Stocks’ Details

Cheniere Energy Partners, LP

A Look at CQP’s 3QFY20 Results: Cheniere Energy Partners, LP (AMEX: CQP) is engaged in offering clean, secure, and affordable LNG to numerous entities which consist of utilities and integrated energy firms, globally. During the September 2020 quarter, the company reported loss per unit of 8 cents against the earnings of 19 cents per unit in the year-ago period. Revenues for the quarter came in at $982 million as compared to $1,476 million reported in the year-ago period, owing to lower margins, along with reduced LNG cargoes sold during the quarter. Adjusted EBITDA in 3QFY20 stood at $352 million, against $543 million reported in 3QFY19. Cash flow from operations came in at $459 million in 3QFY20. The company exited the quarter with a cash balance of $1,254 million, with net long-term debt amounting to $17,573 million. It had a debt to capitalization ratio of 0.97.

Key Results Highlight (Source: Company Reports)

Outlook: For FY20, the company expects distribution per unit to be between $2.55-$2.65. For FY21, distribution per unit is projected to be in the ambit of $2.60-$2.70. The company expects the current distributable cash flow per unit to be between $3.75-$3.95. The company has completed 70.9% work on the SPL Project Train 6 in 3QFY20 and expects the dame to be completed by 2HFY22.

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

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

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of CQP closed at $39.25 with a market capitalization of ~$18.99 billion as on 15 January 2021. The stock made a 52-week low and high of $17.75 and $42.88, respectively, and is currently trading close to its 52-week high level. The stock has delivered a positive return of ~24.96% in the last nine months period. On the technical analysis front, the stock has a support level of ~$37.2 and resistance of ~$41.5. We have valued the stock using a P/CF multiple based illustrative relative valuation method and arrived at a target price with a correction low double-digit (in % terms). For the purpose, we have considered peers such as ONEOK Inc (NYSE: OKE), Williams Companies Inc (NYSE: WMB) and Magellan Midstream Partners LP (NYSE: MMP). Considering the returns in the past nine months, valuation, leveraged balance sheet and current trading levels, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry-level and give an “Expensive” rating for the stock at the closing price of $39.25, up by 0.72% on 15 January 2021.

ContextLogic Inc.

Pricing of IPO: ContextLogic Inc. (NASDAQ: WISH) is a global commerce company, with a market capitalization of ~$17.28 billion as on 15^th January 2021. On December 15, 2021, the company announced the pricing of an IPO of 46,000,000 shares of its Class A common stock worth $24.00 per share. The shares have started trading on the Nasdaq Global Select Market under the ticker "WISH" on December 16, 2020. Subject to customary closing condition, the offering closed at 18 December 2020. Notably, on 18 December 2020, WISH appointed Jacqueline Reses to its Board of Directors.

3QFY20 Key Update:  During the period, the company reported revenues of $606 million, of which $152 million came from Logistics, and the remaining $454 million came from Marketplace. Looking at the past performance, the company’s revenues witnessed a CAGR of 91% from 2015 to 2019. Year to date revenue in 3QFY20 went up ~32%. Adjusted EBITDA loss during the quarter came in at $64 million. Selling and general expenditure as a percentage of revenues in 3QFY20 stood at 64%, compared to 63% reported in the previous quarter.

Revenues Highlight (Source: Company Reports)

Outlook: Looking ahead, the company is focused on increasing its scale and growing its user base. Further, the company is also focused on diversifying merchant base and product categories.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

EV/Sales Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of WISH closed at $24.835 and made a 52-week low and high of $17.41 and $27.1, respectively, and is currently trading close to its 52-week high level. The stock has delivered a positive return of ~36.15% in the YTD period. On the technical analysis front, the stock has a support level of ~$22.4 and resistance of ~$25.1. We have valued the stock using an EV/Sales multiple based illustrative relative valuation method and arrived at a target price with a correction of low single-digit (in % terms). For the purpose, we have considered peers such as Alphabet Inc (NASDAQ: GOOGL), Amazon.com Inc (NASDAQ: AMZN), eBay Inc (NASDAQ: EBAY), etc. Considering the aforesaid facts, returns in the YTD period and valuation, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry level and give an “Expensive” rating to the stock at the closing price of $24.835, down by 11.71% on 15 January 2021.

Centennial Resource Development, Inc.

A Look at CDEV’s 3QFY20 Results: Centennial Resource Development, Inc. (NASDAQ: CDEV) is an independent oil and gas exploration and production company. During the quarter, the company reported an adjusted loss of 19 cents per share, against adjusted earnings of 1 cent per share reported in 3QFY19. In 3QFY20, the company reported revenues from oil and gas sales of $149.1 million as compared to $229.1 million reported in 3QFY19. Total operating costs for the quarter stood at $181.1 million as compared to $217.8 million reported in the year-ago period, mainly due to reduced lease operating expenses. Capital expenditure in 3QFY20 came in at $21.5 million, out of which $19.7 million was allocated to drilling and completion activities. The company exited the quarter, with a cash balance of $5.2 million, and outstanding long-term debt of $1,127.9 million. Net debt to book equity capitalization of in 3QFY20 was 29%.

Key Result Highlights (Source: Company Reports)

Outlook: CDEV upped its FY20 net production outlook to be between 66,000-68,000 million Boe/d (previous view 64,000-68,000 Boe/d). For FY20, lease operating expense is expected to be in the range of $4.25-$4.50 per Boe. The company restarted drilling activities at the quarter-end, with the addition of one rig.  The company intends to spend nearly $240-$265 million of capital in FY20 (previously $240-$270 million). The capital expenditure is expected to be used in drilling and completion activities.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation (Illustrative)

EV/EBITDA Multiple Based Relative Valuation (Source: Refinitiv, Thomson Reuters)

Note: All forecasted figures and peers have been taken from Thomson Reuters, NTM-Next Twelve Months

Stock Recommendation: The stock of CDEV closed at $2.49 with a market capitalization of ~$693.1 million as on 15 January 2021. The stock made a 52-weeks’ low and high of $0.24 and $5.35, respectively. The stock has delivered a positive return of ~285.9% in the last three months period. On the technical analysis front, the stock has a support level of ~$1.9 and a resistance of ~$3.1. We have valued the stock using an EV/EBITDA multiple based illustrative relative valuation method and arrived at a target price with a correction high single-digit (in % terms). For the purpose, we have considered peers such as Callon Petroleum Co (NYSE: CPE), QEP Resources Inc (NYSE: QEP) and PDC Energy Inc (NASDAQ: PDCE). Considering the steep price movement in the past three months, valuation, and leveraged balance sheet, we are of the view that most of the positive factors of the company have been discounted at current trading levels. Hence, we suggest investors to wait for better entry-level and give an “Expensive” rating for the stock at the closing price of $2.49, up by 0.2% on 15 January 2021.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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