🚂 Hype Train #37: Diamond hands...
The Fivver of the ASX and cancer treatment
🚂 All aboard! It’s been a very rough week for tech stocks. Even the Motley Fool’s front page is covered in bearish news headlines, including their 5 ways to be ready for a stock crash.
📈 Equities: The ASX rose 0.5% today after an otherwise terrible start to the week… However, despite this glimmer of hope, tech stocks have continued to fall (Afterpay down 3.6%, Zip down 1.6%, Xero down 3.8%). Overseas, New Zealand also ended the day 0.5% in the green, whilst Wall Street (S&P500) dropped 0.5%.
₿Crypto: Bitcoin has shown some encouraging behaviour over the past couple of days (no longer correlated with speculative tech stocks) as it’s back up to nearly $70k AUD despite the tech sell-down. This rise has been attributed to Citi stating it could topple the US dollar as an international trade currency.
In today’s edition:
The top research from around the web
Australian precision cancer treatment, Race Oncology
Upcoming IPO: 📈 Airtasker - the Fiverr of the ASX?
Bits and pieces
Only interesting finance news:
Aussie market lacking behind: The electric vehicle revolution in Australia is off to a slow start in Australia with a tiny 0.7% of cars sold in 2020 being EVs, compared to a staggering 10.7% in the UK.
You can now buy and sell tweets: The first tweet ever “just setting up my twttr” has drawn a bid of $2.5m USD.
Marketplace IPO: Marketplacer has recruited formed IBM Watson leaders as they signal to the market growth is at the forefront. The tech company is IPOing soon and plans to help retailers create their own online marketplaces.
Teen sport sensations to use AI: As the NFL draft approaches, possible draftees are looking towards AI to gain a competitive edge over competition. This technology provides information on improving sprint times, and stopping self-destructing habits.
Aussie space tech update: Satellite company, Kleos Space (ASX:KSS) have signed a contract with rideshare provider Spaceflight to see their third group of satellites launch this December.
Doom and gloom: Future Fund chairman, Peter Costello, has warned ultra-low interest rates risk creating the next financial crisis.
Web Stock Analysis
The top stock analysis from around the web
ASX CEOs who write well: Which ASX-listed companies have CEOs that write ‘Warren Buffett’-style essays regarding market conditions?
Sex toy company: Delecta Ltd (DLC:ASX) - the bull case and why im not worried about losing my bet
Extremely professional Parkway Minerals (ASX:PWN) DD? Please purify my dirty dirty wastewater Baehay by u/TheRainWillStop
How ASX CEOs are viewing the market currently:NAOS CEO Insights from the 5th March
Buying tweets for $2.5m, what’s this really about? An in-depth analysis of the booming NFT market
Not stock analysis but (maybe?) worth a read: Forget Barefoot, I'm getting naked - My complete trading history since joining r/ASX_Bets ten months ago
Weekly stock overviews
🩺 Australian precision cancer treatment, Race Oncology (ASX: RAC)
If you have a stock you would like us to provide an overview of, email us at thehypetrainaus@gmail.com.
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🏢 Company: Race Oncology is looking to revolutionise cancer treatment using Bisantrene - a chemical they believe will be able to offer treatment to a wider range of patients and result in less side effects than current options. This chemical was originally explored in the 70s and 80s but was then largely forgotten about. Race has revitalised the drug and is now hoping to use it in many more use cases than it was originally trialed in. The company is still in the R&D stages of development but their trials have shown encouraging signs, and the share price has been rising rapidly as a result.
💡 Business plan: Race has a 3 pillared approach to rolling out treatment for different types of cancer. Historically Bisantrene has been known to be useful to treat AML, a type of leukaemia. However, a recent discovery in the US has given validity to using Bisantrene as a targeted treatment for many different types of cancer, and this is the focus of their approach.
The first pillar is focused on melanoma as a clinical trial of the drug’s ability to be used as an effective treatment. This type of cancer has been selected as it meets the strategic needs of undertaking such trials, and there is evidence from the 1970s that suggests it is viable for this type of treatment.
The second pillar revolves around breast cancer treatment and how Bisantrene can reduce the adverse effects of treatment for patients. Pre-clinical trials have already been conducted with promising results.
The third pillar is for the treatment of extramedullary AML which Race see’s as an area of unmet patient need, with little good options of dedicated treatment.
