Stocks’ Details

Tenet Healthcare Corporation

Acquiring 45 Ambulatory Surgery Centers: Tenet Healthcare Corporation (NYSE: THC) is a diversified healthcare services company that operates 65 hospitals and more than 520 other healthcare facilities. As on 17 December 2020, the company’s market capitalization stood at ~$4.34 billion. On 10 December 2020, the company announced that it will purchase up to 45 ambulatory surgery centers (ASCs) from SurgCenter Development (SCD) for approximately $1.1 billion in cash and the assumption of ~$18 million of center-level debt. This acquisition will enhance the company’s overall business mix and will further diversify its earnings profile.

Q3FY20 Result Highlights: For Q3FY20, the company reported a net loss from continuing operations attributable to common shareholders of $197 million, down from $227 million reported in 3QFY19. During the quarter, the company continued to focus on strategic cost reduction measures and corporate efficiencies to mitigate the impact of COVID-19 surges in a certain market. Net cash from operations stood at $593 million in 3Q20, up 42% on pcp.

Q3FY20 Results (Source: Company Reports)

Outlook: Looking ahead, the company is focused on further diversifying into high-growth healthcare services. The company’s high-performance culture with data-driven management processes continues to drive its financial, operational, and clinical performance.

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

P/E Multiple Based Valuation (Source: Refinitiv, Thomson Reuters)

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month

Stock Recommendation: As on 19^th October 2020, the company had around $3.3 billion of cash on hand and no borrowings under its $1.9 billion line-of-credit facility. Over the last three months, the stock of THC has provided a return of 38.07% and in the last six months, it has provided a return of 92.23%. The stock is currently trading near to its 52-week high of $42.78, demonstrating a limited potential for further growth. On the technical analysis front, the stock has a support level of $38.35 and resistance of ~$41.335.  We have valued the stock using the Price to Earnings multiple based illustrative relative valuation method and have arrived at a target price with a correction of low-single digit (in percentage terms). For the purpose, we have taken peers like HCA Healthcare Inc (NYSE: HCA), Universal Health Services Inc (NYSE: UHS), Community Health Systems Inc (NYSE: CYH), etc. Considering the steep price improvement in the past three and six-month period, current trading level and valuation, we are of the view that the stock has factored in most of the positives of the company at a current trading level. Hence, we suggest investors to wait for better entry levels and give an “Expensive” rating on the stock at the closing price of $41.12, up by 1.46% as on 17 December 2020.

Marathon Patent Group, Inc.

Purchased 10,000 S-19j Pro ASIC Miners from Bitmain: Marathon Patent Group, Inc. (NASDAQ: MARA) is a Cryptocurrency mining company, focused on the blockchain ecosystem and the generation of digital assets. As on 17 December 2020, the company’s market capitalization stood at ~$498.54 million. On 9 December 2020, the company announced that it has entered into a contract with Bitmain to purchase 10,000 Antminer S-19j Pro ASIC Miners. As per the contract, MARA is expected to receive an initial batch of 6,000 S-19j Pro Miners in August 2021 and the remaining 4,000 miners in September 2021. Upon delivery, the company will have 33,560 state of the art ASIC miners, generating 3.56 EH/s.

September 2020 Quarter Highlights: For Q3FY20, the company reported total revenue of $835,184, up 160% on the previous corresponding period (pcp).  During the quarter, the company entered into favorable purchase agreements with Bitmain that improved the company’s current and future financial position. Operating loss for the quarter was approximately $2.0 million, up from $807,859 in pcp.

Q3FY20 Results (Source: Company Reports)

Outlook: The company believes that it has the potential to grow its monthly revenue from $500,000 to $11,700,000 by Q4 2021 by aggressively increasing its mining power, reducing bitcoin production cost, and by adding industry experts to the teams. In order to expand its operations, the company is working with its energy partner, Beowulf Energy, to open a renewable energy powered data center in the north-eastern United States. The new facility is expected to be cost-effective and will allow the company to lower its carbon footprint.

Stock Recommendation: As on 5 November 2020, the company had cash and cash equivalent of $24.6 million and zero debt on its balance sheet. Over the last one and three months, the stock of MARA has provided a return of 205.48% and 375.87%, respectively. Moreover, in the past nine-months period, the stock has moved up by 1,872.91%. The stock recently touched its 52-weeks high price of $10.45. On the technical analysis front, the stock has a support level of ~$6.28 and resistance of ~$10.72. Considering, the significant rise in the stock price over the past nine months period, and current trading levels, we are of the view that the stock might have factored in most of the positives of the company at the current level. Hence, we give an “Expensive” rating for the stock at the closing price of $9.47, up by 15.07% as on 17 December 2020. As the stock seems highly speculative in nature, investors with a high-risk appetite may take the position.

Sundance Energy Inc.

September 2020 Quarter Highlights: Sundance Energy Inc. (NASDAQ: SNDE) is primarily involved in the development, production and exploration of oil, natural gas, and natural gas liquids (NGLs) primarily targeting the Eagle Ford basin in South Texas. As on 17 December 2020, the company’s market capitalization stood at ~$13.48 million. For the September 2020 quarter, the company reported a total sales volume of 773,920 Boe, down from 1,251,144 Boe reported in pcp. Moreover, the company witnessed a 62% YoY decline in oil sales and 38% YoY decline in Natural gas sales during Q3FY20. Total revenue from Q3FY20 stood at $20.9 million, down from $51.09 million in pcp, mainly due to a decline in the commodity prices.

Q3FY20 Results (Source: Company Reports)

Outlook: The significant decline in commodity prices and lower expectations for near-term commodity prices, has reduced the company’s revenue and cash flow from operations. Moreover, it has also slowed the pace at which the company develops its oil and natural gas assets. To mitigate its exposure to commodity price volatility, the company continues to execute a hedging program.

Stock Recommendation: The stock of SNDE has corrected by 32.87% in the last six months and is currently trading near to its 52-weeks low price of $1.00. On the technical analysis front, the stock has a support level of ~$1.85 and resistance of ~$2.01. As of September 30, 2020, the company was not in compliance with the Leverage Ratio or the Current Ratio under the Revolving Facility. The company is currently in discussions with the Revolving Facility lenders to waive these defaults. Considering the aforesaid facts, reduced the company’s revenue and cash flow from operations in Q3FY20, along with slow development of oil and natural gas assets, we suggest investors to ‘Avoid’ the stock at the closing price of $1.96, up by 5.38% as on 17 December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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