How to value DDB

Hi All,

Something that I've been pondering recently with regards to DDB and other drillers like MSV and DDH.

How does one go about valuing these companies?

The way I see it, the free cash flow for DDB is negative at the moment as per quarterly cash flow statements (due to acquiring rigs?). Net cash flow from operating activities is lower than payments for capex.

Would you then use a multiple like EV/EBITDA or PE with normalised profit?

Assuming an enterprise value of $52M as at 31 March 2022 and a target EBITDA of $15M for FY22, I get a 3.4 multiple.

The half yearly mentioned a $3.4M normalised profit but given tightening margins due to cost pressure we may see only $6M - $6.5M of normalised profit for the year. That's gives a PE ratio of 6.5 - 7.

On a multiples basis, DDB is a bit cheaper than DDH and about the same as MSV although both of these seem to be free cash flow positive and looking at dividends. DDB does appear to have the most bullish outlooks in terms of actual contract discussions.

Would appreciate other peoples views on this and what would be appropriate multiples and methods of valuation for drillers