Overall these pillars give focus to the key areas Race plans on targeting and give structure to the process of navigating the lengthy and difficult clinical trials and approval stages.
🏭 Industry: The market for cancer treatment is highly diverse and complex due to the varied nature of both types of cancer, and the different approaches that can be taken to manage it. In the context of Race, the important things to note about about the industry are:
Buyouts are very common, with many investors viewing an acquisition of Race being a key pathway to making huge gains from their investment.
Approval and regulation are the key barriers to success. Having previously been approved in France, many see Bisantrene as being a low risk play and expect it to get approved swiftly following good clinical results. That said, if the drug is not able to be approved, that would likely be the end for Race.
Recent news flow: The company has been on a roll recently with key news such as the pre-clinical results for their breast cancer trials.
📈 Financial health and valuation:
Financial Health:
Short-term assets far exceed short-term liabilities and the company has minimal debt, giving it a cash runway of about 2 years.
Current ratio of 50 (Yahoo finance). This may reaffirm the company is not in risk of falling short on its liabilities.
Valuation:
Market cap of $493m
$3.87 from Morningstar Quantitative on 4th March 2020.
$4.50 from Strawman consensus community valuation as of 16th Feb 2020
Takeover premium: given that many investors online are forecasting an acquisition as a likely outcome, taking the company’s intrinsic value and adding a premium for control, intangibles and other factors could be an approach to develop a valuation and exit strategy.
🤔 Unqualified opinion:
This seems to be a pretty interesting option, and if the overwhelmingly positive sentiment about it online is to be believed, could be a multibagger. The real risk lies with Race’s ability to both deliver on its 3 pillars, and then gain regulatory approval and take their treatment to market effectively. Naturally this is no small task, but their has been encouraging signs, and the fact that their key drug has formerly gained regulatory approval is a confidence booster.
However, this type of company is quite outside my circle of competence. I’m not sure what the revenue model looks like down the track and how this will compare to other companies of this sort, and I don't have experience with how this industry operates. This is something to always be aware of when making investment decisions.
We would definitely advise doing a much deeper dive into the company and industry than what we can fit in here, but at first glance, this seems pretty interesting.
🔗 Beast research you need to read/watch to understand this company:
Upcoming IPO
📈 Airtasker - the Fiverr of the ASX?
Australian gig economy startup, Airtasker, is set to go public on the 22nd of March this year, with the broker firm offer closing tomorrow. The company is raising $84m at an offer price of $0.65. This sets their enterprise value at $227m and indicative market cap at $255m, compared to revenue of $19.3m (FY20) and $24.5m (FY21F).
What does Airtasker do? Airtasker is Australia’s leading online marketplace for local services. They connect people and businesses who need work done (customers) with people and businesses who want to work (taskers). If you haven’t used it before, it’s worth checking out here.
The marketplace is quite general in nature with taskers and customers being connected across the following categories:
How do they make money? The company generates revenue through charging a service fee to taskers and a booking fee to customers. Both fees are calculated as a percentage of the task value agreed between the customer and tasker.
Varied competition: Airtasker competition includes local marketplaces such as TaskRabbit, Hipages, Rated People, Pro Referral, Thumtack and Oneflare, as well as remote marketplaces including Fiverr, Upwork, Freelancer, PeoplePerHour and Amazon Mechanical Turk.
They have a large total addressable market: The company estimates their total addressable market at $591 billion (in 2019, however this is growing at ~5% yoy).
Growth: Their growth can be summed up comparing pro forma historical figures to forecast for FY21.
Valuation
Looking at comparables
Fiverr: EV/Rev of 40.64, P/S (ttm) of 41.25
Upwork: EV/Rev of 14.44, P/S (ttm) of 14.80
Hipages: EV/Rev of 5.12, P/S (ttm) of 5.56
Freelancer Limited: EV/Rev of 3.5, P/S of 3.78
These compare to Airtasker with a EV/Rev of 11.8 and P/S of 13.2. So it’s sitting around competitive benchmarks.
TLDR: It’s always exciting to see a fast-growing, consumer-facing tech company go public. This is particularly interesting considering the phenomenal performance of Upwork and Fiverr over the past year. Keen to monitor this one over the coming months.
WEEKLY VIBE
Thank you and have a great week.
p.s. send a ticker for us to include in our summer stock overview segment next week. Whatever ticker gets the most mentions will be included.
Email us at thehypetrainaus@gmail.com if you have any hot tips for an article or just want someone to talk to.