Rigel Pharmaceuticals Inc

Rigel Pharmaceuticals Inc (NASDAQ: RIGL) is a biotechnology entity that develops small molecule drugs for cancer, virus, and autoimmune-related diseases.

Investment Rationale – Speculative Buy at USD 3.61

• From a technical standpoint, 14-day RSI (41.15) is hovering around the oversold position, and therefore, a short-term surge can be anticipated.
• Over the past two years (FY18 to FY20), revenue and gross profit have surged at a CAGR of 56.22% and 56.10%, respectively.
• Rigel is likely to receive an upfront cash payment of US$125 million for supporting Rigel's RIP1 inhibitor program from Lilly.
• Encouraged by the launch of phase 3 trial in Covid-19 hospitalised patients of fostamatinib.

Risk Assessments

• The Company prospects are dependent upon its first commercial product, TAVALISSE, and the evolving conditions of the Covid-19 can adversely impact its performance.
• Intense competition, unfavourable regulatory updates, and challenges related to the distribution facilities can also impact business performance.

Recent News

11 March 2021: In order to evaluate the safety of fostamatinib, Rigel completed the patient enrolment in a Phase 2 trial. The National Heart, Lung, and Blood Institute sponsored the study. In the United States, the Fostamatinib is getting marketed as TAVALISSE®.

Financial Highlights for the year ended 31 December 2020 (as 2 March 2021)

 (Source: Company Website)

• For Q4 FY20, RIGL reported a net loss of US$19.2 million from US$17.2 million in Q4 FY19.
• During FY20, net sales for TAVALISSE was US$61.7 million, representing 41% growth on FY19.
• As of 31 December 2020, Rigel had nearly US$57.3 million in short-term investments, cash, and cash equivalents.
• The Company also received US$16.5 million from the US DOD’s (Department of Defense) to support the Phase 3 trial of fostamatinib, to check its effectiveness in the hospitalized Covid-19 patients.

One Year Share Price Chart    

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

During FY20, revenue generation increased significantly, and therefore, net loss per share declined remarkably. Moreover, the annual price increase of TAVALISSE shall support the Company’s growth in the future as well. However, there are uncertainties in the short-term as patient-doctor interactions and fewer patient visits during Covid-19 conditions can impact business performance. However, the Company has substantial financial resources to navigate through this challenging phase and manage its project funding requirement and create a significant value for shareholders. Stock 52 week High and Low were USD 5.50 and USD 1.36, respectively.

Based on the improved financials, business capabilities and valuation conducted above, we have given a “Speculative Buy” stance on Rigel Pharmaceuticals Inc at the closing price of USD 3.61 (as on 25 March 2021), with a lower double-digit upside potential based on 4.79x EV/NTM Sales (approx.) on FY21E Sales (approx.).

Gilat Satellite Networks Ltd

Gilat Satellite Networks Ltd (NASDAQ: GILT) provides satellite-based broad communication services. Its portfolio includes Solid State Amplifiers, VSAT network platform, and Block Upconverters.

Investment Rationale – Speculative Buy at USD 10.52

• From a technical standpoint, 14-day RSI (36.83) is hovering around the oversold position, and therefore, a short-term surge can be anticipated.
• Over the past two years (FY18 to FY20), gross margin and net margin have remained above 24.8% and 6.9%, reflecting decent fundamentals.
• Revenues in Q4 FY20 was US$42.6 million, reflecting an improved position from US$37.3 million in Q4 FY19.
• During FY20, the Company closed significant deals and registered major technological achievements, which underpins substantial growth prospects.

Risk Assessments

• The significant amount of revenue is dependent upon a certain number of large customers.
• The operations are significantly impacted by the Covid-19 and the Company might take some time operate profitably.

Recent News

9 March 2021: Isaac Angel has been appointed as Chairman of the Board as Dov Baharav decided to step down from his position.

Financial Highlights for the year ended 31 December 2020 (as on 8 March 2021)

(Source: Company Website)

• During FY20, revenue was reported as US$165.9 million versus US$263.5 million in FY19.
• The GAAP operating income increased from US$25.6 million in FY19 to US$37.6 million in FY20, which included US$53.6 million income from the settlement of Comtech (merger cancellation fees).
• For FY20, the adjusted EBITDA loss was US$3.3 million.
• During the quarter, US$20 million was paid as cash dividend to shareholders, while the additional cash dividend of US$35 million was paid in January 2021.

One Year Share Price Chart    

   (Source: Refinitiv, Thomson Reuters)

Conclusion

During FY20, GILT experience significant wins in growth areas, especially NGSO (Non-geostationary) and Cellular Backhaul. It also secured significant recurring revenue with multiple managed service deals. The strong bookings seen in H2 FY20 carried the momentum in FY21 though the Covid-19 pandemic might impact operations in FY21 to some extent. Nevertheless, the cash dividends in FY20 showed confidence in the Company’s prospects. Stock 52 week High and Low were USD 22.69 and USD 4.80, respectively.

Based on the resilient financial performance, operational achievement, and business capabilities, we have given a “Speculative Buy” stance on Gilat Satellite Networks Ltd at the closing price of USD 10.52 (as on 25 March 2021). 

*All forecasted figures and Peer/Industry Information have been taken from Refinitiv, Thomson Reuters.

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

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