RMG Acquisition Corp.

RMG Details

Shareholders Approve Business Combination with Romeo Power: RMG Acquisition Corp. (NYSE: RMG) is a special purpose acquisition company and has experience in power, renewable energy, environmental services, energy technology, and corporate governance. Recently, the company announced the outcomes for the 5 proposals deemed and voted upon by its shareholders at its Special Meeting, held on December 28, 2020. As per the results, all the different proposals giving effect to the earlier declared business combination with Romeo Systems, Inc. (“Romeo Power”) were agreed by ~99.8% of the shares of RMG voted at the special meeting.

Investment Rationale (Romeo Power): The company had signed a definitive agreement for a business combination with Romeo Power in October 2020. Romeo Power has a massive strategic partnership and is expected to lessen the execution risks and deliver competitive advantages. Over a time period from FY22 to FY25, the revenue potential is expected to increase at a CAGR of 59%, with a projected run-rate EBITDA margin of more than 20% 

Revenue Projection (Source: Company Reports)

September Quarter 2020 Results of RMG: During the quarter, the company reported earners $28.5k from interest on restricted cash and cash equivalents but incurred a loss of $491k, down from a profit of $658.15k in 3QFY19. The company ended the quarter with a cash balance of $315.5k.

Stock Recommendation: The stock of RMG gave a positive return of 198.8% during the span of three months and 88.1% in the past one-month period. The stock recently touched its 52-weeks high price of $38.90. The combined entity is likely to have a large and attractive addressable market. On the technical analysis front, the stock has a support level of ~$29.57 and resistance of ~$38.69. The business combination is likely to be completed on 29 December 2020. Considering the spike in the stock price in the last one month, current trading levels, expected merger with Romeo Power Technology, and 3QFY20 financial performance, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $31.94, down by 6.06% on 28 December 2020.

RMG Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Live Oak Acquisition Corp

LOAK Details

Business Combination with Danimer Scientific: Live Oak Acquisition Corp (NYSE: LOAK) is a shell company, mainly focused on doing a merger or business combination with one or more businesses. Recently, LOAK reminded its shareholder to vote in support of the authorization of the company’s proposed business combination with Danimer Scientific (“Danimer”), a next-generation bioplastics company. The associated requests to be voted were scheduled at the company’s virtual special meeting which was held on December 28, 2020.

Danimer Scientific was founded in 2004 and is a high-growth next-generation eco-tech company specialized in creating fully biodegradable and compostable bioplastics. The company is known for producing 100% biodegradable plastic feedstock alternative sold under the proprietary Nodax® brand name.

Future Expectations: Post business combination, Danimer is expected to be fully financed to support organic EBITDA growth to $169 million by 2025E. From the year 2020 to 2025, Danimer expects its revenue to grow at a CAGR of 59%. For the same period, the company expects its EBITDA to grow at a CAGR of $140%. Between 2020 and 2022, Danimer plans to spend around $100 million on capital expenditures to build out the Kentucky PHA facility.

Revenue and EBITDA Forecasts (Source: Company Reports)

Stock Recommendation: The stock of LOAK gave a positive return of 141.78% during the span of three months and 109.6% in the past one-month period. The stock of the company is currently trading close to its 52-weeks’ high level of $28.12. The combination of Danimer and LOAK is expected to advance and accelerate the commercialization of Danimer’s PHA. On the technical analysis front, the stock has a support level of ~$22.81 and resistance of ~$28.05. Considering the steep stock price movement over the last few months, and current trading levels, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $24.65, up by 11.29% on 28 December 2020.

LOAK Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

Disclaimer  

The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376). The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as personalised advice.