Western Union Co

Western Union Co (NYSE: WU) provides international and domestic money transfer services. It caters to nearly 150 million digital and retail customers in over 200 countries or territories.

Investment Rationale – Expensive at USD 24.70

• From a technical standpoint, 14-day RSI (60.01) seems unfavourable and upside potential is sceptical.
• Since the FY16, gross margin has remained below 40%, which is lesser than the industry median.
• The macroeconomic setbacks continued to impact revenue generation.
• The Covid-19 pandemic can impact the stated guidance.

Risk Assessments

• Failure to maintain the agent network, deterioration in customer confidence, and increase foreign exchange regulations can impact the business performance.
• WU is also exposed to foreign exchange risk, credit defaults, and increased cybersecurity issues.

Recent News

25 February 2021: WU expanded its global B2B payment platform with SWIFT Global Payment Initiative, and therefore, strengthened its international currency options within its Mass Payment API to 130.

Financial Highlights for the year ended 31 December 2020 (as 19 February 2021)

 (Source: Company Website)

• During FY20, revenue slightly declined by 9% against FY19, which was largely led by the macroeconomic impact of the Covid-19 pandemic.
• The GAAP operating margin in FY20 stood at 20%, while it was 17.6% in FY19. This increase was driven by cost savings and improved productivity.
• Subsequently, earnings per share rose US$1.87 in FY20 from US$1.73 in FY19.
• The Company returned US$587 million in the form of share repurchases and dividends to shareholders during FY20, post generating US$878 million in GAAP cash flow from operating activities for FY20.

Share Price Chart    

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

Although the Company’s touched all-time highs for money transfer transaction; however, it is mindful to note that revenue declined during FY20. Meanwhile, the stock price is trading close to a 52-week high, raising doubts over the upside potential. Therefore, it is advisable not to take a fresh position in the stock and wait for the due corrections with the evolving state of the Covid-19 pandemic and macroeconomic uncertainties. Stock 52 week High and Low were USD 25.73 and USD 17.39, respectively.

Based on the weak fundamentals, heightened uncertainties, and valuation conducted above, we have given an “Expensive” stance on Western Union Co at the closing price of USD 24.70 (as on 25 March 2021), while we look forward to reviewing the Company when the Company started reporting profitability.   

Zosano Pharma Corp

Zosano Pharma Corp (NASDAQ: ZSAN) is a biopharmaceutical entity that delivers molecules and system administration of therapeutics. Its Qtrypta*™ is currently under the US FDA (Food and Drug Administration) review and should be available in 2021 if approved.

Investment Rationale – Avoid at USD 1.24

• From a technical standpoint, 90-day RSI (54.23) is hovering around the overbought position, and therefore, a short-term dip can be anticipated.
• The Company has a history of operating losses and may never become profitable.
• The resubmission of Qtrypta NDA (new drug application) would lead to additional cost and delay the commercialization.
• ZSAN has no product sales to date, and its prospects are dependent upon its ability to finance product developments, commercialisation efforts, and regulatory approvals.

Risk Assessments

• The Company requires additional funding to support its growth objectives and other commercialisation efforts as clinical trails are quite expensive, and ZSAN does not generate any operating profit.
• The Covid-19 pandemic can delay the clinical trials and regulatory approvals.
• If the Company is unable to sustain its listing on the NASDAQ, it would be difficult to sell securities.

Recent News

22 February 2021: Zosano has received Type A meeting minutes from FDA for the resubmission of Qtrypta™. The FDA has also recommended a skin examination on patients.

Financial Highlights for the year ended 31 December 2020 (as on 11 March 2021)

 (Source: Company Website)

• During FY20, the Company maintained focus on its product candidate Qtrypta™, which now require resubmission.
• On 6 August 2020, it signed a master services agreement with Eversana Life Science Services, LLC for the commercialisation of Qtrypta in the US.
• The Company generated no product sales in FY20; however, net losses reduced against FY19 with service revenue.
• The service revenue was related to its feasibility studies as the Company recognized revenue from two entities in FY20.

One Year Share Price Chart    

 (Source: Refinitiv, Thomson Reuters)

Valuation Methodology: EV/Sales Approach (NTM) (Illustrative)

Conclusion

During FY20, ZSAN failed to attain any product revenue and even the service revenue can fluctuate in FY21 with variations in volume and activity of its feasibility studies. The cash and cash equivalent position at the end of FY20 was slightly lower than the FY19, and the Company might need additional funding to pursue resubmission of its NDA and commercialization endeavours. Meanwhile, the macroeconomic uncertainties arising from the Covid-19 pandemic continued to create risk for regulatory approvals and clinical trials. Therefore, it is rational to avoid taking a fresh position in the prevailing scenario. Stock 52 week High and Low were USD 3.06 and USD 0.3275, respectively.

Based on the heightened operational risk, uncertain market conditions, and valuation methodology, we have given an “Avoid” stance on Zosano Pharma Corp at the closing price of USD 1.24 (as on 25 March 2021), while we look forward to reviewing the commercialisation of Qtrypta™. 

*All forecasted figures and Peer/Industry Information have been taken from Refinitiv, Thomson Reuters.

*Dividend Yield may vary as per the stock price movement.

Disclaimer

The advice given by Kalkine Canada Advisory Services Inc. and provided on this website is general information only and it does not take into account your investment objectives, financial situation and the particular needs of any particular person. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. The website www.kalkine.ca is published by Kalkine Canada Advisory Services Inc. The link to our Terms & Conditions has been provided please go through them. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine do not hold positions in any of the stocks covered on the website. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations later.