Schlumberger N.V.

SLB Details

Redemption of Senior Notes: Schlumberger N.V. (NYSE: SLB) is engaged in providing technology for reservoir categorization, production drilling, & processing to the oil and gas industry. On May 28, 2021, the company informed the market that its indirect wholly owned subsidiary of Schlumberger (“SISA”), Schlumberger Investment SA, is intending to redeem all $664,776K of its outstanding 3.3% senior notes due on June 28, 2021. 

SLB Inks Deal with AWS & NOV: On May 20, 2021, SLB announced a strategic alliance with Amazon Web Services (AWS) to implement domain centric digital solutions on the cloud with AWS. The move further fortifies SLB’s postion and strategies to expand access to the DELFI environment, in order to provide customers with a more secure, extensive, and reliable global infrastructure. On May 10, 2021, the company collaborated with NOV to increase speed of automated drilling solutions implementation by oil and gas operators and drilling contractors. The alliance aids the automation of manual workflows, thus enhancing safety, consistency, and decision making in drilling operations.

1QFY21 Financial Highlights for the Period Ended 31 March 2021: During the period, the company reported total revenue at $5,223 million, down 30% year over year. The company reported a net income per share of 21 cents as compared to 25 cents per share reported in the year ago period. The company exited the period with cash and short-term investments of $2,910 million. Cash flow from operating activities stood at $429 million, with free cash flow amounting to $159 million.

Key Highlights; Analysis by Kalkine Group

Key Risks: On the flip side, pricing pressure continues to remain a major headwind for SLB. Further, stiff competition from peers adds to the woes. Also, rising expenses and foreign exchange fluctuation risk may weigh on company’s financial performance, going forward. 

What to Expect: For FY21, the company expects capital investment to be in the ambit of $1.5-$1.7 billion. Owing to the release of COVID-19 vaccines and economic impetus measures, SLB opines a rise in optimism for fuel demand recovery in 2021. SLB expects increase in demand by 5-6 million barrels of oil per day (MMBbls/d) by the end of FY21. Further, SLB anticipates double-digit growth in international revenues 2HFY21. 

Valuation Methodology: P/E Multiple Based Relative Valuation (Illustrative) 

Source: 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. 

Stock Recommendation: Over the last six months, the stock went up by ~43.19%. The stock is trading close to its 52-weeks’ high level of $34.33. On a technical analysis front, the stock of SLB has an immediate support level of ~$29.53 and a resistance level of ~$35.38. We have valued the stock using the P/E multiple based illustrative relative valuation method and arrived at a target price with a correction of low-single digit (in percentage terms). We believe that the company can trade at a slight discount as compared to its peer’s average considering, volatility in the market, pricing pressure, and decline in revenues in 1QFY21. We have taken peers like Halliburton Co (NYSE: HAL), Baker Hughes Co (NYSE: BKR), to name a few. Considering the current high trading levels, recent rally in the stock price and high debt to equity ratio, we suggest investors to book profits and give a ‘Sell’ rating on the stock at the closing price of $31.33, down by ~0.03% as on May 28, 2021.

SLB Daily Technical Chart, Data Source: REFINITIV 

Zynerba Pharmaceuticals, Inc.

ZYNE Details

1QFY21 Key Operational Highlights: Zynerba Pharmaceuticals, Inc. (NASDAQ: ZYNE) is a clinical-stage specialty pharmaceutical company focused on the development of transdermal cannabinoid therapies used for rare and near-rare neuropsychiatric disorders.  ZYNE announced its quarterly results for the period ended 31 March 2021, wherein the company reported a net loss from operations amounting to $7.96 million, as compared to the net loss of $12.34 million in Q1FY20. Diluted net loss per share for the quarter stood at $0.20. Net loss for the quarter included $82k in foreign currency losses. Research and development expenses stood at $4.6 million in 1QFY21, down from $6.88 million in the previous year’s corresponding quarter. General and administrative expenses stood at $3.27 million as compared to $3.92 million in 1QFY20.  The company reported $93.13 million in cash and cash equivalents as on 31 March 2021. Notably, the company does not generate any revenue as it has no marketed products and collaborations.

Cash Highlights; Analysis by Kalkine Group

Key Risks: On the flip side, the company has been carrying the burden of operational inefficiency for the past numerous quarters. Increasing R&D and SG&A expenses is likely to reduce operating margins.

Also, the company is exposed to risks relating to foreign operations that are required to be addressed from time to time. The company also faces stiff competition from peers which adds to the woes.

What to Expect:  The company took the necessary steps to ensure the safety and well-being of patients and caregivers, curtail the risk of supply disruption, and achieve its growth strategies. The company expects to initiate RECONNECT, a Phase 3 trial of Zygel in children and adolescents with FXS, in the 3QFY21. ZYNE opines that if the outcome from the study is positive, then it will be enough to help the submission of a New Drug Application for Zygel in patients with FXS. Further, the company stated that it plans to review with the FDA data supporting the prospective effectiveness of Zygel in ASD in 1HFY21.

Stock Recommendation: Over the last six months, the stock of ZYNE has provided a return of ~27.07% and in the last nine months, it has provided a return of ~49.87%. The stock made a 52-week low and high of $3.12 and $9.00, respectively. On the technical analysis front, the stock has a support level of ~$3.55 and resistance of ~$7.00. Considering the stock’s decent returns in the past six- and nine-months period, continued impact of COVID-19 pandemic, volatility in the market, and associated key risks, we advise investors to book profit and give a “Sell” rating on the stock at the closing price of $5.68, up by ~7.58% as on 28 May 2021.

ZYNE Daily Technical Chart, Data Source: REFINITIV 

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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.