MESOBLAST LIMITED (ASX:MSB) - MSB Trading - 2020, page-14002 - HotCopper | ASX Share Prices, Stock Market & Share Trading Forum

Originally posted by ecoool2: ↑

MSB Bid Up On Index Inclusion By End of Week - Price Strongly Supported

The professional funds are clearly buying in the lead-up to the ASX200 inclusion. The total dollar value of trading is above $A30m every day at present and the VWAP is increasing at a solid pace. Forget the closing price, we can all see the desperate attempts to knock the price down near the end of each day and yet huge volume is then traded a few minutes later in the closing match.

The VWAP was up 2.2% today and 3.8% yesterday - forget the closing price changes of 8% today and 0% yesterday - instos are buying volume from the opening through to the final match and then crossing stock late and they don't really care about the closing price as their main aim is to get set in the most volume at the cheapest price. To do this, they grab volume early in the opening match and buy hard until the price starts getting a bit too strong (see period of the first circle on the bottom - roughly the first hour of trade). Then they back off a bit to let the price settle down (see first purple line showing price drop. Then they go again, trying to get as much volume as they can, until they feel they have pushed the price a bit hard and they back off again to see where the price settles (see second circle and second purple price drop).
Most of the 5 minute trading sessions to day were less than 100,000 shares (see flat red line), but they had another couple of goes in the afternoon where they bought 200,000 shares in a 5-minute session before backing off. Then at 3:30pm they bought 400,000 in a 5 minute session and stepped back again - this saw the price rise to the day's high of $3.97, then a drift back to $3.90. The final match is not shown on this graph, but they were able to nab another 357,000 in the match at $3.90 and then cross another 112,000 late at $3.90.

This is disciplined insto buying patterns by people who have more to buy. They are consistent buyers through the day and aren't afraid to push the price up a bit to get volume, then step back to let the price settle down before going again.

Here is a 5 minute graph of today’s trades – every point is a 5-minute block of trading:
View attachment 2236548

The buying in the past 3 days since Friday's announcement of ASX200 Index inclusion has been similar. Again, notice the purple boxes below showing Friday and Monday's aggressive buying in the first hour, gaining a lot of volume but pushing the price up. The buyers then back off, the price falls during the day and they come back for another dip in the last hour of the day, buying volume at cheap prices. That's professional buying, and the pattern was even more marked on Friday and Monday - helped no doubt by people panicking that the US market was about to have a big fall (based on the plunge in the US index futures during Aussie trading hours). As it turned out, the US market ignored the fears of traders in our time zone, and finished trading higher last night!

Here is a 5 minute graph of MSB trading in the past week:

View attachment 2236605

Notice also in the graph above, that the pattern was different prior to Friday's announcement. I know there was a lot of doubt as to whether MSB would actually make it into the index right up to the announcement (just as people seem to doubt every announcement to do with MSB until it is actually made - that's a feature of stocks not yet trusted by the professional end of the market - and to me it indicates that the stock is underowned and has plenty more upside). So, once the announcement was made Friday morning, the pro's rolled in and decided they had to buy - and it looks like this is driving total traded volumes of more than $A30m each day (today $A33.2m, yesterday $A35.2m including Chi-X and late trades). The current volume is enormous, and compares with the low value months of last year of $0.5m to $1m average value traded per day for the 3 months up to August.

This will probably culminate in continued higher than normal volume on Friday - particularly in the closing match - and we may see a repeat of the big volume and price rise that happened on the last day of trading in May (when the match price rose 18c above the 4pm closing price). In fact, I think it could well be bigger this Friday, as entering the ASX200 is the big deal, and has only happened once before in MSB's history (back in April 2011 when the price was over $8.00). At a share price of $4 today, and with 580m shares on issue now and a higher Investment Weight Factor now (as The Prof holds a lower percentage of the expanded issued capital), the MSB total index weight would be slightly higher now than when it last entered the ASX200.

Price likely to rise over $4 this week

So, I think the price will continue to be bid higher as the pro's buy. If they are happy to push the VWAP higher by around 3% per day to get the volume they require, the price is likely to trade over $4 on Wednesday (VWAP $3.99) and maybe move up to $4.11 VWAP Thursday and $4.23 VWAP on Friday, with the Friday closing match possibly back up to the high of $4.45 we hit on that crazy day of trading on April 27 (which was a 5-year high).

