Gevo Inc

Gevo Inc (NASDAQ: GEVO) is focused towards commercialization of renewable premium gasoline, jet fuel and diesel fuel to achieve zero carbon emission.

Investment Highlights - Gevo Inc – Expensive at USD 6.80

• Regarding the profitability, the Company has a much lower gross margin and EBITDA margin as compared to the industry median.
• The revenue of the Company is following a downtrend in Q3 FY20 compared to Q3 FY19 data.
• The stock had reached its 52 weeks high on 13 January 2021 and currently trading close to it.
• From a technical standpoint, the Company is trading at 14-day RSI of ~85.09, indicating a further downside potential in the stock.

Key Risks

• The Company may witness postponement of projects and reduced activity levels due to macroeconomic disruptions.
• The Company is exposed to compliance risk.
• The risk of lockdowns and restrictions may persist for an uncertain duration of time which may have an adverse impact on the earnings.

Recent Developments

On 11 January 2021, the Company had announced the concept of Net-Zero project to convert renewable energy into energy-dense liquid hydrocarbons.

On 21 December 2020, the Company had announced of the option to purchase around 239 acres of land near Lake Preston, SD.

On 10 December 2020, the Company announced that it had supported carbon neutrality goals of the aviation industry by supplying Sustainable Aviation Fuel (SAF).

Financial Highlights (for Q3 FY20 ended on 30 September 2020 as on 10 November 2020)

(Source: Company result)

• The revenue of the Company declined to USD 0.2 million during Q3 FY20, while it was USD 6.1 million during Q3 FY19.
• The Company had reported a net loss of negative USD 6.84 million for Q3 FY20 compared to negative USD 8.62 during Q3 FY19.
• The Company had an outstanding secured debt of USD 12.7 million as of 30 September 2020.
• The Company had Cash & Cash Equivalent of USD 80.6 million as of 30 September 2020 compared to USD 6.3 million as of 30 June 2020.

One Year Share Price Chart

 (Source: Refinitiv, chart created by Kalkine Group) 

Conclusion

The Company had entered into a sale and purchase agreement with Trafigura Trading LLC for the initial term of ten years in August 2020. The Company had 48MGPY of offtake agreement, representing revenue of approximately USD 1.5 billion throughout the life of contracts. As announced on 06 January 2021, the Company had paid off the entire outstanding balance of USD 12.7 million of Convertible Senior Secured Notes. On the technical front, the Company is trading at a 14-day RSI of 85.09, indicating a downside potential in the stock price. The stock made a 52-week low and high of USD 0.46 and USD 7.62, respectively.

Based on the weak profitability and various risk factors as discussed above, we have given an "Expensive" stance on Gevo Inc at the closing market price of USD 6.80 (as on 14 January 2021), while we will keep a track on the business operations and revisit our rating when it shows business scalability.

Kaleyra Inc

Kaleyra Inc (AMEX: KLR) is the provider of mobile communication services to financial institutions and corporates around the globe.

Investment Highlights - Kaleyra Inc – Expensive at USD 10.68

• The Company had reported a net loss during Q3 FY20, while it had achieved profitability during an equivalent period of the last year.
• The Company is currently trading near the 52-week high, raising doubts at the upside potential at the current price level.
• From the technical standpoint, 14-day RSI stood at ~75.68 (overbought zone), which means the stock price could decline in the short term.

Key Risks

• The Covid-19 pandemic may result in reduced activity levels and postponement of projects.
• The Company is increasingly exposed to foreign exchange risk for overseas operations.

Recent Developments

On 25 November 2020, the Company announced two new agreements with leading financial institutions from the Company’s k-lab initiative.

Financial Highlights (for Q3 FY20 ended on 30 September 2020 as on 09 November 2020)

(Source: Company result)

• The Company had achieved an 8% growth in total revenue to USD 38.3 million during Q3 FY20 compared to USD 35.3 million during Q3 FY19.
• The gross margin for Q3 FY20 was around 20%.
• The Company had reported a net loss of negative USD 5.3 million during Q3 FY20, while it had achieved a net income of USD 0.81 million for the comparative period of the prior year.
• The Company had around USD 31.5 million of cash and cash equivalent as of 30 September 2020.

One Year Share Price Chart

(Source: Refinitiv, chart created by Kalkine Group)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

The Company had witnessed significant growth in the US and a slight recovery in Italy and India during Q3 FY20. The Company is bullish regarding the business outlook in India and Italy. The Company had anticipated its fourth-quarter revenue to be ranging from USD 41.5 million to USD 42.5 million and total FY20 revenue to be ranging from USD 144.6 million to USD 145.6 million. The adjusted EBITDA had declined to USD 2.8 million during Q3 FY20 due to increased investment in engineering talent. On the technical front, the Company is trading at a 14-day RSI of 75.68, indicating a downside potential in the stock price. The stock made a 52-week high and low of USD 11.20 and USD 3.80, respectively.

Based on the factors discussed and valuation method used above, we have given an "Expensive" stance on Kaleyra Inc at the closing market price of USD 10.68 (as on 14 January 2021).

*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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