The MissionIR Report - Mid-April 2013
In-depth analysis, timely updates, latest market news
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Market News
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Company Updates
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Apartments Lead
Home-Building Growth
As credit remained tight and demand rose, apartment construction led growth for housing starts last month, government data released yesterday indicates.
Construction starts on buildings with at least five units rose to a seasonally adjusted annual rate of 392,000 in March, up 27% from February. Meanwhile, starts for single-family homes fell almost 5%.
“As families are formed, the reality of income employment and credit availability are among the factors pushing people into rental properties that have been under-built in the past 10 to 15 years,” wrote Steve Blitz, chief economist at ITG Investment Research, in a research note. “For single-family housing starts, the reality is no longer the issue of over-construction but under-employment and the passing of an extraordinary period of mortgage availability.”
Given starts volatility, particularly for apartments, analysts caution over reading too much into a single month’s report. However, longer-term trends also show a stark gap between construction on apartments and single-family homes. Over the 12 months ending in March, starts for structures with at least five units rose 82%, compared with a gain of 29% for single-family homes.
“Demand for apartments remains strong amid tight mortgage conditions,” according to a note from analysts with Wells Fargo Securities. “The trajectory for the single-family market continues upward, but builders appear to be struggling with credit issues for lot development and rising construction costs.”
Despite the outsized growth for apartment construction, single-family homes remain dominant. The seasonally adjusted annual rate for single-family homes starts was 619,000 in March, about 60% greater than the starts rate for structures with at least five units.
Data on rental vacancies signal a tightening market. Rental vacancy rates — the share of rental inventory that is vacant and “for rent” — declined to 7.4% in 2011 from 8.2% in 2010 and 8.4% in 2009, according to a separate government report released Tuesday. Over that same time period, only two of the 50 most populous metro areas become affordable for more renters.
Consumer Inflation Drops 0.2%
in March
Consumer inflation pressures eased in March as gasoline prices dropped, which could add to fears of renewed deflationary pressure in the economy.
The consumer price index decreased 0.2% in March, led by lower energy and apparel costs, the Labor Department said Tuesday.
The decrease was larger than the 0.1% decline expected by analysts.
Core prices — which exclude volatile food and energy costs — increased 0.1%, softer than the 0.2% gain expected by economists surveyed by MarketWatch.
Energy prices decreased 2.6% in March, retracing half of the 5.4% rise in February. Gasoline prices fell 4.4% in the month. Electricity prices also declined.
Commodity prices, led by copper and gold, have been under pressure this week due to concerns that the global economy is slowing down. The lower prices have sparked some concern of deflation, or falling prices.
Food prices were flat in March, led by a drop in dairy prices.
Apparel prices fell 1%, the largest drop since April 2001.
The only big gain came in prices for used cars and trucks.
In the past year, the CPI has risen 1.5% — the slowest year-over-year growth since July.
The core CPI has gained 1.9%.
“It remains our view that core inflation has peaked on a year-over-year basis and will be stable to slightly lower in coming quarters as soft global growth weighs on pricing power,” said Josh Shapiro, U.S. economist at MFR Inc.
Economists said the combination of tame inflation, tighter fiscal policy and a soft patch in the economic data should allow the Federal Reserve to maintain its bond-buying program at its current $85 billion pace.
The Fed’s interest-rate setting committee will meet again for two days on April 30-May 1.
“The bottom line is simply that the moderating pace of consumer price inflation is continuing to provide a very supportive backdrop for the Fed’s current easing bias,” said Millan Mulraine, an economist with TD Securities.
Income growth picked up slightly. Real weekly earnings rose 0.5% in March, the government said in a separate report Tuesday. In the past year, real weekly earnings are up 0.6%, while real hourly earnings have risen 0.3%.
In a separate report, the Commerce Department said housing starts jumped 7% in March.
Gold Makes Partial Recovery From to 2-year Low
Gold prices rose yesterday after physical buyers of bullion grabbed the chance offered by the previous session's record-breaking one-day drop, but many investors expect further declines.
Bullion on Monday recorded its biggest ever daily fall in dollar terms - at one point it was down $142 an ounce - catching gold bulls, speculators, and veteran investors by surprise.
Gold has fallen about 20 percent so far this year after an unbroken 12 years of gains and is some 28 percent down from the record high hit in September 2011 at $1,920.30.
"We have had technical barriers broken in the past two days, while the overall macro environment has being moving away from the inflation bias ... and some institutional investors are rethinking their positions in commodities in general and gold specifically," Deutsche Bank analyst Daniel Brebner said.