A price of $4.50 appears to attract a fair amount of selling resistance - there were over 35m shares traded back on April 27 when it hit $4.45, and we have to go back to 2014 for the last time the price was that high. Of course, a big announcement would put us well through that price level.

Announcements? A big partnering deal can’t be too far away

I disagree with @Cato saying there might be an announcement this week regarding the Covid19 trial (I’ll detail my reasons below).

However, I wouldn’t rule out an announcement regarding a manufacturing partnering deal any time between now and the results of the trials. This could be a huge deal for whoever partners with MSB and if they move quickly they will get the kudos and share price appreciation related to being the first with a cure for moderate to severe ARDS - the killer disease of Covid-19. Furthermore, the MSCs may also be capable of treating some of the other Covid19 vascular related diseases.

The pressure to do a manufacturing partnering deal will be high, and could even come before the the Covid19 results are released. The recent requirement for a rebuilding of the Temcell manufacturing capacity in Japan due to unexpectedly high demand is a good sign for the demand for MSB’s aGvHD cells once approved by the FDA in the US and later in Europe. At present, analysts are assuming a relatively slow takeup of demand for Ryoncil – maybe taking two years to get to a 50% US market share and Europe following behind that. What if Dr Joanne Kurzberg’s comment that she will recommend Mesoblast’s cells to 100% of her patients is followed quickly by other leading doctors and means that MSB needs to be able to supply double the market’s expectations and quickly?

So, a manufacturing partnership could be announced any day between now and the FDA approval of aGvHD (maybe tomorrow, maybe after the August Advisory Committee hearing or maybe by the end September FDA fast-track deadline).

To reiterate my probable timing on the Covid19 trial – my guess is that, very roughly, MSB may have treated 50 patients in the first month, 100 in the second month and 150 in the third month. Remember they said “3 to 4 months” to dose 300 patients – so my assumption of 3 months may even be optimistic. This pattern of patient dosing is purely based on the initial guidance and the number of hospitals signed up so far and the very fast period of trial design. I think it’s realistic. Hospital ethics committees need to get up to speed, patients need to be screened for selection, protocols need to be established and importantly patients or their next of kin need to approve a “new, experimental treatment”.

Don’t forget that even though MSB shareholders are convinced this is lifesaving, and we can’t understand why it wouldn’t happen as fast as possible, doctors are conservative and are very wary of new medical developments and patients are cautious about stem cells.

If 50 were treated in the first month, maybe there were 5-10 in the first week, 10 in the second, 15 in the third and 15-20 in the fourth. These numbers are guesses. Even if the first week dosed 10 patients, that’s only 5 with Remestemcel-L and 5 controls. That may only be one person getting the cells per hospital in 5 different hospitals.

The first dosing was reported starting on May 5, so the second dose was May 9^th (4 days between doses). They may have shown signs of recovering from around May 13^th -19^th. Those people have now been fully dosed for 5 weeks, and the second week’s dosings would just be coming up to their 30 days completed – so even if they walked out of hospital after 10 days, it might only be 2 or 3 people per hospital walking out so far. That would be fantastic for the trial, but it probably wouldn’t have nurses noticing “overwhelming efficacy”. I still think we need another month before we can start thinking about stunning results and enough people recovering to stop the trial. All of those numbers are pure guesses – they are just to show why I think we need to be more patient than some are hoping. Sure, it may happen quicker, but why set up unrealistic expectations, and if it comes quicker, great! Remember that unrealistic expectations gnaw away at the share price and create uncertainty where it shouldn’t exist.

Bottom Line

The strong volumes are continuing this week, as I expected after the ASX200 Index inclusion announcement.

If this continues, MSB should be over $4 before Friday, and could even close in the Friday match as high as the $4.45 we saw on April 27^th.

The following graph shows the April $4.45 high which was one of two massive volume days (35m shares on ASX, 150m shares traded on the Nasdaq as ADRs). The Australian volume was closer to 38m that day including Chi-X etc. The red bars on the left of the graph show the Volume at Price and show a big gap between $4 and $4.20 and it wouldn’t be a surprise to see some of that gap filled this week.

View attachment 2237421
The pattern of trading since Friday looks like a professional hit job on the buy side, buying volume then stepping back to let the price drop, then stepping back in again to get more volume.

