Awilco Drilling (AWDR.OL)
Awilco Drilling reported excellent results for the second quarter of 2014 with a revenue of $66.3 million and a revenue efficiency of 99.7%. There were however a bunch of one-time items that impacted the financials statements. Interest expense was artificially high because of costs related to the debt refinancing, the tax rate almost tripled and operating cash flow was relative low due to a big jump in receivables. The tax rate for this quarter was almost 22%, a lot higher than the roughly 8% the company paid in the past. Those low rates are unfortunately a thing of the past due to a new law. Awilco is expecting that the normalized tax rate going forward will be around 15%.
Because the share price of Awilco has been going up steadily since I bought it while the company has paid out all FCF as dividends I think the stock is now not significantly undervalued anymore. It’s not (yet?) expensive, but at an estimated 20% discount to fair value I will probably take some money off the table soon.
Conrad Industries (CNRD)
Conrad is another pick that has advanced significantly since I bought it and is now also trading a lot closer to intrinsic value than in the past. But it not expensive with 25% of its market cap in cash and a 8x PE-ratio. Given the large cash balance I expect another special dividend at the end of the year, and given how management has been able to grow the business I’m happy to continue to hold this. Might be a good stock to hold for the long-term.
Clear Leisure (CLP.L)
I described Clear Leisure as a train wreck in my first post on the company, so perhaps I should have known better, but unfortunately the bad news is not yet behind us. The stock was suspended from trading almost two months ago because the company was unable to fill its annual accounts in time. A bit of hope is provided in the trading update that was released today in which the company announces its intention to sell the Mediapolis land and building rights separately. Call me skeptical…
Crystalox Solar (PVCS.L)
Better news came from Crystalox Solar that announced a €8.7 million settlement with one of its long term contract customers that had entered insolvency proceedings. We will have to wait a few more days for the interim financial report. I expect that they will have maintained their solid balance sheet, but I don’t expect better than break-even results.
Author is long all stocks mentioned in this post
You’re too early in the earnings season 🙂 More results:
That looks like a decent result 🙂
I notice you always post several years of financial information. Do you spread them in excel yourself, or do you download it from a particular site?
I do it myself. Data quality is almost always an issue when you look at small/unlisted/foreign stocks.
Alpha, are you using the recent dip in AWLCF to acquire more? Seems odd it’s been hit so much. The majority owner sold but still owns a huge percentage of shares, the rigs are still leased for several years. Why is the market so panicked?
Concern isn’t insider selling, but it is: http://www.bidnessetc.com/25422-seadrill-nervous-over-depressed-drilling-market/ Haven’t re-bought any Awilco so far FWIW…
Explanation for decline: http://phx.corporate-ir.net/phoenix.zhtml?c=157788&p=irol-IRHome
-just released the highest earning rig (Energy Searcher) day rate of mid 260’s per day is going to be out for 45 days. This is about $12 million in sales that will be missing from the quarter.
Although Searcher had only been billed for 21 days in the past reported quarter. With this current issue there will still be 46 days of billed time, it appears that Q3 will still out shine Q2, so this may be an opportunity with shares oversold.
My mistake, Searcher is a Northern Offshore rig, not Awilco’s. Sorry about conflating the two.
No problem. Northern Offshore is also a kinda interesting situation, although I don’t own it.
I was linked to your site by Base Hit Investing. Enjoyably I’ve read many of your blog posts.
I am recent investor in AWILCO at $17 & change and was wondering if you might revisit Awilco now that PPS is down in low 16s. This is discount of 45% to intrinsic value IMO and nothing has changed in the business contracts.
I received following from Investor relations after making inquiry.
“We will disclose the outcome of the Hess option together with our Q3 results, to be published before market opening in Norway on November 12th. Please note that the dayrate of the option is to be mutually agreed (i.e. is not predefined). ”
IMO and those of experienced rig the contract has high probability of being renewed/extended given Awilco is successfully performing complex decommissioning for Hess.
The market is pricing the probability of lower future day rates, and correctly so: that is certainly going to have an impact on the intrinsic value of Awilco. Don’t think that Awilco got a whole lot cheaper the past two months.