Danimer Scientific

Danimer Scientific (NYSE: DNMR) is a leading producer of PHA, a 100% biodegradable plastic feedstock alternative sold under the proprietary Nodax brand name, for usage in a wide variety of plastic applications including water bottles, straws, food containers, etc.

Key highlights

• Completed business combination: Recently, the company announced that they had completed their previously announced business combination with Live Oak Acquisition Corp. In connection with the closing, Live Oak changed its name to Danimer Scientific, Inc.

• Big Capital Expenditures:The company intends to spend USD 100 million on capital expenditures to build Kentucky PHA facility between 2020 and 2022. This facility would be completed in two phases: Phase I construction is already completed. In contrast, the Phase II construction is expected to be completed by the beginning of Q2 2022, with the majority of the capex allocated to 2021.

Source: Company

Financial overview

Source: Company

• For FY 2020, the Company expects to clock the revenue of USD 51 million, compared to USD 31.7 million in the previous corresponding period.
• On the back of higher revenues and lower operating expenses, the group expects to earn a Net income of USD 2.9 million in FY2020, compared to a loss of USD 12.7 million in the previous corresponding period.

Risks associated with investment

The Company is under various market risks in the ordinary course of operations that could impact its earnings and cash flows. Some important risk factors are failure to realize the anticipated benefits of the transaction, risks relating to the uncertainty of the projected financial information, the overall level of consumer demand for its products; general economic conditions and other factors affecting consumer confidence, preferences, and behaviour, etc.

Stock recommendation

The Company is currently producing and shipping Nodax at a commercial scale from its existing facility in Winchester, Kentucky. They partnered with key manufacturers and consumer products companies such as PepsiCo, Nestle, Bacardi, Genpak, WinCup, Columbia Packaging Group, Kemira and Plastic Suppliers Inc; as they introduce more sustainable alternatives to straws, food and beverage containers, and flexible packaging, among others. Post-Merger, the Company is expected to be fully financed to increase capacity to support anticipated USD 169 million of Organic EBITDA by 2025E. However, on the valuation front, the stock is available at Forward EV to Sales multiple of 19.4x against the Industry (containers and packaging) median of 1.3x. Hence, considering the aforesaid facts and valuation, we recommend an “Expensive” rating to the stock at the closing price of USD 25.13 on January 12, 2021.

Source: Refinitiv (Thomson Reuters)

Property Solutions Acquisition Corp.

Property Solutions Acquisition Corp. (NASDAQ: PSAC) was formed under the laws of the State of Delaware on February 11, 2020 and intends to focus on target companies that service the real estate industry to property technology companies. 

Key Update:

Recently, the company reported that it approached Los Angeles-based company Faraday Future for a possible merger at a valuation of USD 3 billion. Faraday is in focusing on starting production of a luxury electric vehicle, the FF 91 within a year. Notably, PSAC is working to raise ~USD 400 million for the above acquisition. 

Q3FY20 Financial Highlights:

• PSAC announced its third quarter FY20 results, wherein the company posted operating costs of USD 142,108. The company started its operation on February 11, 2020 and is yet to post any income.
• The group reported interest earned on marketable securities held in Trust Account amounting USD 41,254.
• The company reported a net loss of USD 101,977, partially supported by interest earned on marketable securities and benefit from income taxes amounting USD 299.
• The company reported total current assets of amounting USD 762,459 while total assets were reported at USD 230,578, 270.

Income Statement Highlights (Source: Company Reports)

Key Risks: The company does not have any line-of-business and is focusing on acquisition or merger with prospective business units. Thus, without any visible operations, we are uncertain about the income generation of the group.

Stock Recommendation:

The stock of PSAC appreciated ~20% and ~22% in the last one month and three months, respectively and currently trading at the upper band of its 52-weeks trading range of 12.00 and 9.65, respectively. The Management highlighted that they are looking for prospective businesses and had discussions with Los Angeles-based Faraday Future for a merger proposition. However, at present, there is no concrete news about the acquisition. Moreover currently, the group does not have any income generation source, and hence we prefer to remain on the sidelines. Considering the above-mentioned facts, current price levels, we recommend investors to ‘Avoid’ the stock at the closing price of USD 11.60 on January 11, 2020.

PSAC Daily Technical Chart (Source: Refinitiv, Thomson Reuters)

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