RE:RE:RE:Takeout Target?@stonks:
While I understand your point of view, I still believe that holding for the next 3 years (i.e. when all rigs are in play) will yield the best ROI. In comparison, let's consider your point:
(1) Sell the company today for BV, which is kind of a miracle considering their track record as of late; notwithstanding, as of Q3, BV was approximately $2.58. At yesterday's closing, this yields a return of approximately 83%. You mention that there is an opportunity cost (i.e. the time value of money) involved. Therefore, since we're considering a three-year horizon, we need to add gauranteed opportunity cost (i.e. a government 3-year bond). As of yesterday the 3-year bond was paying around 4%. With annual compounding, this is around 12.5% for the three years. Therefore, after three years, the total ROI is ~96%.
(2) Wait to sell for three years when all rigs are in play and FCF is around $40MM-$50MM/yr. A simple valuation would be 5-7x FCF. Using 6x FCF we get a $240-$300MM valuation. Considering the low end, we get $4.92/sh. This yields an ROI of ~249%. Furthermore, considering no increases in the dividend (nor share price), we add an additional 4.3% annually for three years, resulting in an additional 12.9%. After taking the dividends into account, we're looking at a total ROI of ~262%.
Naturally, there's a lot of speculation here but, given the numbers and the fact that they're just starting to ramp up in PNG (for several years), I'd much prefer scenario (2) at the sacrifice of
protracted tired eyes; time will tell and, meanwhile, I expect my money to be working overtime :).
Cheers,
JJ