Ann: Swick announces on-market share buy-back, page-2

As a shareholder I strongly support the share buyback announced yesterday. At yesterday's level of 9.6c (when ann was made) entire company mkt cap was just 20m!! This is despite EBITDA of 18m. The loss incurred in FY15 was the writedown/impairment of the 'surface drilling' assets. SD has become unviable and fortunately SWK turned its main focus onto UG core drilling several yrs ago. Current NTA amounts to 37c/share i.e. almost 4x SP. Intangible assets i.e.goodwill are minimul amounting to just 10m = 5c/share.

But NTA can be a dangerous thing if not examined closely. Yrs ago i bought BOL at 20c with NTA (country's largest crane fleet) of 60c thinking the SP must be worth more. Today BOL SP is about 7.5c. The majority of its cranes have been unable to find steady wk and lie rusting in the yard. Plus its hard to sell something that has little likely hood of earning revenue. Same with BLY with its huge fleet of surface drillers lying idle.

In FY15 SWK achieved an all time high (ATH) in metres drilled in the UG core division. SWK gets paid per metre drilled, rather than by the hour. Hence UG rigs in use are more productive than ever. Against this is the margins today are significantly less than those from 3 yrs ago. Miners are struggling with low commodity prices and costs simply have to be cut substantially. SWK makes a profit on every metre drilled and just under 70% of its UG fleet is working. Several tenders yet to be finalised and SWK is confident re winning at least a portion of these. Each new rig in wk adds 1.3% to revenue.

I could write much more esp re the man-hour improvements new technology developed in-house by SWK has made. It means the competition cannot match SWK for efficiency and while mines stay open SWK will stay in business.

So the company is clearly undervalued by the mkt and buyback (rather than div) is def best method to add shareholder value. But it needs to be backed-up by a stop of new shares being issued as this defeats the purpose. Shares in a viable company are a precious item. Making them scarcer makes them more valuable. I hope SWK don't stop at 10% and consider another 10% depending on situation in 6-9months time. Meanwhile watch vols increase.

PS. After reading yesterday's ann i immediately rang a friend and urged him to buy some SWK. He picked-up a reasonable swag at 9.6c and i expect he'll enjoy some decent gains in not too distant future.

Buyback begins Tuesday 14/12/15.