I titled this post: 'Swick... the luxury u can afford'... based...

I titled this post: 'Swick... the luxury u can afford'... based on long running advert of 'Swish' tissue paper from many moons ago.
So why have i just bought SWK after not owning the stk since selling at $1.22 about 20 months ago? Plenty reasons incl.
1) Fundamentals are constantly improving since 3QFY09. Has 195.3m shares (fully diluted) and at 45c mkt cap is $87.9m. I estimate FY10 rev at 111m and EBITDA at aprox 25.5m. V.hard to estimate NPAT (hence PE) as i am unsure how much debt has been repaid and what interest accruements are. In addition, depreciation may not be severe. Fortunately, SWK predicts low CAPEX for 2010/11 and this will allow retention of profits.
2) Currently some 45 rigs in use each generating revenue irrespective of grades of ore drilled. (As an aside, I wonder how many hours/week average rig is in use?? i.e. are some jobs 24/7??)
3) Fortunately main earner is gold sector. I remain bearish re base metals but gold miners are generally profitable. These machines increase efficiency... hence keep costs low.
4) MD's address and full year presentation now top class and allows investors to examine in detail the various sectors of SWK's income. I look forward to same in interim.
5) IMO Kent Swick's duty is to update mkt and SWK's financiers on a regular basis re the number of rigs actually in work and number sitting idle. It gives investors/lenders confidence to read that each rig is generating income 6 or even 7 days/week... every week. It also demonstrates to potential customers the strong demand for SWK's services.
6) Photos of SWK's rigs in media releases/company website illustrate the complexity and technology of these machines. Emphasises these are not something the average engineering firm can come along and duplicate. After they employ a PhD in engineering and I'm sure some technology is patented.
7) In summary SWK reminds me of ASL. Lots of contracts and ability to churn out the drilling metres and earn regular income. ASL state margins in IO and coal have tightened. Perhaps the exploration and underground specialised drilling of SWK is more profitable.

So what is Achilles heel? In SWK's case i feel it remains too dependent on exploration income and would prefer it has more contracts re ore production sector... esp in complex underground gold seams such as MML and SLR. Perhaps MCO should consider SWK? But my main hope is that management have learn from 2008 when many Swick contracts were cancelled and numerous rigs stood idle. This time i anticipate SWK has been more circumspect re the style of contract signed, which does not allow miners to arbitrarily cancel work, without substantial penalties.

Yes, debt at 50-60% is high for my liking but on schedule to reduce massively by December 2012 to just 12m. On balance i feel SWK is good buying at 43-46c level. The relative sustainability of future income certainly was my driving factor. Of course further announcements of contract wins will boost SP almost immediately.
All that remains is whether SWK will pay an interim dividend? Company has paid decent divs in the past and CEO (imo) is not adverse to re-introducing these at first suitable opportunity. Even a small interim of say 1.5c will attract mkt attention that Swick is back-in-town and will see a substantial (10c??) rise in SP. It will tell mkt the company's lenders are comfortable with future income stream and are willing to see holders get some of this. Looking fwd to interim on 23/02.