Mesoblast Ltd

      MSB Details
 
Solid Clinical pipeline Programs: The shares of Mesoblast limited (ASX: MSB) crashed over 50.29% in just last one month (as at November 20, 2015) due to disappointing capital raising efforts by the group at NASDAQ. Mesoblast initially targeted to raise over USD 12 per American Depositary Share (ADS) but got only USD 8 per ADS and recently closed the 8.53 million American depository shares public offering. The group raised over $96 million or USD 68.3 million via the offer before deducting underwriting discounts and commissions and expenses.
 
At the same time, we do not want to ignore the recent investor update from the Board and management demonstrating MSB’s commitment to deliver the Tier 1 product milestones as set out in the recent F-1 registration statement that include announcement of the six month results from the first cohort in the Phase 2 trial of product candidate for biologic-refractory rheumatoid arthritis by the end of 2015; expectation about the launch of TEMCELL® Hs. Inj. (JR-031) in Japan during 1Q of 2016 along with the outcome of the first interim analysis of safety and efficacy from a Phase 3 trial of MSB’s product candidate for advanced congestive heart failure, and top-line results from an interim analysis of a Phase 3 trial of product candidate for aGVHD and complete enrollment of the first Phase 3 trial of product candidate for chronic low back pain during 3Q of 2016. Thus, Mesoblast has built a strong Clinical pipeline programs and USPTO recently granted key patent which covers MSB’s proprietary adult mesenchymal precursor cells for forming and repairing the blood vessels in ischemic tissues. The group has >661 patents across 72 patent families, and this approval would further boost MSB’s IP in the US in cardiac and vascular diseases treatment. Moreover, MSB’s allogeneic mesenchymal stem cell-based regenerative medicine product JR-031, developed by the group’s Japanese partner JCR Pharmaceuticals, was suggested for approval. Mesoblast is also recruiting at North American sites for developing MPC-150-IM - Chronic Heart Failure, as it expects an early completion of the ongoing Phase 3 trial on the back of FDA’s acceptance of demonstration.
 

Pipeline Programs (Source: Company Reports)
 
The MPC-06-ID - Chronic Discogenic Low Back Pain (CDLBP) program is also recruiting across North American sites and MSB got positive feedback from discussions with the European Medicines Agency (to expand in European sites). Accelerated USA approval was also sought through the FDA and an open-label of Phase 3 study of over 60 children is been actively recruited in the USA. At the back of the disappointing US listing, we hope that MSB finds a partner for its multiple stem cell therapy programs and the trial results due in next one year bring long-term revenue opportunities. We believe the recent crash in the stock opened a bargain opportunity for investors. Given the entire scenario, we give a speculative “BUY” recommendation for the stock at the price of  $1.72
 
 
MSB Daily Chart (Source: Thomson Reuters)
 

Downer EDI Ltd

DOW Dividend Details
 
Growth efforts to offset the ongoing pressure: Downer EDI Ltd (ASX: DOW) reported a revenue decline of 3.9% year on year (yoy) to $7,430.1 million during fiscal year of 2015 on the back of volatile conditions in Queensland road services as well as poor performance by the group’s rail infrastructure business which had offset the better performance at NSW and Victorian road services. The Group’s industrial and commercial construction and maintenance revenues fell by $1,889.3 million in FY15, from $2,040.6 million in FY14 impacted by $11.4 million of losses incurred for QCC and MT and project underperformance in WA. Therefore, DOW is restructuring this segment by decreasing management layers overheads. On the other hand, Downer’s New Zealand transport services business performance has improved during FY15 despite the tough conditions. The group acquired VEC Civil Engineering, during the period which is a specialist in bridges and structures, to further boost its infrastructure projects capabilities. With regards to the Mining sector, although the sector’s Revenue and EBIT were impacted during the fiscal year, DOW won many contracts during the period, which includes Blackwater coal mine extension worth about $100 million over two years, Cobar copper mine (Cobar Management) worth of $70 million for two years as well as won Christmas Creek iron ore mine (Fortescue) expanded contract ($500 million per annum). Rail revenues also declined during the period impacted by the passenger manufacture contracts. But DOW won a 10 year $1.0 billion contract with Pacific National for offering asset management services to over 300 locomotives.
 

Work in progress projects pipeline (Source: Company Reports)
 
Attractive valuations: DOW shares fell over 24.32% in the last six months (as at November 20, 2015) impacted by the poor FY15 performance and subdued outlook by the group for 2016 financial year (estimates an NPAT of over $190 million).  But, DOW continues to build its contracts base and recently Hughes drilling entered into a long term contract with Downer, while the group won two contracts from BHP Billiton Mitsubishi Alliance (BMA) at the Blackwater coal mine in Bowen Basin at Central Queensland as well. The company is also trying to bid on few opportunities in Rail including the one on $800m ACT Capital Metro for which the outcome is due in January. As per media speculations, DOW may be in discussions with IFM and Queensland Investment Corporation for a services contract. It has also come up with a share buyback program in order to support its stock price. We believe that the recent correction has placed the stock at very cheaper valuations with a P/E of just about 8x. DOW also has a decent annual dividend yield of 6.59%. Based on the foregoing, we give a “BUY” recommendation for the stock at the current price of  $3.64
 
 
DOW Daily Chart (Source: Thomson Reuters

---

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people.Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation.Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product.The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
Copyright
Copyright © 2014 Kalkine Pty Ltd ABN 34 154 808 312. No part of this website, or its content, may be reproduced in any form without the prior consent of Kalkine Pty Ltd.
Kalkine is a trading name of Kalkine Pty Ltd ABN 34 154 808 312, which holds Australian Financial Services Licence No. 425376.

---