Fresh Del Monte Produce, Inc.

FDP Details

Fresh Del Monte Produce, Inc. (NYSE: FDP) is a leading vertically integrated producer and distributor of fresh-cut fruit and vegetables in Europe, Africa, and the Middle East, as well as a leading producer and marketer of prepared fruit and vegetables, juices, beverages, and snacks. The Del Monte brand is used to sell the company's products worldwide. Its main manufacturing facilities are in North, Central, South America, Asia, and Africa.

Latest News:

• Steps Towards Carbon Reduction: FDP stated on November 04, 2021, that its emission reduction objectives had been approved by the Science Based Targets initiative (SBTi) as commensurate with the levels required to satisfy the Paris Agreement's goals. The 27.5% reduction goal applies to greenhouse gas emissions from the company's operations (scopes 1 and 2) and is in line with the reductions needed to keep global warming well below 2 degrees Celsius. Ahead of COP26, the FDP commits to reducing Scope 1, 2, and 3 Greenhouse Gas Emissions by 2030.
• Price Increase: FDP notified customers on October 27, 2021, that prices for bananas (including organics and plantains), pineapples, and fresh-cut fruit would increase on November 01, 2021. The decision was made due to extraordinary market conditions and inflationary pressures affecting all industries, particularly FDP's production and supply chain.

9MFY21 Results:

• Minor Increase in Revenues: The company's net sales increased by 1.08% during 9MFY21 (ended October 01, 2021) to USD 3.23 billion from USD 3.20 billion during 9MFY20 (ended September 25, 2021), primarily due to high volumes within its other products and services and new and value-added products segments.
• Progress in Net Income: FDP witnessed an increase in net income to USD 90.60 million during 9MFY21 from USD 47.30 million reported during 9MFY20.
• Leveraged Balance Sheet: As of October 01, 2021, the company's cash and cash equivalents stood at USD 19.00 million, with total debt (including finance lease liabilities) of USD 477.10 million.

Key Risks:

• Customer Concentration Risk: FDP's top ten largest customers contributed 33% of its net revenue in FY20. Further, Wal-Mart, Inc. also contributed 9% of total revenue in FY20. As a result, losing any of these critical customers could harm the company's financials and cash flows.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(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.

FDP Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

FDP's stock price has fallen 23.88% in the past six months and is currently trading in the lower-band of its 52-week range of USD 22.92 to USD 36.57. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 40.65. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 32.85.

Considering the correction in the stock price, decent balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 26.30, up 0.57% as of December 14, 2021, 1:25 PM ET.

* 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.

 

Ultralife Corporation

ULBI Details

Ultralife Corporation (NASDAQ: ULBI) is a global provider offering services to the government, defense, and commercial sectors, spanning from power solutions to communications and electronics systems. It creates rechargeable and non-rechargeable batteries, charging systems, electronic systems and accessories, as well as custom-built systems including RF amplifiers, power supplies, cable and connector assemblies, amplified speakers, etc.

Latest News:

• Acquisition of Excell: ULBI announced on December 14, 2021, that it had purchased all outstanding shares of Excell Battery Group (Excell), a prominent independent designer and manufacturer of high-performance intelligent battery systems, for USD 23.5 million in an all-cash deal, subject to standard working capital and net cash adjustments. Within twelve months, the deal is expected to be EPS accretive.
• Grant of a DLA Award: On December 14, 2021, ULBI was awarded a firm-fixed-price, indefinite-delivery/indefinite-quantity contract for up to USD 9.9 million from the Defense Logistics Agency (DLA) of the United States for its lithium manganese dioxide, non-rechargeable BA-5390 batteries. The contract has a three-year base period and two one-year option periods. The DLA has sole discretion over actual delivery orders, including quantities and timing, under this contract.

Q3FY21 Results:

• Reduction in Revenue: The company reported a 10.68% decline in revenues to USD 21.76 million in Q3FY21 (ended September 30, 2021) from USD 24.36 million in Q3FY20, owing to lower government/defense sales during the period.
• Incurring Net Losses: Its Q3FY21 net loss amounted to USD 0.59 million vs. a net income of USD 0.41 million reported in Q3FY20.
• Strong Balance Sheet: ULBI exited the quarter with a cash balance of USD 15.85 million, with a total debt of USD 0.25 million.

Financial Metrics (Source: Investor Presentation, October 28, 2021)

Key Risks:

• Concentrated Customer Group: ULBI's top two clients, L3Harris Technologies and Thales Defense & Security, Inc., accounted for 17% and 6%, respectively, of its total revenue in FY20. As a result, losing any of these significant customers could have a negative impact on the company's financial success.
• Dependence on the US and Foreign Military: Sales to the US and international militaries and related agencies represented 42% of ULBI's total revenue in FY20. Hence, any unfavorable budget and appropriation decisions made by governments could hurt the company's bottom line.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(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.

ULBI Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ULBI's stock price has declined 31.49% in the past three months and is currently leaning towards the lower band of its 52-week range of USD 4.92 to USD 11.78. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 37.71. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 6.75.

Considering the significant correction in the stock price, robust balance sheet, current valuation, and associated risks, we recommend a "Speculative Buy" rating on the stock at the current price of USD 5.33, up 2.30% as of December 14, 2021, at 11:49 AM ET.

* 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.