and its closing cash balance was $1.64 million at the end of Q1FY21.  

Net Cash Used in Operations (Source: Company Reports)

Outlook: The company has scheduled drilling of the resource on its Alford West Copper Project. And for its Alford East Copper project, THR is preparing for exploration target. For Ragged Range project, it will undertake follow up drill on 4 targets in early 2021 and will drill Wedding Bell under its Uranium & Vanadium US project around March/April 2021.

Stock Recommendation: The stock of THR gave a positive return of 220% in the past six months. The stock has 52 weeks’ low and high of $0.003 and $0.040. On the technical analysis front, the stock of THR has a support level of ~$0.012 and a resistance level of ~$0.02. Considering the track record of incurred losses during FY16-FY20, no significant commercial development on projects, and negative ROE, we give an ‘Avoid’ rating on the stock at the current market price of $0.016, up by 6.66% on 13^th January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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