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Tutor Perini Corporation
TPC Details
Tutor Perini Corporation (NYSE: TPC) is a civil, building, and specialty construction company, and offers diversified general contracting and design-build services to private clients and public agencies worldwide. The company’s services include general contracting, pre-construction planning, and comprehensive project management services, as well as self-performed construction services (site work, concrete forming and placement, electrical, plumbing, and ventilation, etc.). As of June 17, 2021, the company’s market capitalization stood at USD 735.03 million.
Geographic Footprint (Source: Investor Presentation, May 2021)
USD 269.0 Million Contract Award: On May 03, 2021, the company’s subsidiary, Rudolph and Sletten, was awarded a California Department of General Services (DGS) contract worth ~USD 269.0 million for a design-build skilled nursing & memory care facility for the California Department of Veterans Affairs (CalVet). The new 240-bed skilled nursing facility will cover an area of 300,000 sq. ft and replace three existing facilities on the campus.
Low Bidder for LAX Airport Metro Project: On March 15, 2021, TPC was identified by the Los Angeles County Metropolitan Transportation Authority as the low bidder for the LAX Airport Metro Connector Project valued at ~USD 478.0 million. The project work is expected to begin in Q3FY21 and includes the construction of a new major transit station hub connecting the Metro Crenshaw/LAX and Green rail lines and bus routes with the LAX Automated People Mover.
Q1FY21 Results: The company reported a slight decline of 3.45% in total revenue to USD 1.21 billion in Q1FY21 (ending March 31, 2021) compared to USD 1.25 billion in Q1FY20, due to reduced activity in the Building segment. Income from construction operations for Q1FY21 was USD 49.70 million, up 5.24% from USD 47.23 million in Q1FY20. TPC’s net income for Q1FY21 was USD 25.11 million vs USD 26.14 million in Q1FY20. The backlog was robust at $8.1 billion, marginally down from $8.3 billion at the end of 2020. Backlog shrank in the quarter as revenue outpaced new awards by a small margin.
Key Risks: Most of TPC’s contracts are subject to specific completion schedule requirements and failure to meet these schedules could adversely affect its reputation and expose it to financial liability. Further, the civil construction and public-works building markets are dependent on funding by government agencies. Hence, the company’s operating results could be negatively impacted by any decrease or delay in government funding. On the flip side, the company will be a likely beneficiary of the Biden government’s proposed Infrastructure Bill.
Outlook: For FY21, the company expects EPS to range from USD 1.80 to USD 2.20. In its Q1FY21 Report, TPC stated that it is currently bidding on several large projects, with a large stream of other significant bids expected to occur later this year and into FY22.
Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation
(Analysis by Kalkine Group)
TPC Daily Technical Chart
Stock Recommendation: TPC stock fell 18.26% in the past 3 months, and is currently close to the mid-point of the 52-week range of USD 10.79 to USD 20.24. The stock is currently trading slightly below its 200 DMA level. On the technical chart, the next support level is USD 12.92. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 16.98. Considering the correction in the stock price in the past 3 months, upcoming projects, positive outlook, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 14.50, up 0.49% as of June 17, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.
Bank of Marin Bancorp
BMRC Details
Bank of Marin Bancorp (NASDAQ: BMRC) operates as a community bank in the San Francisco Bay Area, with assets of USD 3.1 billion as of March 31, 2021. With 21 branches and 7 commercial banking offices located across 7 Bay Area counties, the bank offers commercial banking, personal banking, specialty lending, and wealth management and trust services. As of June 17, 2021, the company’s market capitalization stood at USD 428.05 million.
Expanding Footprint in California: On April 19, 2021, the company signed a merger agreement with American River Bankshares (AMRB), which has 10 branches across Greater Sacramento, Amador, and Sonoma County regions, and total assets of USD 916.1 million as of March 31, 2021. The transaction is expected to close in Q3FY21 and upon completion, each outstanding AMRB share will be exchanged for 0.575 BMRC shares. Based on BMRC’s closing stock price of USD 39.06 on April 16, 2021, the deal is valued at USD 134.5 million (including the value of AMRB options being paid in cash by BMRC).
