Maxar Technologies Inc.
Q1FY21 Result Highlights: Maxar Technologies Inc. (NYSE: MAXR) is a leading space technology and intelligence company that provides critical data and insights that government and commercial customers need to make informed decisions in an increasingly complex world. For Q1FY21, the company reported consolidated revenues of $392 million and an adjusted EBITDA of $67 million. Over the quarter, the company’s revenue and earnings were negatively impacted by a $28 million charge related to the Sirius-XM7 satellite program. During the period, MAXR signed several renewals with commercial and international government customers. It also won several study contracts supporting national security missions. Net loss for Q1FY21 stood at $84 million.
Q1FY21 Results (Source: Company Reports)
Upcoming Conferences: On 20 May 2021, the company’s Senior Management will present at BofA Securities 2021 Transportation, Airlines, and Industrials Conference. And on 25 May 2021, the Management will present at Barclays High Yield Bond & Syndicated Loan Conference.
Key Risks: The company is exposed to the risks associated with its satellite operations, including the partial or total impairment of the functional capacity of the satellite. The company is also exposed to the risk related to changes in political and economic stability, effects of austerity programs or similar significant budget reduction programs, and difficulties in obtaining or enforcing judgments in foreign jurisdictions.
Outlook: Looking ahead, the company is focused on launching the Legion constellation and successfully competing for the next generation of the EnhancedView program. Further, the company is focused on making investments in 3D technology, artificial intelligence, and machine learning. The company intends to drive cash flow and deploy capital in a disciplined fashion.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Data Source: Refinitiv, Thomson Reuters, 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 has corrected by 38.91%. The stock is currently trading lower than the average 52-weeks’ price band of $58.75 -$8.65, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of $27.58 and resistance of $35.23. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with an upside of low double-digit (in % terms). We believe that the company can trade at a slight discount to its peer average EV/sales (NTM trading multiple), considering the rise in the net loss of Q1FY21, negative net margin, and key risks associated with the business. We have taken peers like Kratos Defense and Security Solutions Inc (NASDAQ: KTOS), Spirit AeroSystems Holdings Inc (NYSE: SPN), and Mercury Systems Inc (NASDAQ: MRCY), all belonging to Aerospace & Defense sector. Considering the recently won study contracts supporting national security missions, renewal with commercial and international government customers, expected launch of Legion constellation, current trading level, valuation, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing price of $31.54, up by ~3.31% as on 7 May 2021.
Gilat Satellite Networks Ltd.
Q1FY21 Result Highlights: Gilat Satellite Networks Ltd. (NASDAQ: GILT) is a leading global provider of satellite-based broadband communications. During Q1FY21, the company witnessed decent momentum across all its business units, except for the IFC market segment, which is yet to witness a recovery. For Q1FY21, the company reported total revenues of $44.7 million, down from $47.7 million in Q1FY20. Over the quarter, the company made progress in its strategic growth areas of NGSO and Cellular Backhaul. Adjusted EBITDA loss for Q1FY21 stood at $1.4 million compared with an adjusted EBITDA loss of $5.0 million in Q1FY20.
Q1FY21 Result Highlights (Source: Company Reports)
Strategic Agreement with a Large Government Corporation: The company recently entered into a strategic agreement with a large government corporation in Asia Pacific, under which the company is responsible for building and operating the network to provide nationwide coverage for a range of applications. The agreement is valued at tens of millions of dollars, including potential for significant project expansions.
Key Risks: The company is exposed to the risks associated with the outbreak and global spread of the coronavirus (COVID-19) pandemic and changes in general economic and business conditions. Introduction of competing products by other companies could also impact the company’s market share and its financial performance.
Outlook: The company sees decent momentum across all its business units, except the IFC market segment. It expects this growth trend to continue during 2021 and anticipates sequential quarterly growth throughout the year. The company expects that NGSO, IFC and Cellular Backhaul will be the main market segments that will drive growth during 2021 and beyond.
Stock Recommendation: Over the last three months, the stock has corrected by 47.75%. The stock is currently trading lower than the average 52-weeks’ price level band of $22.69 and $4.80, offering a decent opportunity for accumulation. On the technical analysis front, the stock has a support level of ~$7.67 and resistance of ~$14.75. On a TTM basis, the stock is trading at a price to book value multiple of 2.2x, lower than the industry (Communication & Networking) median of 3.4x. Considering the recently signed strategic agreement with a large Government Corporation, modest long-term outlook, current trading level, valuation on TTM basis, and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing price of $9.66, up by ~1.36% as on 7 May 2021.
Hepion Pharmaceuticals Inc.
‘AMBITION’ Study Fully Enrolled. Hepion Pharmaceuticals Inc. (NASDAQ: HEPA) is a clinical stage biopharmaceutical company mainly involved in the development of therapeutic drugs for the treatment of liver disease. Currently, the company is progressing a Phase 2a ‘AMBITION’ study, which is a single-blinded, placebo-controlled trial designed to assess safety, tolerability, pharmacokinetics, and biomarker analyses for early assessments of efficacy of 75 and 225 mg CRV431. HERA recently completed recruitment for its Phase 2a ‘AMBITION’ clinical trial. Currently, all its NASH (Non-alcoholic steatohepatitis) patients in the 225 mg CRV431 dosing cohort are fully enrolled.
Completed the Pricing of Underwritten Public Offering: In February 2021, the company completed the pricing of its underwritten public offering of 44,200,000 shares of its common stock at a public offering price of $2.00 per share, raising gross proceeds of around $88.4 million. The proceeds will be used to fund the research and development activities, as well as for working capital and other general corporate purposes.
FY20 Result Highlights: For FY20, the company reported a loss from operations of $20.14 million. Net loss for FY20 stood at $20.35 million. The company ended FY20 with a cash of $40.726 million, up from $13.92 million as at 31 December 2019. Long-term debt as at 31 December 2020 stood at $2.57 million.
FY20 Results (Source: Company Reports)
Key Risks: The company is exposed to fluctuations in the desired outcome of clinical trials. The company is also exposed to the risks related to the delay in the receival of regulatory approval or failure to obtain regulatory approval for its drugs.
Outlook: The company intends to complete an additional clinical Drug-Drug Interaction study in Q2FY21. Further, it will continue to refine and extend AI-POWR™ for NASH and possible other indications. The company will also continue to develop IP for additional indications and business development strategies.
Stock Recommendation: Over the last three months, the stock has corrected by 29.82%. The stock is currently inclined towards its 52-week’s low price of $1.51. On the technical analysis front, the stock has a support level of ~$1.53 and resistance of ~$1.82. Considering the company’s progress in Phase 2a ‘AMBITION’ study, rising cash balance, ongoing focus on the development of IP for additional indications, current trading level and key risks associated with the business, we give a “Speculative Buy” recommendation on the stock at the closing price of $1.60, down by ~1.23% as on 7 May 2021.
Comparative Price Chart (Source: Refinitiv, Thomson Reuters)
Note: 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.