An Investment cas

Hi Everyone,

I think it is a good time to point out a few things - in light of the recent announcement.

• We all know this latest announcement was disappointing, made messy by Nathans involvement. However he does not own 100% of either company and this all has to go through the proper channels. Obviously the mine was not performing as it should - who didn't/couldn't pay SMS - who in turn did not pay MSV.
• MSV will chase SMS for the money and they appear to be a profitable company with this not being their only contract.
• The revenue from this at circa 1.2 million per month is now lost, which equates to 14.4 million per year. This is around 7% of total revenue and is not one of their Tier 1 clients (whom you would suspect would not run into issues like this - if so rarely). Approximately 90% revenue is Tier 1 - so leaves very little non Tier 1/less risk.
• Assuming EBITDA at around 20% - this has the effect of effecting this by $240K per month - or 2.88 million for the year - once again 7% based on expected 40 mill EBITDA on the run rate that was occurring. Remember the 1.2 per month is not profit.
• They have stated they may sell the rigs as remembering this is away from their main focus of drilling work as stated in the original contract announcement.
• DDH1 - a competitor in same space - has just got a float away using Oaktree at 5.3 X EBITDA. Based on last years EBITDA that would give MSV an enterprise value of 185 million - current EV at current price is 110 million (market cap plus net debt). EV is reducing all the time as debt is being paid off at the moment.
• It doesn't make much to kick this valuation up with a 40 mill EBITDA giving 212 million or the equivalent of nearly double the current share price.
• Before anyone says you should apply a lower multiple due to this latest issue - DDH1 back issues cannot be checked as easily due to not being public - so guesswork there.
• In my opinion this has dragged out longer than would ordinarily be the case as all parties would have believed a solution could be attained - due to Mitchells involvement, hence around 6 months of non-payment it would appear.
• There is every chance of some or all of the money being retrieved.
• The sector has a huge tailwind at the moment.
• The track record before this has been commendable.
• The words capital management were mentioned in the update - and I am sure they would be keen to restore confidence as soon as they can after what i guess is current blackout period up until half yearly due soon.
• Those selling could be kicking themselves should a buyback be implemented or directors start buying - buybacks have been mentioned in the past and directors have purchased in the past. Nathan purchased over $100K in April 2020.
• I believe people are underestimating the instant asset write-off from the federal govt and the effect this will have on free cashflow as mentioned in earlier update by MSV.

This is all my opinion only, but thought it all worth mentioning as I think people are extrapolating the bad news and letting their imagination get the better of them - without writing down a few facts.

Non-payment by one of their lesser quality clients (which basically makes up the total of their non-tier 1). The rest of the business looks intact and going very well.

It is worth facing investment decisions with some cynicism, but that can be overdone, so thought it worth presenting this opposite argument.