Bullboard - Stock Discussion Forum Foraco International SA T.FAR

Alternate Symbol(s): FRACF

Metals & Mining Industrial Metals & Minerals

Foraco International S.A. is a France-based company engaged in the mining, geological and hydraulic drilling sectors. The Company's principle business consists of drilling contracts for companies primarily involved in mining and water exploration. The Company operates in two business segments: Mining and Water. The Mining segment covers drilling services offered to the mining and energy... see more

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TSX:FAR - Post Discussion

Foraco International SA > From Beacon Yesterday

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Post by savyinvestor333 on Oct 29, 2024 7:39am

From Beacon Yesterday

Q3 Results Wednesday AM, Conference Call at 10AM EST – The dial-in is 1-888- 699-1199 with no passcode required.

We are looking for Q3 revenue/adjusted EBITDA of $78M/$17M and EPS of $0.09, relatively in line with Q2 figures. We note that ours is the only current revenue estimate, with one other estimate for adjusted EBITDA and EPS ($17M and $0.06) as per FactSet. We reduced our estimates from our prior set ($95M/$25M/$0.13) to better reflect operations in South America. Our original estimates anticipated a quicker recovery in this region; however, we have tempered our expectations as we believe operations have been slower to ramp up in South America than originally expected. On a full year basis, we have revised our FY24 and FY25 estimates. We are now modelling revenue/adjusted EBITDA/EPS of $315M/$67M/$0.34 for FY24 down from our previous estimates of $337M/$78M/$0.40 and $348M/$83M/$0.42 for FY25, down from our previous estimates of $358M/$85M/$0.44.

South America Operations Will be Point of Focus – During Q2, an early winter season was the largest impact on top line numbers as shutdowns occurred two months earlier than expected at large projects in Chile and Argentina. On the earnings call, management indicated that the 53% y/y decline in South America revenues was considered to be a one-off/temporary setback. However, we have tempered our expectations for this region and will be keen on an update regarding ramp up of drilling activity.

Update on Pipeline in North America - During its Q2 earnings call, management indicated being in the final steps of discussions with a Tier-1 client to drill for gold. The contract is for highly specialized, ultra-deep, directional drilling in North America. There were hopes of seeing progress in H2/24, and we will be interested in any comments from management regarding the project and other potential contract wins. With revenues reaching record highs in North America last quarter, the addition of a new Tier-1 client to its roster would bode well for future growth which we view favourably.

Recently Announced NCIB – In late September, FAR announced that it was approved for a new NCIB in which it can purchase up to 1M common shares representing approximately 1% of the outstanding shares. On its previous NCIB, FAR purchased 656k shares at an average weighted price of C$2.29. We continue to believe that the company will remain active on its NCIB throughout the year.

Maintain PT and Buy Recommendation - Following our estimate revisions, we maintain our Buy rating and $4.05/sh PT (75% upside from current levels) which is based on a 3.75x NTM EBITDA multiple. Upcoming catalysts include the Q3 results on Wednesday, new contract wins with Tier-1 clients and exploration budgets catching up to commodity prices.