Stock price when the opinion was issued
The key question is if the energy market turns around. If it did, this would be on the top of his list for stocks to own. They are in great shape on the balance sheet. It scores in the top 1% of valuation. This company will be a survivor. The problem is, he wants a stock that isn’t continually going lower every day.
Splitting the company into two to separate the PNG business makes sense to us. The return of capital could be as much as 76c per share. This all sounds attractive...BUT....it is already a very small company. With less capital, and a split, shareholders will be left with two tiny market cap companies, and it is very possible that they will struggle to get investor attention. Valuations are cheap, but owning two sub ~$30M market cap companies may prove to be very frustrating, unless small caps stage a big rally. Adding in cyclical risks, and we think the 36% YTD gain already reflects some of the possible potential. Thus, we are less enthusiastic at this time on this split.
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He likes it. They made an acquisition a couple of weeks ago. They bought assets at 15-20 cents on the dollar. He has been picking away on it. It is still early with a lot of the service companies. They are at the bottom of the cycle. When they move it will be quick and be tough to get in.