The asset traditionally viewed as a safe-haven has been undermined by a proposed sale of Cypriot gold holdings and uncertainty over the U.S. Federal Reserve's stimulus program.
In wider markets, the dollar fell against the euro, although remaining strong versus the yen. Stocks on Wall Street rose, while data that showed U.S. consumer prices fell in March left room for the Federal Reserve to keep up bullion-friendly economic stimulus efforts.
Reuters market analyst for commodities and energy technicals, Wang Tao, expects gold to fall further to $1,245 per ounce.
Gold hit an 11-month high in October last year after the U.S. Federal Reserve announced its third round of aggressive economic stimulus, raising fears the central bank's money-printing to buy assets would stoke inflation.
But the gain was erased by a rally in equities, talks the Fed could reduce its bullion-friendly bond buying program, and concerns other indebted euro zone countries could follow Cyprus' plan to sell bullion reserves to raise cash.
Heavy outflows on global gold exchange-traded funds, which cut holdings to their lowest in more than a year, could also mark the end of a love affair between gold and investors.
Physical dealers saw inquiries from jewelers following the latest sell-off, but there were no signs of buying related to tensions between the two Koreas or bombings in Boston on Monday, which killed three people.
Premiums for gold bars edged up to $1.70 to the spot London prices in Singapore on Tuesday from $1.20 the previous day, but dealers had yet to see a surge in demand from jewelers and speculators.
Even if inflation doesn't rise, there are limits to how far the price of gold—or any commodity—can fall. “Prices can’t continue to fall below the cost of production for an extended periods of time,” says Michael Haigh, global head of commodities research at Societe Generale.
Platinum and palladium, which have also been hammered by heavy selling, regained strength after Japanese shares pared losses due to renewed weakness in the yen. Spot platinum was up 2.7 percent to $1,439.99 an ounce and palladium rose 4 percent to $678.50. Silver also rallied 3.9 percent to $23.46 after dropping 12.6 percent on Monday.
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Cardium Therapeutics, Inc. (CXM)
Cardium made a series of announcements this month as well as provided a comprehensive update on its ongoing initiatives. The company updated investors on the commercialization of FDA-Cleared Excellagen, progress of advancing Generex, ongoing expansion of its health sciences business and other strategic initiatives, and R&D investments. An abridged overview is presented at the following link http://dtg.fm/M9pn.
About Cardium Therapeutics, Inc. (CXM)
Cardium Therapeutics, Inc. is a health sciences and regenerative medicine company focused on acquiring and strategically developing new and innovative products and businesses to address significant unmet medical needs. Comprised of large-market opportunities with definable pathways to commercialization, partnering, and other economic monetizations, Cardium's current portfolio includes the Tissue Repair Company, Cardium Biologics, and the company's in-house MedPodium Health Sciences healthy lifestyle product platform.
The company's lead commercial product Excellagen® topical gel for wound care management recently received FDA clearance for marketing and sale in the United States. In addition to plans to advance the product's commercialization in the U.S. and internationally via strategic partnerships, the company plans to develop new product extensions for additional wound healing applications and is working towards securing approval for marketing and sale in South Korea and through the CE Mark application process in the European Union.
Generx®, Cardium's lead clinical development product candidate, is a DNA-based angiogenic biologic designed to treat patients with myocardial ischemia due to coronary artery disease. Cardium recently initiated its Generx Phase 3 / registration study in Russia. Consistent with its capital-efficient business model.
Cardium is also actively evaluating new technologies and business opportunities. The company utilizes its team's skills in late-stage product development to bridge the critical gap between promising new technologies and product opportunities that are ready for commercialization. Cardium is dedicated to building on its core products and product candidates to continually create new opportunities for greater success. Leveraging the advantages of its capital-efficient, asset-based business strategy, the company provides a diversified and more balanced portfolio of risk/return opportunities with the chief objective of providing long-term shareholder value.
Chanticleer Holdings, Inc. (HOTR)
Chanticleer Holdings recently announced that it has secured a location for a restaurant in Townsville on the northeastern coast of Queensland, Australia. The new restaurant is Chanticleer’s second location in that country and its seventh location internationally. At 5,140-square-feet, construction on the Townsville site is expected to begin within the next several weeks, with an opening expected by the second quarter of 2013.
Mike Pruitt, CEO and President, remarked, “Australia has been a fantastic area for Hooters, and we are looking forward to expanding our presence in the country. In addition to our new menu, terrific ambiance and iconic Hooters girls, our large-screen TVs are expected to make our new restaurant a destination stop for both locals and tourists. We believe the Townsville area’s strong economy and growing population, coupled with its proximity to the military base, is a perfect location for Hooters.”
