The Walt Disney Company
DIS Details
The Walt Disney Company (NYSE: DIS) is a global entertainment company. It operates two operating segments: 1) Disney Media and Entertainment Distribution (DMED), which produces and distributes global film and episodic television content, and 2) Disney Parks, Experiences, and Products (DPEP), which operates theme parks and resorts, cruise lines, vacation clubs, and other businesses, as well as licensing and selling branded merchandise through retail, online, and wholesale channels.
Latest News:
- Steps Towards Expanding DTC Business: DIS is establishing a new hub for international content creation under Rebecca Campbell, Chairman, International Content and Operations, to support its ongoing global expansion of Direct-To-Customer (DTC) business and fuel the growing pipeline of local and regional content its streaming services. In addition, under the direction of Chairman Kareem Daniel, DIS is announcing numerous critical management appointments to its Disney Media & Entertainment Distribution (DMED) segment.
- Elongation of CFO’s Contract: On December 21, 2021, DIS' CEO Bob Chapek announced the extension of Christine M. McCarthy's contract as Senior Executive Vice President and CFO until June 30, 2024. Ms. McCarthy has been the Company's CFO since 2015 and has been with the company for 22 years.
Q4FY21 Results:
- Double-Digit Growth in Topline: The company witnessed YoY growth of 26.02% in total revenue to USD 18.53 billion during Q4FY21 (ended October 02, 2021) from USD 14.71 billion during Q4FY20 (ended October 03, 2021). The DMED segment, accounting for 70.59% of the total revenue in Q4FY21, improved 9.27% YoY, whereas the DPEP segment grew 99.41% YoY.
- Improved Profitability: DIS reported a net income of USD 159 million in Q4FY21 vs. a net loss of USD 710 million in Q4FY20.
- Cash and Debt Position: As of October 02, 2021, the company had cash & cash equivalents of USD 15.96 billion and total debt of USD 54.41 billion.
Key Risks:
- Continued Impact of COVID-19 Pandemic: The entertainment industry, where DIS operates, was struck hard by the COVID-19 pandemic. Lockdowns and travel restrictions imposed to prevent the spread of the virus resulted in a dramatic drop in worldwide commercial activity across the industry. If this downward trend continues, it could harm the company's financials.
- Stiff Competition: Alternative providers of similar products and services and other forms of entertainment compete directly with DIS. Should this competition intensify further, it could harm the company's prospects.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
- % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
DIS Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
DIS' share price has declined 26.90% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 129.26 to USD 203.02. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 25.70. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 164.64.
Considering the correction in the stock price in the past nine months, strong top and bottom-line performance, efforts in expanding the DTC business, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 135.45, up 1.38% as of January 27, 2022, 12:44 PM ET.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.
Silvergate Capital Corporation
SI Details
Silvergate Capital Corporation (NYSE: SI) is a holding company for Silvergate Bank (the Bank), which offers financial services such as commercial banking, commercial and residential real estate financing, mortgage warehouse lending, and commercial business lending. In addition, the Bank provides a wide variety of deposit products and services. The Silvergate Exchange Network (SEN) of the Bank is a near-instantaneous payment network for digital currency sector participants that also serves as a platform for creating new products and services. As of January 27, 2022, the company's market capitalization stood at USD 2.97 billion.
Latest News:
- Tactical Collaboration: On December 16, 2021, SI and EJF Capital LLC, a worldwide institutional alternative asset management firm, launched EJF Silvergate Ventures Fund, a joint investment vehicle focused on early-stage fintech companies, digital currencies, and payments, as well as banking and specialty finance technology.
- Equity Offer: The Company concluded an underwritten public offering of 3,806,895 shares of Class A common stock at USD 145.00 per share on December 9, 2021, including 496,551 shares of Class A common stock following the underwriters' exercise in full of their option to purchase further shares. Before discounts and fees, the gross proceeds of the offering were approximately USD 552.0 million. The net proceeds from the proposed offering will be used to supplement the Company's and its wholly-owned subsidiary, Silvergate Bank's regulatory capital levels, as well as for other general corporate purposes.