BMRC Pro Forma Profile (Source: Investor Presentation, April 19, 2021)
Q1FY21 Results: The company reported a slight decline of 6.11% in net interest income to USD 23.83 million in Q1FY21 (ending March 31, 2021) compared to USD 25.38 million in Q1FY20, mostly attributable to USD 1.31 million in accelerated discount accretion from early redemption of a subordinated debenture plus lower interest income due to two fewer days in the quarter. Net income for Q1FY21 was USD 8.95 million vs USD 7.23 million reported in Q1FY20. The total deposits increased to USD 2.66 billion as of March 31, 2021, from USD 2.50 billion reported at FY20 end.
Key Risks: As of December 31, 2020, ~77% of BMRC’s loans were secured by real estate, primarily in California. These real estate valuations can fluctuate significantly in a short period due to economic factors such as employment rates and interest rates. In addition, the company’s business strategy is focused on small to medium-sized businesses, which generally have smaller market shares, experience substantial volatility in operating results and may be more vulnerable to economic downturns. Hence, economic factors adversely affecting the real estate and these small to medium-sized businesses can hurt BMRC's financial condition.
Valuation Methodology: Price/Book Value Multiple Based Relative Valuation
(Analysis by Kalkine Group)
BMRC Daily Technical Chart
Stock Recommendation: BMRC stock fell 20.85% in the past 3 months, and is currently leaning towards the lower end of the 52-week range of USD 27.26 to USD 42.19. The stock is currently trading below its 200 DMA level. On the technical chart, the next support level is USD 28.06. We have valued the stock using the Price/Book Value-based relative valuation methodology and arrived at a target price of USD 36.87. Considering the correction in the stock price in the past 3 months, accretive merger with AMRB, decent financials, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 31.62, down 2.11% as of June 17, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.
Mastech Digital, Inc.
MHH Details
Mastech Digital, Inc. (NYSE: MHH) is a minority-held digital transformation IT services provider. Its IT staffing services span across digital and legacy technologies, and its digital transformation services include Salesforce.com, SAP HANA, and digital learning services. The company offers data management and analytics solutions, digital learning, and IT staffing services in the US, Canada, Europe, Singapore, and India. As of June 17, 2021, the company’s market capitalization stood at USD 169.07 million.
Foraying into Customer Experience Consultancy: On October 01, 2020, the company acquired AmberLeaf Partners, Inc., a Chicago-based customer experience consulting company, in a corporate transaction valued at USD 14.0 million. AmberLeaf offers managed services for a variety of Cloud-based enterprise applications across sales, marketing, and customer service.
Q1FY21 Results: The company’s total revenue for Q1FY21 (ending March 31, 2021) was USD 49.78 million, which was largely at par with USD 50.43 million reported in Q1FY20. There were significant project delays in Q1FY21, which were offset by increased demand for IT Staffing Services, with a 9% increase in billable consultants. MHH’S net income for Q1FY21 was USD 1.19 million vs USD 1.87 million in Q1FY20.
Key Risks: The company’s revenues are majorly dependent on clients located in North America, and ~47% of its revenues in FY20 were derived from its top ten clients. As a result, if these clients reduce/postpone their spending significantly, the demand for the company’s services may reduce, negatively affecting its revenues and profitability. In addition, any disruption in the supply of power, IT infrastructure, and telecommunications lines to the company's facilities could disrupt its business process and negatively impact its business and financial condition.
Valuation Methodology: EV/Sales Multiple Based Relative Valuation
(Analysis by Kalkine Group)
MHH Daily Technical Chart
Stock Recommendation: MHH stock fell 16.00% and 14.40% in the past 3 and 6 months, respectively, and breached the previous 52-week low of USD 14.71 (52-week high of USD 29.98). The stock is trading below its 200 DMA level. On the technical chart, the next support level is USD 12.74. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 16.72. Considering the correction in the stock price in the past 3 months, inorganic growth initiatives, decent financials, and associated risks, we recommend a “Speculative Buy” rating on the stock at the closing price of USD 14.33, down 3.11% as of June 17, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
* All forecasted figures and industry information have been taken from REFINITIV.
* Depending upon the risk tolerance, investors may consider unwinding their positions in a respective stock once the estimated target price is reached or if the price closes below the support level.
Kalkine Equities LLC provides general information about companies and their securities. The information contained in the reports, including any recommendations regarding the value of or transactions in any securities, does not take into account any of your investment objectives, financial situation or needs. Kalkine Equities LLC is not registered as an investment adviser in the U.S. with either the federal or state government. Before you make a decision about whether to invest in any securities, you should take into account your own objectives, financial situation and needs and seek independent financial advice. All information in our reports represents our views as at the date of publication and may change without notice.
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Past performance is not a reliable indicator of future performance.
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