Stocks’ Details
 

The Star Entertainment Group Limited

 
Reopening of Gaming Rooms: The Star Entertainment Group Limited (ASX: SGR) is engaged in the management of integrated resorts with entertainment, gaming & hospitality services. Recently, the company stated that it will re-open its private gaming rooms and up to 12 food and beverage venues within the casino areas of the complex, effective from 1 June 2020. This initial reopening will be restricted to up to 500 loyalty club members on an invitation basis. The re-opening will be based on i COVID-safe measures ensuring health and safety procedures.
 
Gaming Tax Agreement: In another update, SGR and the NSW Government made an agreement, under which gaming taxes will be applicable to The Star Sydney until the end of FY2041. The current gaming tax provisions will apply in FY2021. Notably, the International VIP Rebate business and the domestic rebate business gaming tax remains unaffected at 10% of revenue.
 
Other Recent Update: In another update, the company stated that it has executed facility agreements for the Queen’s Wharf Brisbane Funding on terms consistent with the commitments received, along with its joint venture partners in the Destination Brisbane Consortium. The first draw-down on the QWB Funding is expected in June 2020 in relation to facility and other fees, with more substantial draw-down to fund construction in early CY2021.
 
Interim Results: During the half year ended 31st December 2019, the company reported a strong domestic result, with domestic EBITDA up 6% on pcp. Revenue went up by 2.4%, with margin expansion across Sydney and Queensland.
 

1HFY20 Results (Source: Company Reports)
 
Valuation Methodology: P/CF Multiple Based Relative Valuation (Illustrative)

P/CF 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 the company corrected by 19.4% in the last 3 months and is currently trading close to the average of its 52-week trading range of $1.525 - $4.930. The company’s cash and undrawn debt facilities are maintained at a robust level to navigate the uncertain times. We have valued the stock using P/CF multiple based illustrative relative valuation method and arrived at a target price with low double-digit upside in percentage terms. Considering the above factors, reopening of the business, robust liquidity position, and current trading levels, we give a “Buy” recommendation on the stock at the current market price of $3.04, up 3.051% on 1 June 2020.
 

Boral Limited

 
Completes Debt Facility: Boral Limited (ASX: BLD) manufactures and supplies building and construction materials. As on 1 June 2020, the market capitalisation of the company stood at ~$3.81 billion. In a recent update, the company stated that it has successfully completed the issue of its new US Private Placement (USPP) worth US$200 million. The senior, unsecured note issue has two tranches with five and seven-year bullet maturities with an average coupon of 4.49%. Further, the company also completed the execution of its new bilateral two-year bank loan facilities totalling ~A$365 million.
 
Managerial Changes: In a recent update, the company stated that Boral North America’s current President & CEO, David Mariner, will step down from his role, effective from end of May 2020. The company also stated that Darren Schulz, will be the Acting President & CEO for the segment.
 
1HFY20 key Highlights for the Period Ended 31 December 2019: During the period, revenue of the company increased by 2% to $2,960 million, and EBITDA stood at $493 million, up from $470 million in 1HFY19. Statutory NPAT came in at $137 million, down 39% year over year.
 

1H FY2020 Financial Highlights (Source: Company Reports)
 
What to Expect: Due to the uncertainty and impact of COVID-19 led crisis, the company has withdrawn its earnings guidance for FY2020.
 
Valuation Methodology:EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)
 
Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months
 
Stock Recommendation: As per ASX, the stock of BLD gave a negative return of 39.49% in the past six months. The stock is trading below the average of its 52-week low and high trading range of $1.685 - $5.735. The stock has a price to earnings multiple of 21.24x and an annual dividend yield of 7.4%. Considering the returns, and current trading level, we have valued the stock using the EV/EBITDA multiple based relative valuation and have arrived at a target price with an upside of low double-digit (in percentage terms). Hence, we recommend a “Buy” rating on the stock at the current market price of $3.32, up by 6.752% on 1 June 2020.
 

Pro Medicus Limited

 
PME Signs Deal with NMHC: Pro Medicus Limited (ASX: PME) is involved in the development and supplying of software and IT-based solutions to the Public & Private Health sectors. As on 1 June 2020, the market capitalization of the company stood at $3 billion.  Recently, the company signed a 5-year deal with Northwestern Memorial HealthCare (NMHC) for Visage 7 technology implementation for A$22 million. The said contract will strengthen the company’s footprint in the U.S. academic hospital segment. In another update, the company stated an on-market share buy-back of 34,062 shares for a consideration of $842,972.03.
 
Interim Results: During 1H20, revenue of the company witnessed an increase of 15.7% to $29.3 million and a growth of 32.7% in profit after tax to $12.1 million. The company also reported a strong balance sheet with no debt and cash reserves of $38.8 million.
 

1H20 Financial Highlights (Source: Company Reports)
 
What to Expect: The company expects a forward revenue of over $195 million in 5 years and an upside in growth trajectory because of growth in client examination. The company is witnessing continued growth from partners such as Duke, OSU and others. PME has a contained cost base and increasing margins because of an increasing footprint.
 
Stock Recommendation:As per ASX, the stock of PME gave a return of 29.34% on the YTD basis and a return of 15.04% in the past one month. The stock is currently trading above the average of its 52-week trading range of $14.5 and $38.39. During 1H20, net margin of the company witnessed a slight improvement over the previous half and stood at 41%, up from 40.3% in 2H19. In the same time span, ROE of the company went up to 23.7% from 22.2% in 2H19. Considering the trading levels, decent returns, positive long-term outlook and decent financial performance, we recommend a ‘Hold’ rating on the stock at the current market price of $29.32, up by 1.70% on 1 June 2020.
 

Mesoblast Limited

 
Phase 2 Trial Results: Mesoblast Limited (ASX: MSB) is a biotechnology company in the area of adult stem cell technology. As on 1 June 2020, the market capitalization of the company stood at $2.32 billion. The company recently stated that patients with chronic obstructive pulmonary disease (COPD) and a higher state of inflammation have been dosed with Mesoblast’s mesenchymal stem cell (MSC) product remestemcel-L and resulted in improved respiratory and functional outcomes. These Phase 2 Trial results were presented at 2020 International Society for Cell & Gene Therapy Annual Meeting.
 
Key Operational Highlights for the Nine Months Ended March 31, 2020: During the period, revenue of the company witnessed a substantial increase of 113% on the pcp and stood at US$31.5 million. The company witnessed 81% growth in royalty revenues and 127% increase in milestone revenues. In the same time span, the company reported cash in hand of US$60.1 million. MSB continued to prepare for the potential approval and commercial launch of RYONCIL in the US. The company remains on track for a Phase 3 randomized controlled trial in the United States in order to provide data from the utilisation of remestemcel-L in COVID-19 infected patients.
 
 

Key Highlight (Source: Company Reports)
 
Other Recent Update: In another update, the company stated that it has successfully completed a capital raising of A$138 million through a placement of 43 million shares to existing and new institutional investors for a consideration of A$3.20 per share.
 
Stock Recommendation: As per ASX, the stock of MSB gave a return of 95.12% on YTD basis and a return of 26.58% in the past one month. The stock is currently trading above the average of its 52-week trading range of $1.020 and $4.45. During Dec’20, debt to equity multiple of the company stood at 0.19x, as compared t the industry median of 0.08x. On the valuation front, the stock is trading at a P/B multiple of 3.3x as compared to the industry mean of 5x on TTM (Trailing Twelve Months) basis. Considering the above factors and current trading levels, we recommend a ‘Hold’ rating on the stock at the current market price of $3.93, down by 1.75% on 1 June 2020.
 
 
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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