Desjardins Initiate CoverageAnd are looking for a double from here. GLTA Desjardins Securities analyst Frederic Tremblay sees a buying opportunity in France’s Foraco International SA (FAR-T), initiating coverage of world’s third largest drilling service provider to the mining sector with a “buy” recommendation.
“We see commodity prices, demand and an improving financing environment as supportive of increased drilling activity,” he said. “We expect Foraco’s growth to come from existing geographies, and opportunities in the untapped U.S. market. We like its healthy cash flow profile, which supports a combination of debt reduction and growth investments.”
“Foraco predominantly serves tier-1 mining customers, along with some select junior-related opportunities, in politically and economically stable jurisdictions. Its expertise and a client-first approach contribute to customer loyalty, with 70 per cent of revenue coming from contracts that have been in place for 10+ years. Foraco has a world-class customer base with a diversified commodity mix, complemented by water-related services.”
Mr. Tremblay sees the United States as a “major near-term opportunity” while also touting the emerging presence of tailwinds “capable of driving an uptick in drilling activity.”
“With recently added local management and existing international customer relationships, Foraco appears well-positioned for what could be a game-changing expansion into the U.S.,” he said.
“Record gold prices could be a tailwind for exploration activity. Meanwhile, the demand outlook for copper looks positive, thanks in part to the energy transition. Moreover, we are encouraged by October 2024 data showing that funds raised by junior and intermediate companies reached their highest level since March 2022.”
Believing its current valuation is “cheap” and “attractive,” Mr. Tremblay set a target of $4.25. The current average is $4.35.