Maxar Technologies Inc

Maxar Technologies Inc (NYSE: MAXR) is an integrated space and geospatial intelligence company with a full range of space technology solutions for commercial and government customers including satellites, Earth imagery, geospatial data and analytics.

Key highlights 

• Presence across multiple domains: The company caters to several domain like Space, Air, Land, Maritime, sub-surface and cyber, and helps them in monitoring, understanding, and delivering global broadband communications, and explore and advance the use of space. The company is present in all possible domains from space to sub-surface, providing extreme diversity. 

Source: Company 

• Higher guidance for FY2021: The management highlighted strong revenue growth and expected it to be in a range of USD 1,805-1,885 million, up by 9.4% from 2020. The company’s guidance looks promising. Furthermore, it expects an adjusted EBITDA margin between USD 420-470 million, along with operating cash flow in a range of USD 240-290 million.

Source: Company 

• Divested MDA Business: The company completed its previously announced sale of the MDA Business to Neptune Acquisition Inc for an aggregate purchase price of USD 729 million. This divestiture represented a strategic shift in its business. 

• Robust backlog: The company is having a healthy backlog, which increased to USD 1.9 billion from USD 1.6 billion, or by approximately USD 300 million, for the year ended December 31, 2020 compared to the previous corresponding period. Approximately 58% of the total backlog is expected to be converted into revenue in 2021, which is a key positive. The increase in backlog was primarily driven by an increase in the Space Infrastructure segment due to new contracts with the U.S. government. 

Financial overview of FY2020 (In millions of USD)

Source: Company

• In FY2020, the company reported revenues of USD 1,723 million, increased by USD 57 million, against USD 1,666 million in 2019. The increase was primarily driven by the rise in the Space Infrastructure segment, partially offset by a decrease in the Earth Intelligence segment. 

• Adjusted EBITDA stood at USD 422 million, or 24.5% as percentage of revenues as compared to adjusted EBITDA of USD 416 million, or 25.0% adjusted EBITDA margin in 2019. The increase was driven by higher Adjusted EBITDA from the Space Infrastructure segment.

• The company posted a net income of USD 303 million in the reported period against USD 109 million in 2019. The prime source of net income was gain from the discontinued operation. 

Risks associated with investment

The company’s business with various government entities is exposed to the risk associated with policies, priorities, regulations, mandate and funding levels. Furthermore, it requires innovative technologies to meet the needs of existing or potential new customers. It also faces competition that may cause either to reduce prices for imagery, related products and services or to lose market share.

Valuation Methodology (Illustrative): EV to Sales 

Note: All forecasted figures and peers have been taken from Thomson Reuters 

Stock recommendation

The company made solid progress during 2020 toward achieving its longer-term targets, including efforts to drive sustainable growth in both Earth Intelligence and Space Infrastructure segments and reduced its debt and leverage. For 2021, the company expects to see revenue and adjusted EBITDA growth and improvement in free cash flow. Significantly, it has also increased its 2023 targets to reflect the earnings and cash generation power better. Therefore, based on the above rationale and valuation, we recommend a “Speculative Buy” rating at the closing price of USD 37.64 as on March 26, 2021. We have considered Real Matters Inc, Sierra Wireless Inc, Open Text Corp. as the peer group for the comparison.

1-Year Price Chart (as on March 26, 2021). Source: Refinitiv (Thomson Reuters)

Churchill Capital Corp IV

Churchill Capital Corp IV (NASDAQ: CCIV) is a blank check company formed for the purpose of effecting a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination with one or more businesses.

Key Updates:

Merger with Lucid Motors: On February 22, 2021, the company entered into an Agreement and Plan of Merger with Lucid Motors at a price consideration of USD 11.75 billion. The transaction includes USD 2.1 billion cash contribution by CCIV and a USD 2.5 billion fully committed PIPE investment.

Financial Highlights from April 30, 2020, to December 31, 2020: 

• CCIV announced its financial result as on December 31, 2020, wherein the company posted its loss from operations of USD 2.9 million.
• Net loss stood at USD 2.52 million, partially supported by a provision for income taxes at USD 0.081 million.
• The group reported a cash balance of USD 3.59 million, while total assets were recorded at USD 2.07 billion.

Income Statement Highlights for period ended December 31, 2020.

Risks: The company is yet to post a stable income and is being funded through its equity component. Moreover, Electric Vehicles requires huge capital investments, and a delay in funding might lead to hindrance in the overall operations.

Stock Recommendation:

Lucid Motors has an impressive track record of designing, engineering and manufacturing of battery management software used for Electronic Vehicle, which would benefit CCIV in the near future. The company is building an in-house manufacturing unit with Arizona factories for EV vehicles, which is scheduled to commence production in the second half of FY21. However, despite a decent product pipeline, the company is likely to compete with world-leading EV vehicle manufacturers having solid capital base and several upcoming products. Moreover, the success of the products depends on the acceptability by the customers. Hence, considering the above facts, we prefer to remain on the sidelines due to the absence of a stable revenue base. Hence, we give an ‘Avoid’ rating on the stock of CCIV at the closing price of USD 23.02 on March 26, 2021.

Price Chart (as on March 26, 2021). Source: Refinitiv (Thomson Reuters)

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