Loved this article. On the acquisition multiples, it's worth noting the Swick, DDH and Perenti multiples were all script (Perenti had a minor cash proportion with script the majority), which meant the multiples were lower. It is hard to see the Mitchell family giving up control (though I guess same could have been said for Kent Swick) so I think a premium is warranted for valuation purposes. For me a rough rule of thumb for ASX listed drillers is to buy when div yield is around 10% (worked really well in the past for me), which is the case for MSV now. Ultimately Australian investors have a strong bias for dividends and at some stage if/when MSV start paying franked dividends, then expect share price could react well.
Great article - did you discuss falling oil prices and the impact on the business?
Thank you!
We did. I won't impact much. Fuel is not a relevant cost for them since it gets provided at the mine sites
Gotcha that makes sense and did they mention if it will impact the customers themselves?
I didn't ask them about it. It should
Loved this article. On the acquisition multiples, it's worth noting the Swick, DDH and Perenti multiples were all script (Perenti had a minor cash proportion with script the majority), which meant the multiples were lower. It is hard to see the Mitchell family giving up control (though I guess same could have been said for Kent Swick) so I think a premium is warranted for valuation purposes. For me a rough rule of thumb for ASX listed drillers is to buy when div yield is around 10% (worked really well in the past for me), which is the case for MSV now. Ultimately Australian investors have a strong bias for dividends and at some stage if/when MSV start paying franked dividends, then expect share price could react well.
Thank you Nick. All good points!
Unfortunately, due to the 90%+ payout ratio, last year's dividend was above normal so I wouldn't expect this 10% yield to be sustainable.
Why only 3% then?
My concerns are outlined in the previoust post