Opinions
Michael Sprung
Trinidad Drilling Ltd
TDG-T
COMMENT
Apr 28, 2015
Stock price when the opinion was issued
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(A Top Pick November 9/17 Up 5%) The stock is benefiting from the Ensign bid at $1.68, but thinks it will need a $2.00 price per share to make sense. He would like to see the company remain independent. They have a strong management team. The company is moving more rigs into the US under term contract agreements. He has a $3.00 per share 12 month target price.
He would rather see this company stay independent--its metrics are better than either Precision or Ensign (the two companies bidding for Trinidad). However, he sees the combination of Trinidad with Precision is a good deal. He thinks Ensign might come back with a higher bid, creating a bidding rivalry. His price target is $7. If the company is bought by Precision, he would roll over, to become a shareholder of Precision. Note: Precision’s debt to equity is high, almost 1 to 1. Ensign offers a dividend but also has a much higher debt than Trinidad. Yield 0%. (Analysts’ price target is $2.34)
With respect to oil service companies, drillers, etc. it is a question of when do you want to step in. It depends on the time horizon that you are looking at for your investment. This is a well-run company and will be a survivor in the current environment, but you may be sitting on a stock that doesn’t do much for a year or 2. Not a bad place to have this in your portfolio as a longer-term investment.