China Aviation Oil — Strong volumes in tougher trading environment

China Aviation Oil — Strong volumes in tougher trading environment

Q3 results reflected the combined impact on gross margin of the core trading operation due to a return to a backwardation situation in product markets, as well as supply disruptions. More positively, SPIA and the other associates made a stronger contribution. With adverse trading conditions expected to persist for a period of time, management’s strategy to reduce volatility is being tested. The key growth drivers of increasing air traffic and an expanding geographic footprint continue to increase trading volumes and augur well for the future. Maintenance of profitability at a lower margin level while backwardation conditions persist should be offset by stronger growth from SPIA next year, but we now assume a more subdued expansion of the core business. The balance sheet remains supportive of further strategic M&A to facilitate growth. Our fair value falls to S$1.88 from S$2.11.

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Written by

Mologen

Licensing and funding milestones in Q3

Q3 results

Pharma & biotech

10 November 2017

Price

€2.77

Market cap

€95m

Net cash (€m) at 30 September 2017

3.27

Shares in issue

34.3m

Free float

62%

Code

MGN

Primary exchange

Frankfurt (Prime Standard)

Secondary exchange

N/A

Share price performance

%

1m

3m

12m

Abs

(9.2)

(10.7)

94.2

Rel (local)

(10.6)

(17.7)

56.9

52-week high/low

€4.6

€1.4

Business description

Mologen is a German biopharmaceutical company developing novel biopharmaceuticals. Lead product lefitolimod (TLR9 agonist) is being evaluated in metastatic colorectal cancer maintenance, small cell lung cancer maintenance, HIV and a combination trial in advanced solid malignancies.

Next events

TEACH full data presented

Mid-2018

FY17 financial results

March 2018

IMPULSE full data presented

Mid-2018

IMPALA data

Mid-2019

Analysts

Dr Daniel Wilkinson

+44 (0)20 3077 5734

Dr Susie Jana

+44 (0)20 3077 5700

Mologen is a research client of Edison Investment Research Limited

Mologen has announced two new sources of funding that will likely extend its cash reach into mid-2018. The signing of a share subscription facility with Global Corporate Finance (GCF) commits GCF to purchase up to 3.4m Mologen shares (c 10% of share capital). At the current share price, this approximates to €10m in funds which, in addition to the expected completion of the iPharma deal (worth up to €100m) by year end (€3m initial payment), will boost Mologen’s cash position. Furthermore, Mologen has a commitment to receive a $2.6m grant for further development of a leishmaniasis vaccine candidate, part of the MIDGE technology platform it is looking to divest. We value Mologen at €256m (€7.43/share).

Year end

Revenue (€m)

PBT*
(€m)

EPS*
(c)

DPS
(c)

P/E
(x)

Yield
(%)

12/15

0.0

(20.5)

(0.99)

0.0

N/A

N/A

12/16

0.0

(20.8)

(0.84)

0.0

N/A

N/A

12/17e

3.0

(18.4)

(0.54)

0.0

N/A

N/A

12/18e

0.0

(15.9)

(0.46)

0.0

N/A

N/A

Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.

Funding and licensing deals expand cash horizon

The signing of a share subscription facility with GCF and the soon-to-be-signed deal with iPharma will provide Mologen with ongoing capital. The GCF agreement commits GCF to purchase up to 3.4m Mologen shares (c 10% of share capital), Mologen has full control over the drawdown of the funds and they can occur in €1m tranches over a 30-month period. Signed deal terms with iPharma look to aid the development and commercialisation of lefitolimod, particularly in China. Mologen would be eligible to receive a €3m initial payment, milestone payments of up to €100m, as well as low double-digit royalties and a €2m equity investment.

Mature data packages expected in H118

Full data packages from the Phase II SCLC IMPULSE trial and the Phase Ib/IIa HIV TEACH trial are expected to be presented at relevant conferences in mid-2018. Top-line data from TEACH and IMPULSE were presented earlier in 2017 and a detailed breakdown can be found in our previously published outlook report. We expect data from the ongoing pivotal Phase III IMPALA trial in mCRC in 2019.

