Redfin Corporation

Redfin Corporation (NASDAQ: RDFN) is a technology-powered residential real estate company, redefining real estate in the consumer's favor in a commission-driven industry. 

Key Highlights:

• Business Expansion: On January 06, 2020, the group launched real estate brokerage service in the Phoenix metro area. With the company’s technology-powered brokerage service, the group provides buyers to safely tour RedfinNow-owned homes without the intervention of an agent. Notably, in 2020, the group marked its presence across San Francisco and Seattle, and the service is available across the major cities like California, Inland Empire, Los Angeles, Orange County, Palm Springs etc.
• Elevated Revenue coupled with increasing market-share: The company reported solid growth in its topline during FY15 to FY19, wherein its revenue grew from USD 187 million to USD 780 million, driven by higher traction of Average Monthly Unique Visitors. Moreover, the group’s brokerage website ranks first in the industry and reports 4x more traffic than the Second-Largest Brokerage Website. We believe, the group’s future performance would be driven by higher repeat business backed by higher customer satisfaction. Notably, the group’s market share reached 1.04% at the end of Q3FY20, higher from 0.93% in FY19, which is a key positive.

Source: Company Presentation

Q3FY20 Financial Highlights:

• RDFN announced its quarterly results, wherein the group posted revenue of USD 236.916 million, as compared to USD 238.683 million in the previous corresponding period (pcp). The slight decline was primarily due to a sharp decline in income from product segment (USD 19.636 million versus USD 80.164 million in Q3FY19), partially offset by higher income from service segment (USD 217.280 million versus USD 158.519 million in pcp).
• Gross profit increased to USD 93.072 million, from USD 53.377 million in pcp, supported by a significantly lower cost of revenue (USD 143.844 million versus USD 185.306 million in pcp).
• The quarter was marked by higher technology and development expenses, an increase in marketing costs and a surge in general and administrative expenses. Income from operation was higher at USD 37.009 million, as compared to USD 7.436 million in pcp.
• Net income surged to USD 34.166 million, considerably higher than USD 6.782 million in pcp.
• The group reported cash and cash equivalent of USD 371.573 million, while total assets were reported at USD 763.249 million.

Q3FY20 Income Statement Highlights (Source: Company Reports)

Risks: The business model is highly dependent on the technology, and hence the arrival of new innovative IT applications might hinder the overall traction, and subsequently, the performance of the company.

Valuation Methodology (Illustrative): EV to Sales-based

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Months

Stock Recommendation:

The group reported strong operating performance and posted income from operations of USD 51.535 million in 9MFY20, significantly higher from a loss of USD 132.638 million, a year ago. The company’s services are supported by machine learning generated listing recommendations and provides direct interact with the buyers without the intervention of an agent. Moreover, the Direct Access to the real-estate portfolio allows buyers to unlock the door with their phone and tour properties on their own schedule. The stock of RDFN gained ~341% and ~226% in the last nine months and one year, respectively. We have valued the stock using EV to Sales-based relative valuation method and have arrived at a double-digit downside (in percentage terms). For the said purposes, we have considered peers Zillow Group Inc, eXp World Holdings Inc etc. Considering the aforesaid facts, current price movements, we recommend an ‘Expensive’ rating on the stock at the closing market price of USD 76.68 on January 19, 2021.

RDFN Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Mustang Bio, Inc.

Mustang Bio, Inc. (NASDAQ: MBIO) is a clinical-stage biopharmaceutical company focused on translating today's medical breakthroughs in cell and gene therapies into potential cures for hematologic cancers, solid tumours and rare genetic diseases.

Key Highlights 

• Initiation of Phase 1 Clinical Trial of MB-101:Recently, the Company and “City of Hope” announced the initiation of Phase 1 Clinical Trial of MB-101. The company initiated this Phase 1 single-centre, two-arm clinical trial to establish the safety and feasibility of administering MB-101 to patients with leptomeningeal brain tumours (e.g., glioblastoma, ependymoma or medulloblastoma). The trial will enrol up to 30 patients and take place at City of Hope, where the chimeric antigen receptor T cell therapy was initially developed.

• The company’s goals in 2021: The company is targeting 4 Open INDs and anticipate initiating pivotal XSCID trials & building on early indications of CAR-T activity.

Source: Company

Financial overview of Q3 2020 (In thousands of USD)

Source: Company 

• In Q3 2020 the company reported a loss from operations of USD 10.4 million, compared to USD 10 million in the previous corresponding period. R&D expenses and G&A expenses were reported slightly higher in the present quarter.
• Net loss stood at USD 12.95 million in Q3 2020, compared to USD 10.1 million in the previous corresponding period. 

Risk associated with investment

The Company currently rely on third parties, such as contract laboratories, contract research organizations, medical institutions and clinical investigators to conduct studies and clinical trials. If these third parties themselves are adversely impacted by restrictions resulting from the coronavirus outbreak, the group is likely to experience delays or need to realize additional costs. Furthermore, the company has no products for sale and are heavily dependent on its product candidates' success.

Stock recommendation

Recently the company announced the initiation of Phase 1 Clinical Trial of MB-101. The company initiated this Phase 1 single-centre, two-arm clinical trial to establish the safety and feasibility of administering MB-101 to patients with leptomeningeal brain tumours (e.g., glioblastoma, ependymoma or medulloblastoma). Furthermore, the company targets 4 Open INDs and anticipates initiating pivotal XSCID trials & building on early indications of CAR-T activity in 2021. However, the company is in the clinical trial phase and recently started phase one clinical trial. The company’s prospect depends on the outcome of clinical trial and these are quite early days to comment on the outcome. Hence, we prefer to remain on the side-line. On the valuations front the stock is trading at LTM P/BV multiple of 3.61 as against the peers mean P/BV multiple of 3.06. Therefore, based on the aforementioned facts, we recommend an "Avoid" rating on the stock at the closing price of USD 4.71 as on 19 January 2021.

Source: Refinitiv (Thomson Reuters)

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