Bonanza Creek Energy, Inc.

 BCEI Details

Bonanza Creek Energy, Inc. (NYSE: BCEI) is an oil and natural gas company. It engages in the exploration and production of oil and related liquids-rich natural gas in the United States. Its principal oil and liquids-weighted assets are situated in the Wattenberg Field in Colorado. In Q1FY21, crude oil sales accounted for 67.51% of its total revenue. As of June 30, 2021, the company’s market capitalization stood at USD 1.43 billion.

Series of M&As to Gain Dominance in the Denver-Julesburg (DJ) Basin: On April 01, 2021, BCEI closed the acquisition of Highpoint Resources Corporation, a DJ Basin-focused oil & gas company, for a total transaction value of USD 376.0 million as of November 06, 2020. As a result, BCEI shareholders now own ~68% of the combined company, with HighPoint’s stakeholders holding ~32%. Subsequently, on May 10, 2021, the company and Extraction Oil & Gas, Inc. (XOG) signed an all-stock merger of equals agreement. The transaction will result in the formation of a new combined entity, Civitas Resources, Inc., with an enterprise value of ~USD 4.5 billion (based on June 04, 2021 share prices). The existing BCEI and XOG shareholders will each hold a 50% stake in Civitas.

On June 07, 2021, Civitas signed an agreement to acquire Crestone Peak Resources, another DJ Basin-focused energy producer in an all-stock transaction. Under the terms of the agreement, 100% of the equity interests in Crestone will be exchanged for ~22.5 million BCEI shares, resulting in BCEI and XOG shareholders each owning ~37% of Civitas and Crestone shareholders holding the remaining ~26% stake in Civitas upon closing.

Q1FY21 Results: BCEI reported total revenues of USD 74.16 million for Q1FY21 (ending March 31, 2021), compared to USD 60.41 million in Q1FY20, realizing double-digit growth of 22.77% YoY primarily due to favorable pricing. Operating expenses declined by 36.96% YoY in Q1FY21 to USD 50.67 million as compared to USD 80.39 million in Q1FY20. Despite improvement in operating performance of the company, BCEI reported a net loss of USD 0.12 million in Q1FY21 vs net profit of USD 78.55 million in Q1FY20, on account of loss arising from derivatives.  

Key Risks: Prices of oil and natural gas liquids (NGLs) are highly volatile and unpredictable, any unfavorable movement in their prices could negatively impact the topline of the company. Moreover, all the reserves and operations of BCEI are in the Wattenberg Field, and any disruption in the production process or limited access to reserves in the core operating area could adversely impact its operations. Further, BCEI does not operate all the properties in which it has a stake on its own, any failure on the contractual obligation by operating partners could harm its business.   

Outlook: For FY21, BCEI forecasts production of 42 thousand barrels of oil equivalent per day (Mboe/d) along with levered free cash flow (LFCF) of over USD 150 million. In FY21, its capital expenditure is expected to be in the range of USD 150 – 170 million.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

BCEI Daily Technical Chart

Stock Recommendation: BCEI share price increased 31.74% and 137.85% in the past 3 and 6 months, respectively, and is currently leaning towards the higher band of the 52-week range of USD 14.35 to USD 50.98. The stock is currently trading above its 50 and 200 DMA levels, and its RSI Index is 53.80. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 50.08. Considering the significant uptick in the stock price in the past three months, decent fundamentals, positive outlook, and associated risks, we recommend a “Watch” rating on the stock at the closing price of USD 47.07, up by 0.97% as of June 30, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.

Meridian Bioscience, Inc.

VIVO Details

Meridian Bioscience, Inc. (NASDAQ: VIVO) is an integrated life science company. Its operating segments are 1) Diagnostics, which develops and commercializes test kits for gastrointestinal, viral, respiratory, and parasitic infections, and 2) Life Science, which deals in the manufacturing and distribution of bulk antigens, antibodies, PCR/qPCR reagents, nucleotides, and bioresearch reagents used by pharmaceutical and biotechnology companies. As of June 30, 2021, the company’s market capitalization stood at USD 976.66 million.

Launching Innovative & Cost-Effective Solutions: On June 16, 2021, VIVO unveiled its Lyo-Ready RT-LAMP Mix, designed to detect RNA viruses in a quick, reliable, and sensitive manner. RT-lamp is a low-cost and uncomplicated technology and provides a pragmatic solution for portable testing of influenza, hepatitis C and other RNA virus-caused diseases at non-standard institutions such as airports, rural hospitals, and homes. Previously, on May 17, 2021, it also launched the new Air-Dryable Direct DNA qPCR Plant Mix, which helps in the development of ambient temperature stable assays without the need for lyophilization, and manufactures field-friendly and economically viable molecular plant assays.

Q2FY21 Results: VIVO reported total revenues of USD 85.26 million for Q2FY21 (ending March 31, 2021) compared to USD 57.30 million in Q2FY20, thus registering a growth of 48.81% YoY. The Life Science segment, which accounted for 62.53% of revenue in Q2FY21, reported an increment of 138.50% YoY driven by higher demand of molecular reagents by diagnostic test manufacturers for use in COVID-19 related PCR and immunoassay tests. The impact of the strong performance of the topline percolated down to the company's operating performance, wherein it reported a twofold increment in its operating income to USD 34.20 million in Q2FY21 as compared to USD 11.79 million in Q2FY20. The operating margin almost doubled to 40.11% in Q2FY21 in contrast to 20.58% in Q2FY20. Net income soared by 181.03% YoY in Q2FY21 to USD 26.30 million vs USD 9.36 million in Q2FY20.

Key Risks: In FY20, two US distributors accounted for 23% of the revenue from the Diagnostics segment. Similarly, three diagnostic manufacturing customers fetched 27% of the revenue from the Life Science segment. Therefore, the loss of any of these critical customers could harm the financials of the company. In addition, about one-third of VIVO’s revenues were in currencies other than USD in FY20, exposing it to currency fluctuations. Further, the company operates in a highly regulated industry, and it must comply with strict quality control norms, non-observance of which would lead to recall or even suspension of its products.

Outlook: In FY21, VIVO expects to generate total revenues in the range of USD 305 – 335 million, with an adjusted operating margin ranging between 30% and 33%. EPS is estimated to be in the range of USD 1.60 – 1.80.

 Valuation Methodology: EV/Sales 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.

VIVO Daily Technical Chart

Stock Recommendation: VIVO stock price has increased 14.04% and 30.62% in the past 6 and 9 months respectively and is currently at the mid-point of the 52-week range of USD 12.98 to USD 30.65. The stock is currently trading marginally above its 50 and 200 DMA levels, and its RSI Index is 63.11. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 23.80. Considering the significant uptick in the stock price, strong financial performance, medical innovations, and current valuation, we recommend a “Watch” rating on the stock at the closing price of USD 22.18, down by 1.60% as of June 30, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

* The reference data in this report has been partly sourced from REFINITIV.