Spotless Group Holdings Ltd

SPO Details 
·         Downer’s takeover offer for Spotless: Spotless Group Holdings Ltd (ASX: SPO) stock made an outstanding rally on March 21, 2017 and surged over 48.96%. Downer EDI Limited (ASX: DOW) made an unsolicited conditional offer regarding all the issued share capital of SPO and has an interest of about 19.9% in the group. Moreover, the conditional takeover offer for Spotless has been made at $1.15 per share. However, the group reported that this offer is highly conditional, and is linked to factors including a minimum acceptance of 90% and SPO meeting its earnings guidance. This update from the group boosted the shareholders’ sentiment leading to a solid rally. In fact, the management reiterated that their earnings guidance would be maintained as issued in February 2017. The group built a solid chip customer base and a strong portfolio of long term Government, Health, Defense and PPP contracts as well as operating the largest commercial laundry business in Australia and New Zealand. Accordingly, the management reported that they would assess any proposal in the context of their announced strategy reset, including the recently announced contract portfolio restructure, which is expected to be a material driver of growth and enhanced future performance.SPO has advised the shareholders to take no action in respect of the offer till the offer is evaluated in detail.
 
·         Recommendation: SPO stock lost over 22% in the last four weeks (as of March 20, 2017). Given the trading scenario, we give a “Hold” recommendation on the stock at the current price of $ 1.08
 

Portfolio Transformation (Source: Company Reports) 

Mesoblast Ltd

MSB Details
·         Bullish stance at the back of improving sentiments: Mesoblast Ltd (ASX: MSB) stock rallied over 12.74% on March 21, 2017 given the improving sentiments on the stock. Recently, the group reported a 36-month results from the randomized, placebo-controlled 100- patient Phase 2 trial of its proprietary allogeneic Mesenchymal Precursor Cells (MPCs) in patients with chronic low back pain (CLBP) due to intervertebral disc degeneration. A single intra-discal injection of 6 million MPCs led to decent improvements in both pain and function that were durable for at least 36 months. The group believes that these developments have the potential to transform the treatment paradigm for chronic low back pain due to disc degeneration. Management also says that rather than replacing or fusing the disc, there is mounting compelling evidence that they can use this regenerative medicine to heal the disc. The group believes that they are nearing this inflection point in the treatment of low back pain, which is particularly important in view of the epidemic of opioid abuse.
 
·         Recommendation:MSB stock rallied over 86.78% in the last six months (as of March 20, 2017) and we believe there is more upside momentum. We give a “Hold” recommendation on the stock at the current price of $ 2.39

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