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Tutor Perini Corporation
TPC Details
Tutor Perini Corporation (NYSE: TPC) is a global construction company that provides general contracting, construction management, and design-build services to private clients and public agencies. TPC's services comprise general contracting, pre-construction planning, comprehensive project management services, and self-performed construction services (site work, concrete forming and placement, electrical, plumbing, ventilation, etc.). As of September 28, 2021, the company's market capitalization stood at USD 694.07 million.
Gaining Key Commercial Contracts: On September 24, 2021, Rudolph and Sletten, a subsidiary of TPC, was awarded a contract to construct a replacement hospital for Cedars-Sinai Marina del Rey Hospital in Los Angeles County, California. With contract value included in the backlog of Q3FY21, the project is scheduled to commence in October 2021 and conclude in 2026.
Previously, on August 19, 2021, Naval Facilities Engineering Systems Command, Pacific Division granted a fixed-price contract worth ~USD 98.3 million to a joint venture between TPC and Black Construction to construct bachelor officer quarters at Marine Corps Base Camp Blaz on Guam. The Japanese government financed the contract as part of an international agreement with the US, comprising a multi-story housing tower with an attached one-story common space wing and a detached utility structure. While the engineering work has already begun, fieldwork is slated to begin in November 2021, with substantial completion projected in May 2024.
Q2FY21 Results: The company reported a 4.48% decline in revenue to USD 1.22 billion in Q2FY21 (ended June 30, 2021) from USD 1.28 billion in Q2FY20. The Civil segment, which accounted for 45.55% of the total revenue in Q2FY21, reported a YoY decline of 2.39%. Net income for the company increased to USD 31.17 million in Q2FY21 vs. USD 18.71 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 231.13 million and total debt of USD 970.24 million.
Key Risks: The majority of TPC's contracts are subject to stringent completion deadlines. Any failure to meet the contractual schedule requirement could lead to liquidated expenses and damage its reputation. In addition, TPC is dependent on work granted by federal, state, and local governments for civil construction projects. Hence, any downturn or delay in government spending for such projects could negatively impact the company's financial performance.
Outlook: In its Q2FY21 earnings release, TPC stated that it expects to clock EPS in the range of USD 1.80 – 2.20 in FY21.
Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation
(Analysis by Kalkine Group)
TPC Daily Technical Chart (Source: REFINITIV)
Stock Recommendation: TPC's stock price has declined 3.97% in the past three months and is currently leaning towards the lower end of its 52-week range of USD 10.79 to USD 20.24. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is at 45.50. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 15.08. Considering the slight correction in the stock price in the past three months, recent commercial contracts, decent balance sheet, and associated risks, we recommend a "Hold" rating on the stock at the closing price of USD 13.05, down 3.97% as of September 28, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
*All forecasted figures and industry information have been taken from REFINITIV.
Natural Gas Services Group, Inc.
NGS Details
Natural Gas Services Group, Inc. (NYSE: NGS) is engaged in manufacturing, renting, and distributing natural gas compressors, flare systems, and other allied equipment of compression units used in small, medium, and large horsepower applications for oil and natural gas production. NGS also sells custom-built natural gas compressors to meet customers' needs, such as pressures, production characteristics, and specific applications. As of June 30, 2021, it had rented 1,245 natural gas compressors with a total capacity of 287,365 HP to 79 customers.
Share Repurchases: In H1FY21, NGS repurchased 175,007 common shares, representing ~1.3% of total outstanding shares, at an average price of USD 10.81 per share, for an aggregate consideration of USD 1.9 million. At period-end, the company had ~USD 7.6 million available under its repurchase authorization.
Q2FY21 Results: The company reported YoY growth of 1.98% in total revenue to USD 17.75 million in Q2FY21 (ended June 30, 2021) compared to USD 17.41 million in Q2FY20. Rental income, which accounted for 87.97% of the total revenue in Q2FY21, reported YoY growth of 3.19%, whereas the Sales segment declined by 21.66% YoY. NGS reported a net loss of USD 1.92 million in Q2FY21 vs. a net income of USD 0.17 million in Q2FY20. As of June 30, 2021, the company had cash & cash equivalents of USD 26.17 million and no outstanding debt.
Key Risks: The majority of NGS' revenue is generated from a limited number of customers, with Occidental Permian, Ltd. representing ~30% of net sales and ~35% of account receivables in FY20. As a result, the loss of any of its key customers could harm its financial performance. Furthermore, NGS faces direct competition from more significant equipment and service providers, having higher financial and operational resources at their disposal. Hence, competitors' advanced innovation or superior product development could have an adverse impact on the company's operations.
Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation
(Analysis by Kalkine Group)
NGS Daily Technical Chart (Source: REFINITIV)
Stock Recommendation: NGS' stock price has decreased 4.92% in the past three months and is currently at the mid-point of its 52-week range of USD 8.00 to USD 12.23. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is at 57.01. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 11.19. Considering the slight correction in the stock price, strong balance sheet, current valuation, and associated risks, we recommend a "Hold" rating on the stock at the current price of USD 10.04, up 0.30% as of September 28, 2021, 2:05 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.
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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