Stocks’ Details 

Fisker Inc.

Signed Definitive Agreement with Magna: Fisker Inc. (NYSE: FSR) is primarily involved in the manufacturing of eco-friendly electric vehicles.  As on 31 December 2020, the company’s market capitalization stood at ~$4.06 billion. The company recently entered into a definitive “operational phase” platform-sharing and initial manufacturing agreements with Magna International Inc. to ensure it can keep its rapid development program on track towards the delivery of the all-electric Fisker Ocean SUV. FSR and Magna have already achieved Preliminary Product Specification (PPS) engineering gateway in November 2020, and they are now working together to start the production of Fisker Ocean SUV in Q4 2022. 

Financial Highlights: For the nine months ended 30 September 2020, the company has reported no revenues and incurred general and administrative expenses of $8.05 million. For the period, the company reported a net loss of $42.60 million. As at 30 September 2020, the company had cash and cash equivalents of $45.0 million and long-term debt of $10.9 million.

Financial Highlights (Source: Company Reports)

Outlook: Looking ahead, the company intends to open consumer experience centers in major global cities from 2021. Further, the company plans to open the London experience center in 2022. The company intends to reveal a production-intent prototype of the Ocean in the summer of 2021.

Stock Recommendation: Over the last one month, the stock has corrected by 14.57% and is currently trading lower than the average of its 52-week price band. On the technical analysis front, the stock has a support level of ~$10.86 and resistance of ~$17.3. For Q3FY20, the company’s current ratio stood at 0.05x, lower than the ratio of 0.22x in Q2FY20. The company has a very limited operating history, making it difficult to predict future revenues and appropriately budget for its expenses. Considering the company’s track record of incurring losses, negative ROE, limited operating history, and decline in current ratio, we suggest investors to “Avoid” the stock at the closing price of $14.65, down by 4.62%, as on 31 December 2020.

Bain Capital Specialty Finance, Inc.

Q3FY20 Result Highlights: Bain Capital Specialty Finance, Inc. (NYSE: BCSF) is a business development company that directly originates loans to middle-market companies. As on 31 December 2020, the company’s market capitalization stood at ~$783.14 million. For the September 2020 quarter (Q3FY20), the company reported net investment income per share of $0.33, as compared to $0.37 for Q2FY20, impacted by the contraction in the size of the investment portfolio as a result of net repayments. Net income per share stood at $0.80 in Q3FY20, as compared to $0.40 in the previous quarter. Overall, the company delivered decent results for the quarter, driven by the stable performance of its investments as broader credit market conditions improved. During the quarter, the company invested $29.2 million in 16 portfolio companies across 10 different industries.  

Q3FY20 Results (Source: Company Reports)

Outlook: The company is focused on providing attractive risk-adjusted returns and current income by investing primarily in middle market companies. With decent lender controls, significant portfolio diversification, and scaled middle-market businesses backed by private equity sponsors, the company’s investment portfolio seems well-positioned in the current market environment. Looking ahead, the company seeks to capitalize its balance sheet in a prudent manner, consisting of equity and debt capital based on the underlying risk profile of investments. For Q4FY20, the company has already paid a dividend of $0.34 per share on 31 December 2020.

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

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

Note: All the forecasted figures are taken from Thomson Reuters, NTM: Next Twelve Month

Stock Recommendation: As at 30 September 2020, the company had total principal debt outstanding of $1,521.4 million and cash and cash equivalents (including foreign cash) of $45.0 million. Over the last three months, the stock has provided a return of 16.85%. The stock has 52-weeks’ high and low price of $20.29 and $7.11, respectively. On the technical analysis front, the stock has a support level of ~$10.8 and resistance of ~$12.86. We have valued the stock using the Price to Earnings based illustrative relative valuation method and have arrived at a target price with a correction of low single-digit (in % terms). For the purpose, we have taken peers like Ares Capital Corp (NASDAQ: ARCC), Apollo Investment Corp (NASDAQ: AINV), BlackRock TCP Capital Corp (NASDAQ: TCPC). Considering the decent returns in the past three months and valuation, we are of the view that the stock has factored in most of the positives of the company at current level. Hence, we give an “Expensive” rating for the stock at the closing price of $12.13, up by 1.08% as on 31 December 2020.

Global Cord Blood Corporation

AGM Highlights: Global Cord Blood Corporation (NYSE: CO) is a leading umbilical cord blood banking operator in China. The company is mainly involved in providing cord blood collection, laboratory testing, hematopoietic stem cell processing, and stem cell storage services. As on 31 December 2020, the company’s market capitalization stood at ~$450.95 million. The company recently held its 2020 Annual General Meeting (AGM), wherein, the shareholders ratified the re-appointment of KPMG Huazhen LLP as independent auditors of the company for FY21. Further, the shareholders also re-elected Ms. Ting Zheng, Dr. Ken Lu and Mr. Jack Chow as Class B directors of the Company until the 2023 AGM.

Q2FY21 Result Highlights: During the quarter ending 30 September 2020 (Q2FY21), the company added 17,643 new subscribers, taking the total accumulated subscriber base to 867,180. For the quarter, the company reported revenue of RMB285.6 million, down by 8.9% on pcp, due to the decline in the processing fees and other services from fewer new subscribers. Gross profit and non-GAAP operating income stood at RMB240.9 million and RMB151.4 million, respectively.

Q2FY21 Results (Source: Company Reports)

Outlook: Looking ahead, the company is focused on preparing for multiple potential outcomes and undertaking business expansion and risk diversification initiatives. Despite the challenges associated with COVID-19, a downward trend in newborn and an overall cautious consumer environment, the company is on track to meet its annual subscription base target.

Stock Recommendation: As at 30 September 2020, the company had cash and cash equivalent of $5.73 million. In the last one-month period, the stock has corrected by 4.62% and in the last six months, it has provided a return of 22.03%. The stock has a 52-week high and low price of $5.25 and $2.54, respectively. On the technical analysis front, the stock has a support level of ~$3.27 and resistance of ~$4.19. Considering the uncertainties surrounding the COVID-19 pandemic, downward trend in new-borns, overall cautious consumer environment, and decline in Q2FY21 revenue, we suggest investors to “Avoid” the stock at the closing price of $3.71, up by 3.63%, as on 31 December 2020.

Comparative Price Chart (Source: Refinitiv, Thomson Reuters)

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