Q3 results: Cash into mid-2018

R&D for the first nine months of 2017 remained similar to 2016 at €10.6m (9M16: €10.5m). As a result the EBIT loss increased slightly to €14.5m (9M16: €14.3m). We now include the initial €3m payment from iPharma in our FY17 forecasts which are largely unchanged. New funding should enable a cash reach until mid-2018, however, a funding gap to the IMPALA readout remains.

Valuation: €256m (€7.43/share)

We value Mologen at €256m (€7.43/share) vs €253m previously. We have rolled forward our model which is based on a risk-adjusted rNPV of lefitolimod across a range of indications and regions. For a full break down of our valuation, see our previously published outlook note (Lefitolimod trial readouts hint at future potential).

Exhibit 1: Financial summary

€'000s

2014

2015

2016

2017e

2018e

Year end 31 December

IFRS

IFRS

IFRS

IFRS

IFRS

PROFIT & LOSS

Revenue

 

 

12

39

74

3,036

40

Cost of Sales

0

0

0

0

0

Gross Profit

12

39

74

3,036

40

Research and development (cost of materials)

(8,687)

(11,681)

(11,780)

(12,369)

(7,421)

Selling, general & administrative (personnel expenses)

(5,113)

(5,074)

(5,453)

(5,180)

(4,662)

Other operating income / expense

(3,199)

(3,702)

(3,418)

(3,444)

(3,444)

EBITDA

 

 

(16,987)

(20,418)

(20,577)

(17,957)

(15,488)

Operating Profit (before GW and except.)

 

(17,059)

(20,499)

(20,813)

(17,960)

(15,494)

Intangible Amortisation

(38)

(40)

(172)

(19)

(17)

Exceptionals/Other

0

0

0

0

0

Operating Profit

(17,097)

(20,539)

(20,985)

(17,978)

(15,511)

Net Interest

19

3

(18)

(424)

(422)

Other

0

0

0

0

0

Profit Before Tax (norm)

 

 

(17,040)

(20,496)

(20,831)

(18,384)

(15,916)

Profit Before Tax (FRS 3)

 

 

(17,078)

(20,536)

(21,003)

(18,403)

(15,933)

Tax

0

0

0

0

0

Deferred tax

0

0

0

0

0

Profit After Tax (norm)

(17,040)

(20,496)

(20,831)

(18,384)

(15,916)

Profit After Tax (FRS 3)

(17,078)

(20,536)

(21,003)

(18,403)

(15,933)

Average Number of Shares Outstanding (m)

16.8

20.7

24.7

34.3

34.3

EPS - normalised (c)

 

 

(1.01)

(0.99)

(0.84)

(0.54)

(0.46)

EPS - FRS 3 (c)

 

 

(1.02)

(0.99)

(0.85)

(0.54)

(0.47)

Dividend per share (c)

0.0

0.0

0.0

0.0

0.0

BALANCE SHEET

Fixed Assets

 

 

440

414

62

97

121

Intangible Assets

206

175

37

33

20

Tangible Assets

234

239

25

64

101

Other

0

0

0

0

0

Current Assets

 

 

14,613

25,981

21,300

8,015

22,265

Stocks

30

28

13

13

13

Debtors

0

0

33

33

33

Cash

13,563

24,592

20,520

7,235

21,485

Other

1,020

1,361

734

734

734

Current Liabilities

 

 

(1,747)

(6,886)

(7,404)

(7,404)

(7,404)

Creditors

(1,315)

(6,390)

(6,530)

(6,530)

(6,530)

Short term borrowings

0

0

0

0

0

Other

(432)

(496)

(874)

(874)

(874)

Long Term Liabilities

 

 

(8)

(6)

(2,121)

(7,072)

(37,072)

Long term borrowings

0

0

(2,119)

(7,070)

(37,070)

Other long term liabilities

(8)

(6)

(2)

(2)

(2)

Net Assets

 

 

13,298

19,503

11,837

(6,364)

(22,091)

CASH FLOW

Operating Cash Flow

 

 

(15,602)

(15,095)

(19,270)

(17,755)

(15,280)

Net Interest

3

0

0

(424)

(424)

Tax

(6)

12

0

0

0

Capex

(93)

(95)

(57)

