Valuation, page-271

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23/09/21

17:53

Post #: 56303954
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Originally posted by WizzardofOz: ↑

@ saintex Noted for Cettire. Thank you v much for taking the time to explain. I ll check NewsCorp this weekend.
FYI why i just completed my purchase of SWK shares today.
For me SWK has turned a big corner.
1) Finally refocusing on its core bz, underground drilling where it enjoys competitive advantages through a) December Orexplore’s demerger( but shares of OXT to be given to SWK shareholders = potential upside intact) and b) completed sale of it lower margin RC drilling division
2) New great products/ divisions launched and already registering contracts like Deep X (worlds most powerful underground drilling rig and alternative to deep surface drilling) and new Engineering division starting to sell rigs in countries where SWK does not operate . Lets not forget the Futures division (1st electric UD rig, remote controlled rigs)..
3) V solid book order book of $ 284M ( 2021 Revenue was $ 154M) with 94% of 2022 Underground Drilling revenue already secured.
4) Major wins this year with BHP Olympic Dam, 8 rigs for 5 years + renewal of NST contract at Jundee Gold with 14 rigs (largest contract ever for SWK) + overseas contract with MATSA in Spain also for 5 years.With 77% of sales still coming from Australia I see big potential for growth as overseas contract can only go up and we start seeing that with the MATSA deal in Spain.
5) Close to 0 net debt.
6) 1.45 sen dividend, =around 5% at current SP with mgmt indicating it will continue.
SWK right now reminds me of IMDEX also in the mining service sector back 6 y ago: different events led to the same result, a very depressed share price. Back then IMD SP had nosedived from $2 to 20 sen and now it is back to $2.30 and MC back up from roughly $80M to $ 900M because it delivered and the market ultimately recognised it. I cant forecast yet the same figure for SWK at this stage but at 29 sen it is for me massively undervalued.
Quick comparison with IMD below,based on only the underground drilling bz for SWK ( which is now the focus of mgmt), my calculations:
EBITDA margin: 20 % // 28% IMD
Revenue: $ 154M // $ 264M IMD
Market Cap: $ 80M // $ 900M
Valuation 2.8 x EBITDA* // 12 for IMD
(* 2021 EBITDA $ 28.7M excludes contribution from RC drilling bz sold in Feb (+1.7M) as well as drag from Orexplore(– $4.3M) being dermerged.
Hope i am right aha

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Huge annual cash flow increase from cutting Orexplore loose - see screenshot - they have pumped in around $6mill pa for the last few years in actual cash….

I always follow the cash
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