Criterion column in The Australian

This was in The Australian a few days ago. It may be of interest to contributors here.


Injectable drug delivery firm needs cash injection
THE AUSTRALIANFEBRUARY 11, 2016 12:00AM
SAVE
PRINT
Tim Boreham
Banking reporter
Melbourne
https://plus.google.com/116956110402704936193
Unilife Corp yesterday disclosed quarterly results showing a $US25.4m ($35m) loss.
Unilife Corp (UNS) 22c
A denouement of sorts looms in the sorry saga of the injectable drug delivery specialist, which over the years has chewed up more cash — and made more rash promises — than the Trump election bandwagon.
The money-muncher yesterday disclosed quarterly results showing a $US25.4m ($35m) loss and (after all these years) revenue of $US4.5m. Unilife lost $US90m in 2014-15, $US57m in 2013-14 and $US63m the year before that.
The confounding thing is that Unilife has attracted plenty of big-ticket pharma interest, including a deal with Novartis to supply injectable drug delivery systems for an early-stage drug.
Heavy hitter Amgen in December entered a deal to use Unilife’s wearable devices in its products, with the negotiating period extended until February 15. We’re also waiting on whether Amgen, which has an option over 19.9 per cent of the company, converts this right for a much needed cash injection for Unilife.
Meanwhile, lender Orbimed has agreed to extend a $US1.7m interest payment, which was due on February 9. Amid all this, the boutique Discover Growth Fund was enamoured enough to convert $US7.5m of redeemable preference shares into common stock.
Frankly, we’re not sure what this melange of events really means. The disclosures are phrased in the mangled corporate US version of the Queen’s English, which doesn’t help. Sell.
Commonwealth Bank (CBA) $74.20
CBA chief Ian Narev may be the rock star of local banking, but investors yesterday marched to a different beat and ignored his soothing commentary on the resilience of the sector.
Some niggles aside, local conditions for the bank remain as benign as a crowd at a Seekers reunion tour.
On the global banking sell-off, Narev dubs it as “out of whack” with underlying economic trends.
The bank’s impairment charge rose 28 per cent to $564m, but this represents only a steady 0.17 per cent of the total lending book.
“We are not seeing any signs of the endemic credit-quality deterioration,’’ Narev says. “The forces people talk about are not showing up today in the business.’’
Asked about the GFC-style Doomsday scenario of banks refusing to lend to each other, Narev says high levels of deposit funding and pre-committed wholesale arrangements means the CBA could hang out the “business as usual” shingle in a freeze.
He says the board’s decision to maintain the interim div at $2.84 a share is a guide to the bank’s short-term confidence.
It’s likely that punters will remain petrified about credit fault default swap blowouts and other arcane derivates. (Is it a coincidence the sell-off has coincided with the release of The Big Short?)
But on the evidence, the CBA’s 800,000 retail investors should be more sanguine and we maintain a long-term buy call.
Estrella Resources (ESR) 0.13c
There will be more of this. Citing “prevailing market conditions’’ in the tech sector, the resource junior has decided that its original quest of fossicking for copper in Chile is preferable to acquiring “human resources visualisation’’ software after all.
DataLabs was to have back-doored through Estrella, but the deal’s off by mutual consent.
“Life goes on,’’ says DataLabs founder Sam Jones.
The revenue-generating DataLabs had better prospects than the average tech reverse takeover play and an interesting backstory.
As a headhunter for British investment banks, founder Sam Jones was amazed at the multi-million quid salaries demanded by the barrow boys turned traders. He noticed while the money men were treated to the best of technology, the human resources division struggled to track simple metrics such as revenue per employee. DataLabs’ platform slices and dices employee data and displays it in a user-friendly manner.
Estrella is an avoid for all but Chilean copper aficionados.
Mt Magnet South (MUM) 0.5c
Not that that’s the end of resource shell transformations, with the Perth shell agreeing to buy the mouthguard maker Gameday.
Gameday’s remit is to provide an affordable bespoke alternative to the less reliable “boil and bite” mouthguards, based on the customer sending an impression of their chompers by mail. A costly visit to the dentist is avoided.
Gameday’s board will include former West Coast Eagles coach and player John Worsfold, who hopefully won’t be distracted from leading Essendon’s Dad’s Army stand-ins to shock finals glory.
Mt Magnet shares spiked one-tenth of a cent yesterday. Don’t scoff, that’s a 25 per cent surge but we’re happy to wait. Avoid.

The Australian accepts no responsibility for stock recommendations. Readers should contact a licensed financial adviser. The author holds CBA shares.