RE:RE:RE:Insider buy Sept 1TG1960 wrote: Upgrade to buy...B.Pow...A.C.P.
Already the "dominant" provider of drilling and work force services in Papua New Guinea and Canada's largest provider of snubbing services, Mr. Pow said the deal makes High Arctic the third largest provider of well servicing in Canada.
"On a retrospective basis, HWO is trading at 2.6 times 2015 EV/EBITDA [enterprise value to earnings before interest, taxes, depreciation and amortization] (2.1 times trailing 12-month EV/EBITDA) despite industry leading margins, high levels of return on invested capital (“ROIC”), and balance sheet strength," he said. "The discount to its peers is likely a result of concerns over customer concentration and the delay of contract renewals in PNG. The market is still waiting on the news of contract extensions for heli-portable rigs 103 & 104. HWO was operating these rigs under a three-year contract which originally expired on June 30th with extensions signed into Q4/16. As we dig into this side of the business, we are of the view that investors are over reacting to the potential risks, given the limited options available to its top-tier customers."
Mr. Pow set a 12-month target price of $5.95 for the stock. Consensus is $5.63.
"While we acknowledge that risk remains due to the importance of PNG contract extensions, we are attracted to HWO’s margin stability, ROIC, and cash flow generation which contrasts with most of their peers," he said. "We also expect new senior management to capitalize on their extensive industry experience and opportunistically grow their Canadian energy services presence both organically and through M&A. We expect the Canadian energy services industry to remain sluggish over the near term, however, if they are able to transact at attractive multiples during trough levels, as seen with the Tervita acquisition, we see significant upside for HWO as the industry rolls over and utilization increases."