Covanta Holding Corporation

CVA Details

Signed a New Agreement with North Hempstead: Covanta Holding Corporation (NYSE: CVA) is a leading provider of sustainable waste and energy solutions. The company also provides comprehensive industrial material management services to companies seeking solutions to complex environmental challenges. As on 4 February 2021, the company’s market capitalization stood at $1.93 billion. On 12 January 2020, the company announced that it has signed a new agreement with the Town of North Hempstead, NY for sustainable waste disposal. Under the agreement, the town will utilize the Covanta Hempstead Waste-to-Energy facility located in Westbury, New York, which will reduce truck traffic and greenhouse gases. The agreement is for an initial five-year term with options to extend for an additional 10 years.

Q3FY20 Results Highlights: During Q3FY20, the company sustainably processed 5.5 million tons of waste and reported Adjusted EBITDA of $128 million, up from $125 million in pcp. Free cash flow for the quarter stood at $3 million. Over the quarter, the company witnessed continued recovery from the initial months of the pandemic, most notably in the waste market, with tip fees up 3% year-over-year. The company ended the quarter with a total net debt of $284 million comprising cash and cash equivalent of $34 million and total debt of $2,583 million.

Q3FY20 Results (Source: Company Reports)

Outlook: Looking ahead, the company is focused on operating safely and reliably, while progressing its growth initiatives, particularly in the UK. The company expects Q4FY20 spend to be higher than typical due to outage deferrals and planned capital spend. The company plans to release its Q4FY20 and full-year FY20 results on 19 February 2021.

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

Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: Over the last three months, the stock of CVA has provided a return of 33% and is trading close to its 52-weeks high price level of $16.13. On the technical analysis front, the stock has a support level of ~$12.90 and resistance of ~$14.98. We have valued the stock using EV/EBITDA multiple based illustrative valuation method and have arrived at a target price with limited upside. We believe that the company can trade at a discount to its peer average EV/EBITDA (NTM Trading multiple), considering its high debt to equity multiple, continued impact from COVID-scenario, while also taking into account that the company has been trading at a discount in the past 3-years over its peer median. Considering the stock’s decent rise in the past three months, current trading level, and valuation, we suggest investors to wait for better entry-level and give an “Expensive” rating to the stock at the closing price of $14.67, up by 1.1% as on 4 February 2021.

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

Ocugen, Inc. 

OCGN Details

Partners with Bharat Biotech for the Commercialization of COVAXIN™: Ocugen, Inc. (NASDAQ: OCGN) is a biopharmaceutical company mainly involved in the development and commercialization of gene therapies to cure blindness diseases. Currently, the company is also focused on developing a vaccine to fight COVID-19. OCGN recently entered into a definitive agreement with Bharat Biotech to co-develop, supply, and commercialize Bharat Biotech’s COVAXIN™. Under the agreement, OCGN will be responsible for clinical development, regulatory approval and commercialization of COVAXIN™ for the US market.

Q3FY20 Result Highlights: For Q3FY20, the company reported research and development expenditure of $1.5 million compared to $1.3 million in pcp. Further, it incurred general and administrative expenses of $1.7 million in Q3FY20, compared to $1.4 million in pcp. For the quarter, the company reported total net loss per share of $0.07. The company ended the quarter with cash, cash equivalents, and restricted cash of $19.3 million.

Q3FY20 Result Highlights (Source: Company Reports)

Outlook: The company is on track to achieve multiple near and mid-term milestones with a plan to initiate four Phase 1/2a trials during 2021 and 2022. The company is focused on manufacturing its biologic product candidate, OCU200. It plans to enter OCU200 to the clinic in the first half of 2022.

Stock Recommendation: Over the last three months, the stock of OCGN has provided a whopping return of 1,032.79%. The stock is currently inclined towards its 52-weeks high level of $3.72. On the technical analysis front, the stock has a support level of ~$2.86 and resistance of ~$3.79. For the development of COVAXIN™ in the US, the company has already initiated discussions with the US FDA and the Biomedical Advanced Research and Development Authority (BARDA) to develop a regulatory path to EUA and, eventually, biologics license application (BLA) approval in the US market for COVAXIN™. On a TTM basis, the stock is trading at a price to book value multiple of 31.6x, lower than the industry average of 19.1x. Considering the steep rise in the company’s stock price over the last three months, current trading levels, and valuation on TTM basis, we believe that most of the positives are factored in at current juncture. Hence, we suggest investors to wait for better entry-level and give an “Expensive” rating to the stock at the closing price of $3.25, up by 15.66%, on 4 February 2021, owing to the announcement related to the signing of a definitive agreement with Bharat Biotech.

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

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