SSR Mining Inc.

SSRM Details

SSRM Expands the "Facility" Terms: SSR Mining Inc. (NASDAQ: SSRM) is a minerals company, focussed on mining precious metals in the Americas. On June 28, 2021, the company revised its current undrawn revolving credit facility (the "Facility") by increasing the Facility amount to US$200 million, up from the previous amount of US$75 million.  Notably, the term of the Facility has been lengthened by four years to June 8, 2025.

Other Recent Developments: On May 26, 2021, SSRM’s 20% interest in Minera Cachinal S.A. ("Minera Cachinal"), the Chilean holding company for the Cachinal Ag-Au project was acquired by Aftermath Silver Ltd. The acquisition was previously announced on May 27, 2020, for a total consideration of C$700,000.

1QFY21 Key Results Highlights: During the quarter, the company reported adjusted earnings per share of 47 cents, which went up ~147.3% year over year, primarily due to lower costs, higher sales of gold equivalents and average realized prices for gold and silver. Total revenues went up 123.2% year over year and came in at $366 million, primarily due to higher Production (which went up 83% on pcp). The company exited the quarter, with a cash balance of $866 million. The cash flow from operations stood at $145 million in 1QFY21.

Revenues Highlights; Analysis by Kalkine

Key Risks: The company’s revenue is dependent on international gold, copper, and silver prices, and hence, price volatility in the international market would likely dampen the company’s overall performance.

Outlook: The company remains on track to invest in large brownfield organic portfolio across the US, Turkey, and Canada. The company expects to make greater operational performance in 2HFY21, at Çöpler, where the flotation plant construction remains on-track for commissioning mid-year.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the last one month, the stock went down by ~15.96%. The stock is currently quoting towards the lower band of its 52-weeks’ trading range of $13.68 to $25.32. We have valued the stock using the P/E multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digits (in percentage terms). We believe that the company can trade at a slight premium as compared to its peer’s median, considering lower costs, higher sales of gold equivalents and average realized prices for gold and silver, decent 1QFY21 performance, and decent liquidity position. Considering the company’s strong performance in 1QFY21, international presence, growth initiatives, positive outlook, current trading levels, and valuation, we give a “Buy” recommendation on the stock at the closing price of $15.59, up ~1.76% on June 30, 2021.  

SSRM Daily Technical Chart, Data Source: REFINITIV 

Merck & Co., Inc.

MRK Details

MRK’s Keytruda Gets Approval for Esophageal Cancer in Europe: Merck & Co., Inc. (NYSE: MRK) is a global healthcare company, which is involved in offering health solutions through its prescription medicines, biologic therapies, vaccines, and animal health products. On June 29, 2021, MRK stated that the European Commission has given authorization to its PD-L1 inhibitor, Keytruda in Europe as a first-line treatment in blend with chemotherapy for patients suffering with esophageal cancer.

Managerial Changes: On June 24, 2021, the company appointed Michael Klobuchar as its executive vice president and chief strategy officer, effective from July 5, 2021. Michael will become a member of MRK’s Executive Committee and is expected to take the company to newer heights.

MRK Inks Deal with the US government: On 17 June 2021, the company announced that it has inked a purchasing deal with the US government for Molnupiravir (MK-4482).  MK-4482 is presently being investigated in a Phase 3 clinical trial, the MOVe-OUT study, for treating non-hospitalized patients suffering from COVID-19. The company is creating Molnupiravir in partnership with Ridgeback Biotherapeutics.

 

MRK Spinoff Organon: On June 3, 2021, the company informed the market that it has completed the spinoff of Organon & Co. (Organon). The spinoff will aid MRK to build two patient-centered companies with an improved strategic and operational focus, enhanced agility, streamlined operating models, augmented capital arrangements and better financial profiles.

1QFY21 Key Financial Highlights: During the quarter, the company reported adjusted earnings of $1.40 per share, which declined 7% from the prior corresponding period. The company reported revenues of $12.08 billion, which was flat year over year and down 1% on a constant currency basis. Adjusted gross margin during the quarter came in at 75.7%, which contracted 80 basis points year over year, mainly due to pricing pressure. R&D expenditure during the quarter stood at $2.4 billion, up ~13% on pcp, owing to increased clinical expansion expenses for COVID-19 programs and higher investment used for early drug development.

Adjusted Earnings Per Share Highlights; Analysis by Kalkine Group  

Risk Analysis: It is to be noted that MRK’s biggest strength lies in Keytruda, but it can also be said that Merck is extremely dependent on the drug and should look for ways to expand its product line-up. Further, supply chain disruptions caused by the outbreak adds to the woes.

Future Expectation: For FY21, the company expects revenues to be in the range of $51.8 billion-$53.8 billion, depicting an increase of 8% to 12% year over year. Adjusted earnings are predicted to be between $6.48-$6.68. The company is set to report its 2QFY21 results on July 29, 2021.

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Source: Analysis by Kalkine Group 

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation: Over the last three months, the stock went up by ~5.8%. The stock is currently quoting towards the upper band of its 52-weeks’ trading range of $15.32 to $87.80. We have valued the stock using the P/E multiple-based illustrative relative valuation method and arrived at a target price with an upside of low double-digits (in percentage terms). We believe that the company can trade at a slight discount as compared to its peer’s median, considering volatility in the market, pricing pressure, supply chain disruption, and decline in bottom line in 1QFY21. We have taken peers like Abbott Laboratories (NYSE: ABT), Abbvie Inc (NYSE: ABBV), to name a few. Considering the strong demand for KEYTRUDA & GARDASIL and other products, approval for Esophageal cancer in Europe, agreements with the US government, decent outlook, current trading levels, and valuation, we give a “Hold” recommendation on the stock at the closing price of $77.77, up ~0.73% on June 30, 2021.  

MRK Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

 

Technical Indicators Defined:-

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.