TSX:MAXR - Post Discussion
Post by
retiredcf on Jun 22, 2022 11:24am
RBC
Their upside scenario target is US$56.00. GLTA
Outperform
NYSE: MAXR; USD 25.18; TSX: MAXR
Maxar Technologies Inc.
Refinancing lifts near-term overhang, focus now shifts to WV Legion launch as next catalyst
Our view: Maxar Technologies (MAXR) recently replaced its $500M 2023 notes with $500M notes due in 2027. The company had been waiting for the EOCL contract announcement to complete this refinancing. While the delay in the EOCL announcement likely cost the company in its rates (the new notes are at 7.75%, replacing the 9.75% 2023 notes), we believe this does help lift an overhang on the stock, and continue to view the expected launch of the WV Legion satellites as the next positive catalyst. We are maintaining our Outperform rating and $44 price target.
Key points:
The refinancing has lifted a near-term overhang on the stock. While the timing of the $500M 2027 note offering could have been better (the delay in the EOCL contract announcement likely cost the company some rate options) this does lift a near-term overhang on the stock. Note that the company continues to have net debt of 4.7x on a TTM EBITDA basis (3.6x on our 2023E EBITDA), and we continue to view further de-leveraging as a focus for the company. However, we do not believe current leverage levels are a headwind to sentiment on the stock now that the 2023 re-financing risk has been lifted.
We anticipate limited impact to the financial model. Prior to the offering, the company had been guiding to ~$125M in net interest in 2022. We believe the financing costs will largely offset the potential 2022 savings. However, we have slightly lowered out 2023 EBITDA to reflect timing on the contribution of the World View (WV) Legion launch. The first two satellites are now expected to be launched in September.
The company tightened its 2022 guidance with the EOCL contract announcement. As a result, we are not anticipating a change to the 2022 outlook with the 2Q22 results, however, we do believe investor focus is shifting to 2023. We continue to expect the eventual launch of the initial 2 WV Legion satellites to be a positive catalyst. Supply chain disruptions and other one-off items have pushed the initial launch to the right, but we continue to view the earth observation market as supply constrained, and we believe the demand for the data from WV Legion will be robust.
With MAXR still down ~15% YTD, and up ~3% since the start of the war in Ukraine, we believe the set-up remains very favorable. The stock did not receive the sustained bounce we anticipated from the EOCL contract award, but believe broader market sentiment is as much of a near-term headwind to sentiment as are the company specific issues. Note that peer SMID defense stocks are up an average of 7.4% since the start of the war in Ukraine. Our $44 price target is based on the blend of a 10x EBITDA multiple and a 24.5x EPS multiple applied to our 2023 estimates. We believe a multiple at the mid-point of historic ranges is appropriate considering the expected 2023E upside, partially offset by continued timing and macro risk.
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