Opinions
Josef Schachter
Trinidad Drilling Ltd
TDG-T
TOP PICK
Aug 13, 2018
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)
Ensign Energy has a takeover bid on Trinidad. Ensign is trying to consolidate this business. The current offer is $1.68 which is less than what it is trading at today. He believes they have to come up with a much improved cash offer. Trinidad could consolidate this business on their own. Book value of Trinidad is $ 4.63. Why would you let your company go for less than book value? He doesn’t think the deal will happen. (Analysts’ price target is $ 2.50)