Q4FY21 Results:
- Robust Interest Spread: The company reported a growth of 63.83% in total interest income to USD 130.39 million in FY21 (ending December 31, 2021) as compared to USD 79.59 million in FY20. Interest income from loans constituted 52.62% of the total interest income in FY21, with the rest coming from investment securities and deposits. Improvement in the interest income can be accredited to an increase of USD 152.31 million in average loan balances, which stood at USD 1.78 billion as of December 31, 2021. Interest expenses decreased to USD 1.13 million in FY21 vs USD 7.23 million in FY20, attributable to 32.58% decline in the Interest bearing accounts.
- Surge in Profitability: Net income for FY21 increased 201.59% YoY and stood at USD 78.53 million compared to USD 26.04 million in FY20.
- Decline in NPAs: As of December 31, 2021, the company’s Nonperforming Assets (NPA) reduced to USD 4.01 million from USD 4.92 million on December 31, 2020.
Key Risks:
- Depositor Concentration Risk: In FY21, SI’s top ten depositors accounted for ~45.3% of the total deposits. The loss of any of its key customers could hurt its financials.
Valuation Methodology: Price/Book Value Multiple Based Relative Valuation
(Analysis by Kalkine Group)
- % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
SI Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
SI's share price has declined 40.63% in the past three months and is currently leaning towards the lower-band of the 52-week range of USD 79.00 to USD 239.26. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 31.61. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 110.30.
Considering the correction in the stock price in the past three months, robust financial performance, inorganic growth initiatives, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the closing price of USD 93.26, down 6.25% as of January 27, 2022.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.
ABM Industries Incorporated
ABM Details
ABM Industries Incorporated (NYSE: ABM) is a leading provider of integrated facility solutions through five business segments: Aviation, Business & Industry (B&I), Education, Technology & Manufacturing (T&M), and Technical Solutions. It provides janitorial, parking, facility services, building & energy solutions, and airline services across its varied business segments. The company generates most of its revenue from the Business & Industry segment.
Latest News:
- Strategic Acquisition: On September 30, 2021, ABM completed the acquisition of Able Services, a San Francisco based facilities services company. The transaction is expected to scale ABM’s core business and critical geographies and thus advance its engineering and technical services, estimated to generate over USD 2 billion in annualized revenue.
FY21 Results:
- Double-Digit Growth in Topline: The company witnessed YoY growth of 14.22% in total revenue to USD 6.23 billion during FY21 (ended October 31, 2021) from USD 5.99 billion during FY20. The B&I segment, accounting for 53.73% of the total revenue in FY21, improved 5.98% YoY.
- Surge in Profitability: Net income for FY21 increased to USD 126.3 million compared to USD 0.3 million in FY20.
- Cash and Debt Position: As of October 31, 2021, the company had cash & cash equivalents of USD 62.80 million and total debt of USD 886.60 million.
Key Risks:
- Dependence on Long-term Clients: Long-term client relationships are usually more profitable than short-term client partnerships since the company incurs higher initial expenditures on new contracts until labor management and facility operations stabilize. As a result, even if ABM generates equal revenue from new clients, its financial status and cash flow may be harmed if it loses long-term clients.
- Dependence on Third-Parties: In circumstances where ABM cannot self-perform the task, it relies on subcontractors or other parties, such as joint venture partners, to complete the work. Any failure on the contractual obligation by these third parties could harm its operations.
Outlook:
FY22 Outlook (Source: Investor Presentation, Q4FY21)
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
- % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
ABM Daily Technical Chart (Source: REFINITIV)
Stock Recommendation:
ABM' share price has declined 23.64% in the past nine months and is currently leaning towards the lower-band of the 52-week range of USD 36.31 to USD 55.48. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 38.90. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 49.06.
Considering the correction in the stock price in the past nine months, decent top performance, inorganic growth initiatives, current valuation, and associated risks, we recommend a "Buy" rating on the stock at the current price of USD 40.45, down 1.75% as of January 27, 2022, 03:59 PM ET.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached.
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