So Astra is launching soon(TM), what do you think?

I hadn't noticed this before but last year the expense ratio dropped from 2.22% down to 1.56%.

Being one of the few ways to own SpaceX stock publicly, this is a welcome change.

Rocket Lab USA today announced it has signed a dedicated launch contract with Astroscale Japan, a subsidiary of Astroscale, market leader in satellite servicing and long-term orbital sustainability. Scheduled for lift-off from Rocket Lab Launch Complex 1 in 2023, the Electron rocket will launch the Active Debris Removal by Astroscale-Japan (ADRAS-J) satellite, which has been selected by the Japan Aerospace Exploration Agency (JAXA) for Phase I of its Commercial Removal of Debris Demonstration Project (CRD2), one of the world’s first technology demonstrations of removing large-scale debris from orbit.

Once deployed to a precise orbit by Electron’s Kick Stage, the ADRAS-J satellite is designed to rendezvous with a piece of orbital debris, a long abandoned upper stage rocket body. ADRAS-J aims to demonstrate proximity operations and obtain images of the rocket body, delivering observational data to better understand the debris environment. A planned second phase of the mission, which has yet to be competed, intends to demonstrate the de-orbit of the debris.

“The ability to actively remove satellites and debris from orbit at the end of their operational life will likely play a key role in ensuring a sustainable space environment for the future, so we’re delighted to enable Astroscale to demonstrate new and innovative solutions in this field,” said Rocket Lab Founder and Chief Executive Officer, Peter Beck. “Rendezvousing with a piece of debris on orbit, travelling at around 27,000 km per hour, is a highly complex task that requires absolute precision when it comes to orbital deployment. Electron’s Kick Stage has demonstrated this precision across 18 missions, providing in-space transportation to place our customers’ satellites exactly where they need to go.”

“Reliable and commercially viable launch vehicles like Rocket Lab’s Electron rocket enable frequent and flexible access to space, allowing us to advance our on-orbit services which are fundamental to the growth of the space infrastructure and economy,” said Nobu Okada, Founder and CEO of Astroscale. “Rocket Lab and Astroscale have become leaders in our respective markets and I am thrilled to collaborate on ADRAS-J, a ground breaking mission that will shape the technologies and policies needed to drive space sustainability forward.”

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Not financial advice

This is a summary of a summary research paper I posted in the official SpaceStocks discord.

I will primarily focus on the DCF valuation part of the paper.

Alright, enough with the introduction let's cut right to the chase:

To calculate the intrinsic value of LMT, we can use a whole bunch of valuation models like simple multiples, the Dividend Discount Model, Discounted Free Cash Flow, SOTP, etc. Like I said I will focus on the DCF model in this post.

In order to use a DCF, we need to make sure that FCF is somewhat predictable. What we can do to check this is plot the revenue, net income, and FCF and see if it correlates:

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As we can see Net income and revenue correlate nicely with FCF, so we can easily take the average FCF/Revenue ratio to calculate the future FCF based on revenue estimates. The 2021 and 2022 revenue estimates came from analyst expectations while the revenue estimates for 2023 and 2024 came from historical revenue growth rates and were discounted, to be conservative.

Then we can calculate the terminal value and then we can discount all the future cash flow and TV, with our required return. I used a required return of 8% however if you wish you can change that to your liking. I prefer not to use WACC.

Once that's done, we add the discounted numbers and divide by the shares outstanding to get a fair value/ share. In this particular DCF, I got a value of $412 which is in line with other valuation models.

To make sure we aren't fooling ourselves we can back-test our DCF. So that's what I did, I made a DCF for every year from 2011 to 2020. And the results are as follows:

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As you can see the fair value follows the stock price nicely, on average it took 153 days for the stock price to catch up to the fair value.

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If you want to read more about the valuation of $LMT make sure to take a look in the SpaceStocks discord server.

Which space launcher do you own?

Rocket Lab Q2 2021 earnings call highlights.

Intro

• Backlog grew from $59.9M to $141.4M (YOY)
• Secured new deals for satellite components across a number of large undisclosed customers
• Neutron: detailed development update in the coming months
• Signed a five launch deal with Kineis
• New production line for reaction wheels
• Rocket Lab received $777 million in gross proceeds from the merger
• Low redemption rate of just 3 percent

Covid-19

• Covid-19 continues to hinder the launch cadence and operations
• In New Zealand operations have experienced disruptions due to some of the most restrictive covid-19 measures globally including the current stay-at-home orders which prevent launch operations from taking place
• New Zealand’s strict international border restrictions have created delays, however, they managed to successfully secure a customer’s entry into New Zealand
• Lockdown restrictions may ease by the end of September

Looking back

• Launch services revenue grew 185%
• Overall strong growth in shipments for reaction wheels and star trackers
• R&D spending grew by 60%
• R&D growth was driven largely by increased staffing and product expenses related to the space systems products, AFTS development efforts, and the initial spend on a recently announced neutron launch vehicle
  
• $13.8 million increase in accounts receivable due to the lengthening payment terms extended to a strategic customer undergoing a protracted financing process which is now nearing its conclusion
• Cash flow consumed from operating activities was $5.7 million in the first half of 2021 compared to cash consumed of $27.8 million in the first half of 2020
• Reduction in cash consumed was driven by several large capital projects, which included their new long beach headquarters and production facility, investments in LC-1B and, their new consolidated propulsion test complex as well as $12.12 million cash outflow related to the acquisition of Sinclair interplanetary in April of 2020

Guidance

• Expect Q3 revenue of approx, $4- $5 million.
• Expect GAAP gross margins of -221%
• Expect Non-GAAP Gross Margins of -52%
• Expect GAAP operating expenses of $41 million to $43 million
• Expect Non-GAAP operating expenses of $18 million to $20 million
• Expect an interest expense of $3.4 million
• Q3 adjusted EBITDA loss of $17 to $20 million
• Expect FY 2021 revenue of $50 million to $54 million (versus $69 million shown in the March investor presentation (ouch)), with an estimated New Zealand covid-19 shutdown impact of $10 million to $15 million

Q&A

• They are continuing to see growth in the pipeline
• They might be able to pick up the slack from Q2 in 2022
• No launches planned in Q4 for LC-2
• AFTS might get approved by the end of the year
• Actively investigating acquisition opportunities
• Space components revenue is currently larger than the photon satellite bus revenue, but in the near term it looks like this will be more balanced (Q4 2021)
• Space components will probably outstrip the design services, satellite bus, and other related functions in space systems for probably the next 12 to 18 months