(56)

(47)

Acquisitions/disposals

0

0

13

0

0

Financing

14,495

26,207

12,706

0

0

Dividends

0

0

0

0

0

Other

0

0

0

0

0

Net Cash Flow

(1,203)

11,029

(6,608)

(18,236)

(15,751)

Opening net debt/(cash)

 

 

(14,765)

(13,563)

(24,592)

(18,401)

(165)

HP finance leases initiated

0

0

0

0

0

Exchange rate movements

1

0

1

0

0

Other

0

0

416

0

0

Closing net debt/(cash)

 

 

(13,563)

(24,592)

(18,401)

(165)

15,585

Source: Mologen accounts, Edison Investment Research

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Mologen and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Edison is an investment research and advisory company, with offices in North America, Europe, the Middle East and AsiaPac. The heart of Edison is our world-renowned equity research platform and deep multi-sector expertise. At Edison Investment Research, our research is widely read by international investors, advisers and stakeholders. Edison Advisors leverages our core research platform to provide differentiated services including investor relations and strategic consulting. Edison is authorised and regulated by the Financial Conduct Authority. Edison Investment Research (NZ) Limited (Edison NZ) is the New Zealand subsidiary of Edison. Edison NZ is registered on the New Zealand Financial Service Providers Register (FSP number 247505) and is registered to provide wholesale and/or generic financial adviser services only. Edison Investment Research Inc (Edison US) is the US subsidiary of Edison and is regulated by the Securities and Exchange Commission. Edison Investment Research Limited (Edison Aus) [46085869] is the Australian subsidiary of Edison and is not regulated by the Australian Securities and Investment Commission. Edison Germany is a branch entity of Edison Investment Research Limited [4794244]. www.edisongroup.com

DISCLAIMER
Copyright 2017 Edison Investment Research Limited. All rights reserved. This report has been commissioned by Mologen and prepared and issued by Edison for publication globally. All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report. Opinions contained in this report represent those of the research department of Edison at the time of publication. The securities described in the Investment Research may not be eligible for sale in all jurisdictions or to certain categories of investors. This research is issued in Australia by Edison Aus and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act. The Investment Research is distributed in the United States by Edison US to major US institutional investors only. Edison US is registered as an investment adviser with the Securities and Exchange Commission. Edison US relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. As such, Edison does not offer or provide personalised advice. We publish information about companies in which we believe our readers may be interested and this information reflects our sincere opinions. The information that we provide or that is derived from our website is not intended to be, and should not be construed in any manner whatsoever as, personalised advice. Also, our website and the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. This document is provided for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.
Edison has a restrictive policy relating to personal dealing. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report. Edison or its affiliates may perform services or solicit business from any of the companies mentioned in this report. The value of securities mentioned in this report can fall as well as rise and are subject to large and sudden swings. In addition it may be difficult or not possible to buy, sell or obtain accurate information about the value of securities mentioned in this report. Past performance is not necessarily a guide to future performance. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (ie without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision. To the maximum extent permitted by law, Edison, its affiliates and contractors, and their respective directors, officers and employees will not be liable for any loss or damage arising as a result of reliance being placed on any of the information contained in this report and do not guarantee the returns on investments in the products discussed in this publication. FTSE International Limited (“FTSE”) © FTSE 2017. “FTSE®” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under license. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distribution of FTSE Data is permitted without FTSE’s express written consent.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

295 Madison Avenue, 18th Floor

10017, New York

US

Sydney +61 (0)2 8249 8342

Level 12, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Smith & Nephew — No distractions from the search for growth

Smith & Nephew’s Q317 results featured 9% revenue growth in emerging markets that continued the trend of previous quarters. A further efficiency review looks likely to focus on reducing complexity in manufacturing and warehousing, improving the G&A ratio and continued salesforce efficiency. A narrowing of the FY revenue and profit growth expectations towards the lower end of the previously guided range may have disappointed some, but this close to the year-end there should be confidence that the revised FY ranges will remain intact. Management does not comment on M&A speculation, but with the recently announced retirement of its CEO, S&N’s continued strength in the attractive emerging markets and rumoured activist interest look likely to stoke further media speculation.

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