'Why the persistent discount?' Good question.....Since IPO...

'Why the persistent discount?' Good question.....

Since IPO they've been on a growth drive to become one of the largest, if not the largest independent drillers in Australia. They would have been in contention for that had DDH not recently taken over SWK. DDH undertook their expansion as a private vehicle....MSV have largely done so under public listing. Numbers in a steep growth phase for a capital intensive business don't always look good at face value. There's been an absence by necessity of dividends to retain capital in the business for growth. We were on the cusp of being in an arguably similar position to DDH was at the time of IPO. That's when retail jumps on board.....P/E ratios look favourable, franked dividends are being paid & there's yet still small growth opportunity. We were almost there...

The related party impairment as you know has put a huge dent in 'trust'. It's a year now & the ramifications are still being felt. That said, ultimately the share price will follow the numbers. They could have elected to maintain a 'steady as she goes' mindset with the business they had but expansion was been the choice. I've backed them since 2016, happy to stay another 18 months to see a few quarters at full utilization. I hate the way brokers price targets keep moving around. Morgans had them up at around a $1 at one stage. I think that's possibly achievable. They're getting carried on industry tailwinds, just need to keep a tight rein on it. Can't see any notable expansive growth phases of note from here, maybe a rig or two (other than what's committed) but that's it.

As to buyouts, can't see them being a target within industry now- they're just too big. What could happen is like when they were bought out by AJL years ago paying top of cycle metrics (something around 6.5x EBITDA if memory serves me). Compare that to the sub 2x EBITDA MSV is trading at today. Based on industry comparisons & historicals, you'd think this was dirt cheap (at a minimum it should be trading at around 4-4.5xEBITDA at industry cyclical highs). One day the market will I guess wake up to it. It's been a tough & disappointing 12 months but for me if anything the story & ultimately the target has gotten better just via a longer (and at times more bumpy) pathway. Nothing I haven't encountered before.

Good luck with it

Disc:-Massively overweight in our portfolios. We have just shy 4% of the register. Expressly my opinions only & does not constitute 'advice' DYOR