RE:Akita Drilling Ltd. Price Target Raised to C$3.75/Share It is amazing that the analyst for Akita (Akt.a) can increase his target price by 39% (from $2.70 to $3.75) and the Akt.a stock only goes up by 2%, from $1.46 to $1.49. Usually, if the analysts increase their target price by 10%, the stock goes up by close to the increase of 10%. But a 39% increase in the analyst target price of Akt.a. should result in at least an increase of 25% in the stock, much more than the 2% increase that occurred.
Comparing all the drillers in Canada, Akita is the one with the most upside (by far) to their 12 month target price. Akita has a 12 month target price of $3.75, a 154% increase from the $1.49 current price. PD’s (Precision Drilling) target price of $122 is only 25% higher than the $97.63 current price. Cathedral Energy’s (CET) target price of $1.47 is only 53% higher than its $0.96 current price, while Ensign Energy’s (ESI) $3.50 target price is only 47% higher than its $2.38 current price. Therefore, even if Akita’s share price increased by 50%, it would still have more upside than any other Canadian driller compared to its target price.
Also, Akita’s total debt at the end of Q1’2024 was $70.4M. The cash was $11.2M. Therefore, net debt was $59.2M ($70.4M - $11.2M). The accounts receivable was $47.1M while the current liabilities were $32.0M. This net $15.1M ($47.1M - $37.1M) should be collected in Q2’24 or early Q3’24 at the latest. This should take net debt to $44.1M ($59.2M - $15.1M) in Q3’24 which is much lower than their $50M target, which should trigger stock buybacks and a dividend for the shareholders, as well as continuing to pay down debt with its cash flow.