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Equitrans Midstream Corp.
ETRN Details
Equitrans Midstream Corp. (NYSE: ETRN) is a provider of midstream services to its customers in Pennsylvania, West Virginia, and Ohio in the United States. ETRN is one of the largest gas gatherers in the US (in the Appalachian Basin). The company operates across three lines of business, namely 1) Gathering of natural gas, which is delivered by dry gas gathering systems of high-pressure gathering lines 2) Transmission of natural gas, provided by Federal Energy Regulatory Commission (FERC) regulated interstate pipelines and storage systems 3) Freshwater sourcing conducted by water pipelines, pumping stations that collect flow back and produced water for recycling and disposal purposes. As of June 01, 2021, the company’s market capitalization stood at USD 3.56 billion.
Net Zero Emission by 2050: On April 16, 2020, the company announced its support for reducing methane and greenhouse gas emissions. As mentioned in its climate report, ETRN took the necessary steps to improve the greenhouse gas emission measurements and tracking across its business verticals. The company has set its goal to go carbon net-neutral by 2050. It expects to achieve a 50% reduction in methane emissions by 2030 and a 50% reduction in total greenhouse gas emissions by 2040.
Q1FY21 Results: The company reported a 16.13% decline in operating revenues to USD 379.99 million in Q1FY21 (ending March 31, 2021) compared to USD 453.11 million in Q1FY20 (ending March 31, 2020), primarily due to a decrease in revenues from the Gathering segment and Water segment. The company reported a 6.81% decline in operating income to USD 225.58 million in Q1FY21 compared to USD 242.08 million in Q1FY20. Net income fell to USD 76.59 million in Q1FY21 compared to USD 189.56 million in Q1FY20 due to higher net interest expense and additional loss on extinguishment of debt charges. As of March 31, 2021, the company’s cash and cash equivalents stood at USD 231.91 million, with long-term debt of USD 6.42 billion.
Key Risks: The company’s largest customer EQT Corporation accounted for 74%, 69%, 64% of the company’s total revenues for FY18, FY19, and FY20, respectively. The significant concentration of the revenue from the single customer could hamper the company's operational and financial strength in the future.
Outlook:
ETRN FY21 Guidance (Source: Investor Presentation, May 2021)
Valuation Methodology: EV/ EBITDA Multiple Based Relative Valuation
(Data Source: REFINITIV, Analysis by Kalkine Group)
ETRN Daily Technical Chart (Source: REFINITIV)
Stock Recommendation: ETRN stock price has already surged 23.29% in the past three months and is currently trading at a slightly higher band of the 52-weeks range of USD 6.23 to USD 11.66. The stock is currently trading close to its 200 DMA levels. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 9.63. Considering the significant increase in the stock price in the past three months, robust dividend yield, strong margins, high debt levels, and current valuation, we recommend a "Hold" rating on the stock at the closing price of USD 9.05, up by 9.83% as of June 01, 2021.
* The reference data in this report has been partly sourced from REFINITIV.
International Money Express, Inc.
IMXI Details
International Money Express, Inc. (NASDAQ: IMXI) is engaged in money remittance services between North America (the US and Canada) and Mexico, Guatemala, and other countries in Latin America, Africa, and Asia (Latin American and Caribbean region i.e., LAC). The company provides wire transfer, money order, foreign exchange, and cash checking services. It operates offline through a network of agents located in various retail establishments and self-operated stores in the US and Canada, and online through its app and website. As of June 01, 2021, the company’s market capitalization stood at USD 597.71 million.
Q1FY21 Results: The company reported an increase of 22.43% in total revenue to USD 94.58 million in Q1FY21 (ending March 31, 2021) compared to USD 77.25 million in Q1FY20, primarily due to a 20.60% increase in revenue from wire transfer and money order fees. The net income for Q1FY21 was USD 8.98 million, higher than USD 5.68 million in Q1FY20.
Key Risks: IMXI earns most of its revenue from its key sending agents, who use the company’s services and provide them to end customers. This results in significant distribution channel concentration risk, as any loss of major sending agents could impact the topline as well as earnings. Further, the company assists the US federal and state in the prevention of money laundering and terrorist financing activities. As there is a significant rise in digital transactions, the probability of money laundering and terrorist financing activities is also increasing. Any litigation, court rulings related to such activities or events could have a material and adverse effect on the company.
Outlook: In its Q1FY21 Report, the company stated that it expects a 16% - 18% revenue growth, with revenue for FY21 to range between USD 414.0 million and USD 421.0 million. Net Income is expected to be in the range of USD 40.0 million – USD42.0 million (19% - 24% growth).
IMXI FY21 Guidance (Source: Q1FY21 Earnings Presentation, May 2021)
Valuation Methodology: Price/Earnings Multiple Based Relative Valuation
(Data Source: REFINITIV, Analysis by Kalkine Group)
IMXI Daily Technical Chart (Source: REFINITIV)
Stock Recommendation: IMXI fell 5.07% and 11.24% in the past 6 and 9 months, respectively, and is currently at the mid-point of the 52-week range of USD 11.03 to USD 18.69. The stock is currently trading close to its 200 DMA levels. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 16.98. Considering the correction in stock price, decent financials, strong brand name (particularly in the LAC region), and current trading levels, we recommend a “Hold” rating on the stock at the closing price of USD 15.08, down by 1.24% as of June 01, 2021.
* The reference data in this report has been partly sourced 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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