Stocks’ Details

Dana Incorporated 

A look at DAN’s 2QFY20 Key Financial Highlights: Dana Incorporated (NYSE: DAN) is engaged in providing technology driveline, sealing and thermal-management products. During the June 2020 quarter, the company reported total sales of $1.08 billion, down from $2.3 billion reported in the year-ago period.  The decline in top-line was due to soft demand across all mobility markets owing to customers idling operations in response to the coronavirus led pandemic. The company reported a net loss of $174 million in 2QFY20, as compared to a net loss of $68 million reported in 2QFY19.  Diluted loss per share for the quarter came in at $1.20, which widened from the year-ago loss per share of $0.47. The company’s cost management actions and a successful restart of operations in May aided DAN to lessen the margin impact of the event-driven sales decline.

Key Financial Highlight (Source: Company Reports)

Balance Sheet and Cash Flow Details: The company exited the quarter with a cash balance of $694 million, with long-term debt amounting to $2.8 billion. For 2QFY20, operating cash outflow stood at $75 million. 

DAN Unveils New Electric Motor: On July 7, 2020, the company unveiled a new electric motor for material-handling vehicles, along with a new series of modular, high-productivity drive axles for industrial lift trucks. This move was in sync with Dana’s strategy of positioning it as the leader in automotive market.

What to Expect: Due to the global uncertainty caused by the COVID-19 pandemic, the company has withdrawn its FY20 outlook. The company believes that it has sufficient liquidity to stay afloat during difficult times.

Key Risks: Higher costs and stiff competition from peers remain potential headwinds, going forward. Also, rising investments, coronavirus-induced challenging demand environment, and a leveraged balance sheet adds to the woes.

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

EV/Sales Based 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 DAN closed at $13.84 with a market capitalization of ~$1.99 billion. The stock made a 52-week low and high of $4.22 and $19.21, respectively, and is currently trading above the average of its 52-week trading range. The stock gave positive returns of ~43.76% and 11.71% in the last three months and one-month period. Debt to equity ratio of the company stood at 1.5x in Mar’20, as compared to the industry median of 0.60x. Considering the above factors, we have valued the stock using EV/Sales multiples based relative valuation method (illustrative) and arrived at a target price with an upside of lower double-digit (in % terms). Hence, we recommend a “Speculative Buy” rating on the stock at the current market price of $13.84, up 0.07% on 17 August 2020.

Tilray, Inc.

A look at TLRY’s 2QFY20 Key Financial Highlights: Tilray, Inc. (NASDAQ: TLRY) is a pharmaceutical company that is engaged in the development of cannabis-based medicines, drugs, drops and oil products. During the June 2020 quarter, the company reported revenues of $50.4 million, up 10% year over year, primarily due to 16.2% rise in cannabis sales, particularly from ongoing improvement in International Medical. Net loss during the quarter came in at $81.7 million, compared to a net loss of $36.3 million reported in the year-ago period. Adjusted EBITDA Loss of during the quarter came in at $12.3 million as compared to a loss of $18 million reported in the year-ago period, owing to higher revenues in all channels, and decreased expenses. The company exited the quarter with a cash balance of $137.2 million.

Key Financial Highlight (Source: Company Reports)

What to Expect: The company’s existing cash balance, reduced cash burn, along with $250 million remaining on its ATM, offers adequate capital to manage operations and execute its long-term plans for the remainder of 2020 and 2021. The company has also undertaken significant steps to drive competences across the business and the positive impact of these actions might be a tailwind in the coming quarter.

Key Risks: On the flip side, an increase in operating expenses related to growth initiatives might have an adverse impact on the gross margins, going forward. Further, coronavirus led uncertainties, stiff competition and stringent regulations outlined by governments remain a potential headwind. 

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

EV/Sales Based 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 TLRY closed at $7.06 with a market capitalization of ~$897.9 million. The stock made a 52-week low and high of $2.43 and $37.9, respectively, and is currently trading below the average of its 52-week trading range. The stock gave a negative return of ~4.08% in the last one-month period. Debt to equity ratio of the company stood at 2.5x in Mar’20, as compared to the industry median of 0.45x. Apart from boosting its top and bottom-line numbers, the company also focuses on collaboration deals to strengthen its global footprint. Considering the above factors, we have valued the stock using EV/Sales multiples based relative valuation method (illustrative) and arrived at a target price with an upside of single-digit (in % terms). Hence, we have a watch stance on the stock at the current market price of $7.06, down 2.62% on 17 August 2020.

Mesoblast Limited 

ODAC Votes in Favor of RYONCILTM: Mesoblast Limited (NASDAQ: MESO) is engaged in the development of innovative cell-based medicines. The company’s lead product candidate, RYONCILTM (remestemcel-L), was recently accepted for priority review by the United States Food and Drug Administration (FDA). The Oncologic Drugs Advisory Committee (ODAC) of FDA recently evaluated efficacy and safety of data related to remestemcel-L and it has come to the conclusion that the available data support the efficacy of remestemcel-L in pediatric patients with steroid-refractory acute graft versus host disease (SR-aGVHD). Although FDA will give the final decision regarding the approval of the product, it will consider the recommendation of ODAC. The action date of FDA priority review is 30 September 2020. If MSB gets the approval from FDA, it expects to launch RYONCIL in the United States in 2020.

Remestemcel-L Phase 3 Trial for COVID-19 ARDS: In September 2020, there is going to be a Phase 3 trial of remestemcel-L in ventilator-dependent COVID-19 patients with moderate to severe acute respiratory distress syndrome (ARDS). It is expected that 30 leading medical centers across the United States will participate in this trial. It is worth noting that currently there no approved treatments for COVID-19 ARDS.

June Quarter Update: During the June 2020 quarter, the company completed a US$90 million capital raise from global institutional investors. Over the quarter, the company spent US$6.7 million on research and development activities, primarily for its Phase 3 programs. Net cash outflow for operating activities stood at US$19.58 million. At the end of the quarter, the company had cash on hand of US$129.3 million. Notably, for the nine months ended March 31, 2020, total revenues of the company stood at $31.5 million.

Key Highlights (Source: Company Reports) 

Key Risks: The company’s future revenues are dependent upon the size of any markets in which its product candidates may receive approval, and its ability to achieve and maintain sufficient market acceptance, pricing, reimbursement from third-party payors, and adequate market share for its product candidates in those markets.

Stock Recommendation: The stock of MESO closed at $19.81 with a market capitalization of ~$2.32 billion. The stock made a 52-week low and high of $3.12 and $20.57, respectively, and is currently trading close to its 52-week high. The company intends to release its FY20 results on 27 August 2020.

The stock gave positive returns of ~48.83% in the last one-month period. Debt to equity ratio of the company stood at 0.19x in Dec’19, as compared to the industry median of 0.10x. On the valuation front, the stock is trading at a P/BV multiple of 4.0x as compared to the industry median (healthcare) of 3.3x on TTM (Trailing Twelve Months) basis. Considering the above factors current trading levels and the recent increase in share price, we have a watch stance on the stock at the closing price of $19.81, up 10.79% on 17 August 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. 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. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.