The buyers obviously have a heavy load to lift and they have taken advantage of fears of a fall in the US market, especially Tuesday when the US futures were hit during Australian trading hours, which saw the share price drop back from $3.95 to under $3.60. Amazingly, all this buying has been done at a lower price than the close on Thursday last week before the ASX200 announcement – they are good!

The insto buyers are also competing with short covering. Shorts have recently moved back down near the lowest % of MSB’s capital since Feb 2018 – currently 21.8m shares short, or 3.75% of capital, down from 5.24% a month ago.

The sellers are harder to understand. I don’t know their motivation, but it seems amateurish to be selling such large volumes in front of the ASX200 Index inclusion – especially with so many announcements due in the next 3 months, and especially with tax to pay on profits booked just before June 30. I guess they’re just traders.

The trading since April 27^th has been consolidating that huge gain up to $4.45 and digesting the profit taking from the traders on big volumes and it’s looking like that period might now be coming to an end with the strong price rise today. We are ending the first period of the move higher after four years of consolidation since the price first moved down to $1 in early 2016.

I’m an investor, not a trader, and I believe in research. I buy companies when the share price is significantly below my long-term valuation and I sell when they are significantly overvalued. In the meantime, I act like an owner of the business – I am not sweating on daily share price variations, and I’m sure the Prof isn’t sitting at his desk all day wondering if he should dump his holding if the share price rises or falls 10c. Can you imagine Bill Gates selling out of Microsoft early in its history so he could "leave some profit for the next guy"?

I concentrate on identifying businesses which have the potential to earn rates of return well above their cost of capital ie growth businesses which have the capacity to raise new capital, invest it profitably and grow over the years. I believe I’ve found that in Mesoblast, and I’ve been lucky enough to buy it well below my valuation, and as I’ve shown in previous notes it is still a 30% discount to the very conservative price targets of the main analysts (which are likely to continue to increase). It is very rare to find a stock with this sort of long-term growth potential selling at a significant discount, with such a positive return vs risk tradeoff.

So, for me, the share price this week doesn’t really matter – I’m not going to sell and I’d prefer to see the price move up smoothly rather than the volatility which has characterised MSB in recent years. That’s why I don’t want to get over excited regarding timing of trial results, all that happens is the price rises too quickly and then slumps again when people are disappointed that their over-optimistic time frames aren’t met. That’s why the traders try to talk up the timing and think it’ll happen sooner than the company indicates – they just want to try to force the price up quickly so they can exit for a few pennies profit – it’s small-time thinking.

There’s a lot happening in the next three months, and if it all goes well we will be invested in a high margin company with global blockbusters just starting years of profitable development in incurable SR-acute Graft vs Heart Disease, Chronic Heart Failure, Chronic Lower Back Pain, and the biggest of all ARDS resulting from Covid19. Label extensions, partnering deals and the second tier of products should keep the growth going well into the future. That should drive P/E expansion until we get to CSL style growth P/E in the high 30’s. That should all mean years of share price growth, and all I have to do is Let It Ride. All this plus a bit of self-respect and the admiration of Mrs Ecoool for investing in a company saving lives. Good luck to all investors.

Expand

Thanks @ecoool2 - you just keep on making too much sense, even for those difficult topics - keep 'em coming

Intuitively, I can see that the buying has stepped up, but your explanations helped to clarify the patterns.

I'm guilty as anyone of being quite impatient for Mesoblast to progress, but the basis of my impatient is not for a quick sell. I just want to see Mesoblast going from under-priced to fair-priced as quick as possible.

The volume on April 27th was just crazy, in particular MESO volume.
I still don't know how it can have that much churn without proper traces, so very well executed by the big players.

With professional shorters - I'm still questioning the professionalism.
If they haven't sold out a fair chunk last Friday, then they don't really have an exit strategy. How is this even remotely professional?

So, I'll wait for a short squeeze.

(20min delay)
Last $1.45		Change 0.065(4.69%)		Mkt cap ! $1.655B

Open	High	Low	Value	Volume
$1.39	$1.50	$1.38	$7.016M	4.856M

No.	Vol.	Price($)
1	10425	1.440
2	9000	1.435
4	62190	1.430
1	473	1.425
1	5000	1.420

Price($)	Vol.	No.
1.450	16999	2
1.455	17000	1
1.465	24896	3
1.470	112738	6
1.475	1800	1

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