About Chanticleer Holdings, Inc. (HOTR)
Chanticleer Holdings, Inc. owns and operates Hooters® branded restaurants in emerging international markets. As one of the most well-known restaurant brands in the world, Hooters has a menu that consists of moderately-priced American bar food and the world-famous Hooters girls. The company has ownership interests in the parent company of the Hooters brand, Hooters of America (HOA), four Hooters restaurants in South Africa, one restaurant in Hungary, one Hooters restaurant in Australia, and the exclusive franchise rights to develop and operate Hooters restaurants in three of the most populous states of Brazil: Rio De Janeiro, Minas Gerais, and Espirito Santo.
The first Hooters® restaurant opened October 4, 1983, in Clearwater, Florida. Today there are more than 430 Hooters restaurants in 28 countries. During its history, Hooters has continued to rank high amongst the industry's growth leaders. The Hooters concept has stayed true to its roots with its beach-themed concept, logo, uniform, menu and ambiance being similar to what existed in its original store, and has proven successful in small-town America, major metropolitan areas, and internationally.
In 2011, Chanticleer (NASDAQ: HOTR; HOTRW), together with a group of major private equity investors, acquired Hooters of America (HOA) and its largest franchisee Texas Wings, Inc. Today HOA is the Atlanta-based operator and the franchisor of over 430 restaurants in 28 countries. Chanticleer has rights to develop and operate restaurants in South Africa, Hungary, and parts of Brazil, and has joint ventured with the current franchisee in Australia, while evaluating several additional opportunities.
Chanticleer's core growth strategy involves expanding the Hooters® brand in emerging markets and other rapidly developing global economies. The rising number of middle class consumers in emerging markets is driving the demand for recognized international brands. Targeting underpenetrated international markets with proven market success, the company aims to achieve consistent, above-average growth rates and favorable financial returns for its shareholders.
VistaGen Therapeutics, Inc.
(VSTA)
VistaGen Therapeutics announced the signing of a strategic financing agreement with the European subsidiary of Bergamo Acquisition, a global diversified investment holding company. Bergamo’s European subsidiary has agreed to invest $36 million in VistaGen in exchange for 72 million shares of restricted VistaGen Common Stock at a price of $0.50 per share.
A self-placed strategic financing without any warrants or investment banking fees, this transaction is scheduled to close on or before the last day of this month. At closing, Bergamo will hold the majority of the issued and outstanding shares of VistaGen’s Common Stock. VistaGen will be using the proceeds of this financing to accelerate and expand its stem cell technology-based drug rescue programs.
About VistaGen Therapeutics, Inc. (VSTA)
VistaGen Therapeutics is a biotechnology company applying stem cell technology for drug rescue and cell therapy. Drug rescue combines human stem cell technology with modern medicinal chemistry to generate new chemical variants ("drug rescue variants") of once-promising drug candidates that have been discontinued during late-stage preclinical development due to heart or liver safety concerns. VistaGen also focuses on cell therapy, or regenerative medicine, which includes repairing, replacing or restoring damaged tissues or organs.
VistaGen's versatile stem cell technology platform, Human Clinical Trials in a Test Tube™, has been developed to provide clinically relevant predictions of potential heart and liver toxicity of promising new drug candidates long before they are ever tested on humans.
By more closely approximating human biology than conventional animal studies and other nonclinical techniques and technologies currently used in drug development, VistaGen's human stem cell-based bioassay systems can improve the predictability of the drug development cycle and lower the cost of new drug research and development by identifying product failures earlier in the cost curve. According to the Food and Drug Administration even only a ten percent improvement in predicting failure before clinical trials could save $100 million in development costs, which savings ultimately could be passed on to patients.
Using mature human heart cells produced from stem cells, VistaGen has developed and internally validated CardioSafe 3D™, a novel three-dimensional (3D) bioassay system for predicting the in vivo cardiac effects of new drug candidates before they are tested in humans. VistaGen is now focused on using CardioSafe 3D™ to generate up to two new, safer small molecule drug rescue variants every twelve to eighteen months. VistaGen anticipates that these drug rescue variants will be modified versions of once-promising new drug candidates that have been discontinued by pharmaceutical companies and academic research institutions because of heart toxicity concerns, despite substantial prior investment and positive efficacy data demonstrating their potential therapeutic and commercial benefits.
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