Science Applications International Corporation

SAIC Details

Award of Task Order from U.S. Customs: Science Applications International Corporation (NYSE: SAIC) provides technical, engineering and IT services. The market capitalization of the company as on 19 January 2021, stood at ~$5.82 billion. As per a recent update, the company own an order of ~$973 million from the U.S. customs to identify and assess threats from travelers, as well as cargo that crosses the border.

Q3FY21 Financial Update: The company reported revenues of $1.8 billion during the quarter. Adjusted EBITDA as a percentage of revenues stood at 9%. SAIC expects the impact of COVID-19 on the third quarter to be ~$60 million of revenue and ~$9 million of adjusted EBITDA, driven by reduced volume in the supply chain business and lower FAA training service revenues. Cash flows from operating activities were at $231 million during Q3FY21. It reported a cash position of $182 million as on 30 October 2020. The total debt of the company was at $2,536 million at the end of the quarter.

Q3FY21 Financial Performance (Source: Company Reports)

Outlook: The company expects the potential impact of the COVID-19 pandemic in its operations to be ~$250 million in revenue and ~$35 million in adjusted EBITDA, in FY21. It is anticipating the impact of the pandemic through the end of the fiscal year 2021.

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 debt-to-equity ratio of the company was high at 1.69x in Q3FY21, as compared to the industry median of 0.53x. SAIC gave a positive return of 27.15% in the past three months and a positive return of 38.1% in the past six months period. It is currently trading close to its 52 weeks’ high level of $100.71. On a technical front, the stock of SAIC has a support level of $91.56 and a resistance level of $100.57. We have valued the stock using an EV/EBITDA multiple-based illustrative relative valuation and have arrived at a target price with a correction of low double-digit (in % terms). For the purpose, we have taken peers such as CACI International Inc (NYSE: CACI), Leidos Holdings Inc (NYSE: LDOS) and Perspecta Inc (NYSE: PRSP). Considering the steep price movements in the past months, the potential impact of COVID-19 on its performance and comparative higher debt levels, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $100.12, up by 1.84% as on January 19, 2021.

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

Tuscan Holdings Corp.

THCB Details

Intent of Business Combination: Tuscan Holdings Corp. (NASDAQ: THCB) is formed for the purpose of entering into a merger, stock purchase, reorganization etc. or similar business combination with other entities. The market capitalization of the company as on 19 January 2021, stood at ~$554.25 million. The company has expressed its intent to form a business combination with Microvast Inc. THCB has signed a letter of intent with Microvast for this purpose on 13 November 2020.

Q3FY20 Financial Update: During the quarter the company incurred a loss of $101,287, compared to an income of $896,594 in the previous corresponding period. It reported a decrease in interest income to $579,117 in Q3FY20, when compared to $1,577,268 in Q3FY19. The cash position of the company was at $255,886 as on 30 September 2020.

Q3FY20 Financial Performance (Source: Company Reports)

Initial Public Offering: THCB made the Initial Public Offering of 24,000,000 units on 7 March 2019 at $10 per unit and generated gross proceeds of $240 million. It also raised $6.15 million in a private placement to Tuscan Holdings Acquisition LLC and Early Brid Capital, Inc.

Stock Recommendation: The proposed business combination with Microvast is subject to execution of a definitive agreement, approval by the respective boards and approval from the shareholders. THCB gave a positive return of 53.13% in the past three months and a positive return of 56.04% in the past nine months. It is trading slightly above the average of its 52-week trading range of $20.93 -$9.16. On a technical front, the stock of THCB has a support level of $14.79 and a resistance level of $16.91. Considering the steep price movements in the past months, absence of revenue generation and decrease in interest income, we suggest investors to book profit and give a ‘Sell’ rating on the stock at the closing price of $15.62, up by 0.9% as on January 19, 2021.

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

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