Frontline Ltd

Frontline Ltd (NYSE: FRO) is an Industrial Transportation Company. The Company is a world leader in the seaborne transportation of crude oil and refined products.

Investment Highlights - Frontline Ltd – Hold at USD 7.49

• Despite the challenges faced due to covid-19 pandemic, the Company has shown significant improvement in financial performance in FY2020.
• In the last three months, the Company delivered a decent return of ~14.88% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, the Price/Cash Flow and Price/Book Value multiples of Frontline Ltd are currently lower as compared to the corresponding multiples of the Oil & Gas Related Equipment and Services industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, shares were trading well above the support level of 200-day simple moving average prices (USD 7.01), which reflects an uptrend in the stock and can move up further.

Key Risks

• Any change in regulations and government policies could affect the overall business of the Company.
• The covid-19 outbreak has resulted in supply chain disruptions which will have a negative impact on the Company’s performance.

Financial Highlights – FY2020 (31 December 2020) (released on 18 March 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, driven by higher voyage charter and time charter revenue, the total operating revenue increased to $1,221,187 thousand.
• Driven by higher revenue and lower administrative expenses and voyage expenses and commission, the profitability margins for the period improved.
• The cash balance as on 31 December 2020 increased slightly to $174,721 thousand (31 December 2019: $174,223 thousand).

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The Company has shown an improvement in financial performance in the financial year 2020. Both the revenue and profitability margins improved for the period. The Company expects strong recovery in world economy in 2021 as oil demand grows firmly globally. At present, the demand for tankers is muted due to capping of total volume of oil transported. Frontline witnessed demand recovery due to strong development in oil prices. In Asian market, the real demand is close to pre COVID-19 levels. The Company believes it is well-positioned to capture a recovery for tankers. The stock made a 52-week low and high of USD 5.28 and USD 11.95, respectively.

Considering the uncertainties and market dynamics, we are currently maintaining the “Hold” recommendation for Frontline Ltd at the closing price of USD 7.49 (as on 6 April 2021) and will recommend fresh buying at the right time.

ADMA Biologics Inc

ADMA Biologics Inc (NASDAQ-GM: ADMA) is a Pharmaceuticals & Biotechnology Company. The Company is focused on developing, manufacturing and marketing of specialty products for prevention and treatment of infectious diseases.

Investment Highlights - ADMA Biologics Inc – Speculative Buy at USD 1.78

• Despite the lower financial performance in the financial year 2020, the Company is focused on driving growth across the platform and executing business objectives.
• In the last three months, the Company delivered a positive return of ~1.14% and delivered higher returns compared to the benchmark Index.
• As per valuation metrics, EV/Sales multiple of the ADMA Biologics Inc is currently lower as compared to the corresponding multiple of the Biotechnology & Medical Research industry. It reflects, shares are undervalued as compared to the industry.
• From the technical standpoint, 14-day RSI is supporting an upside move (around 35 level), which means the stock price could increase in the short term.

Key Risks

• The market conditions in which the Company operates is full of challenges and might impact the operation performance and reduce financial performance as well.
• Liquidity and interest rate risks which could affect the operations of the Company.

Financial Highlights – FY2020 (31 December 2020) (released on 25 March 2021)

(Source: Annual Report, Company Website) 

• For the financial year 2020, driven by higher product revenue, the total revenue increased significantly to $42,219,783.
• Due to higher cost of revenue and higher operating expenses, the profitability margins for the period declined significantly. The Company reported an increase in net loss to $75,748,548 in FY2020.
• The cash balance as on 31 December 2020 increased to $55,921,152 (31 December 2019: $26,752,135).

One Year Share Price Chart

(Source: Refinitiv, Thomson Reuters)

Conclusion

The Company has shown a decline in financial performance in the financial year 2020. Despite the higher revenue, the profitability margins declined significantly. The Company needs to manage its operating expenses more effectively. ADMA Biologics has a strong liquidity position with a well-positioned balance sheet. The Company’s operations were significantly impacted by the covid-19 pandemic and resulted in a delay in clinical developments. ADMA has taken several steps to improve liquidity and reduce expenses. The Company has a strong product pipeline to drive future growth. The stock made a 52-week low and high of USD 1.57 and USD 4.20, respectively.

Based on the above rationale, we have given a “Speculative Buy” recommendation on ADMA Biologics Inc at the closing price of USD 1.78 (as on 6 April 2021).

*Dividend Yield may vary as per the stock price movement.

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

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