Hielko Posted October 24, 2013 Share Posted October 24, 2013 This might explain some part of recent price movement: http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA... Link to comment Share on other sites More sharing options...
klarmanite Posted October 24, 2013 Share Posted October 24, 2013 Stenshagen Invest (I saw Tveitereid was mentioned earlier on the thread) is out. They bought in at an avg around 30 NOK in late 2011 and exited, included dividends, at 120 recently. Now that's a good investment. Link to comment Share on other sites More sharing options...
Gamecock-YT Posted October 24, 2013 Share Posted October 24, 2013 This might explain some part of recent price movement: http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA... Yeah, pretty random how the guy comes up with $57 p/s. I expected him to underline and bold it given how he wrote the rest of the article. Link to comment Share on other sites More sharing options...
BG2008 Posted October 24, 2013 Share Posted October 24, 2013 Harry Long wrote up Awilco on Sumzero and cited a 7% dividend yield. While I believe there's still legs for Awilco from current price, a 7% dividend yield on an asset with 18 year life just isn't right. I was literally on the floor laughing last night when I saw his write up. I think a price closer to high 20s to $30 is probably fair value when you factor in current dividend yield, expected asset life, future expected dayrate, a healthy discount rate that you feel comfortable with. Sanity check, 18 year useful life and 13.3% dividend yield. It implies 7.5 years to get all your money back. I think that's fair to price in all the potential unexpected unpleasant events. If the retail guys want to drive this down to a 7% yield, I'm not gonna wait around to see that happen. Implicitly, you would be holding a very overvalued security in your portfolio when the stock trades at a 13.3% yield to 7% yield. Regarding why people sell in a situation like this. I would beg to disagree with Buffet and Munger on this a bit. They tend to stress that trimming position size is downright stupid sometimes if you still believe in lots of upside. Let's say you had a 5% position that grew to a 20% position or even better a 10% position that grew to a 40% position, you're not sleeping very well knowing that a low probability and high impact event like an explosion can wipe out your entire gain. Better to trim some and move on. It's a bit different when you're buying a "good jockey" on a "good horse". It's hard to sell in that situation as growth and value creation will take care of itself. Round Tripping is a very painful experience from my personal experience. This might explain some part of recent price movement: http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA... Link to comment Share on other sites More sharing options...
siddharth18 Posted October 24, 2013 Share Posted October 24, 2013 Wow nice pump, and agreed his target price is, for the lack of a better term, starry eyed. Link to comment Share on other sites More sharing options...
Myth465 Posted October 25, 2013 Share Posted October 25, 2013 Harry Long wrote up Awilco on Sumzero and cited a 7% dividend yield. While I believe there's still legs for Awilco from current price, a 7% dividend yield on an asset with 18 year life just isn't right. I was literally on the floor laughing last night when I saw his write up. I think a price closer to high 20s to $30 is probably fair value when you factor in current dividend yield, expected asset life, future expected dayrate, a healthy discount rate that you feel comfortable with. Sanity check, 18 year useful life and 13.3% dividend yield. It implies 7.5 years to get all your money back. I think that's fair to price in all the potential unexpected unpleasant events. If the retail guys want to drive this down to a 7% yield, I'm not gonna wait around to see that happen. Implicitly, you would be holding a very overvalued security in your portfolio when the stock trades at a 13.3% yield to 7% yield. Regarding why people sell in a situation like this. I would beg to disagree with Buffet and Munger on this a bit. They tend to stress that trimming position size is downright stupid sometimes if you still believe in lots of upside. Let's say you had a 5% position that grew to a 20% position or even better a 10% position that grew to a 40% position, you're not sleeping very well knowing that a low probability and high impact event like an explosion can wipe out your entire gain. Better to trim some and move on. It's a bit different when you're buying a "good jockey" on a "good horse". It's hard to sell in that situation as growth and value creation will take care of itself. Round Tripping is a very painful experience from my personal experience. This might explain some part of recent price movement: http://seekingalpha.com/article/1763212-awilco-drilling-is-the-worlds-most-undervalued-company Another fine example of how the most promotional and crappy articles make it to alpha-rich on SA... Ya I dont think people realize that these are depreciating assets which are being used up. I would buy at 4x CF, but dont think it should sale for 10x cash flow. None of the drillers trade a significantly high cash flow #s. Link to comment Share on other sites More sharing options...
BG2008 Posted October 25, 2013 Share Posted October 25, 2013 Holy Mother of Jesus! Awilco traded up to a 52 week high of $25.65! Link to comment Share on other sites More sharing options...
gary17 Posted October 25, 2013 Share Posted October 25, 2013 So people do believe stuff on SA?????? Link to comment Share on other sites More sharing options...
BG2008 Posted October 25, 2013 Share Posted October 25, 2013 There was a 10% rally in the Oslo Exchange at the end of trading in that market today. Not sure whether the ADR was leading or lagging that. Link to comment Share on other sites More sharing options...
Gamecock-YT Posted October 25, 2013 Share Posted October 25, 2013 So people do believe stuff on SA?????? Just hit $26.20. Ridiculous. Up over 20% on the day. I don't know whether to laugh or cry. Link to comment Share on other sites More sharing options...
siddharth18 Posted October 25, 2013 Share Posted October 25, 2013 Wow: http://i.imgur.com/4jDSSE0.png And why were the shares halted? http://globenewswire.com/news-release/2013/10/25/583771/0/en/Trading-halt-in-AWILCO-DRILLING-PLC.html http://www.dgap.de/dgap/News/corporate/trading-halt-awilco-drilling-plc/?companyID=10072&newsID=774764 Link to comment Share on other sites More sharing options...
tombgrt Posted October 25, 2013 Share Posted October 25, 2013 Lol at Harry Long... He had some good luck regarding timing with ALSK, VIFL, etc. and now he has enough followers to pump a stock in a matter of hours. He is following CoB&F or Packer like a hawk (or it's all serious coincidence of course!). I thought the forum wasn't worthy of his knowledge but clearly the same isn't true the other way around! I decided to pass on this one some weeks ago but gratz to those that didn't. One should have known when Packer takes a position in a stock. Her is a little bet: Packer's portfolio return YTD: 100%+, if not double that. Link to comment Share on other sites More sharing options...
DTEJD1997 Posted October 25, 2013 Author Share Posted October 25, 2013 Hey all: What a nice day I'm having! Awilco is of course responsible for most of that! Certainly Mr. Long's article is responsible for part of that. While it is a bit simplistic, and somewhat promotional, I am not sure I would categorize it as "pumping scheme" or some other type of fraud. Awilco is a real, solid company. It has solid prospects. It is earning good money and paying a good dividend, unlike some USA megacaps (AMZN I'm looking at you!). It is funny that AMZN, which is still LOSING MONEY, goes up 10%+ on the same day... One of the investment thesis for Awilco was that as people learned it's story of earnings, dividends, and future earnings potential, the price would spike. Mr. Long has most likely piggybacked on some of us here at "The Corner". I still think Awilco is undervalued, and will eventually trade in the 30's. I am just surprised it moved this quickly. Link to comment Share on other sites More sharing options...
tombgrt Posted October 27, 2013 Share Posted October 27, 2013 I'm not the one to point fingers (given that I have for example taken a call position before and during the SHLD short squeeze/run up) but is such a thing as "1 year high in google search trends" a relevant metric nowadays? It doesn't even say anything about general bullishness on the stock, just increased interest? Not to mention cause and effect in this instance where the 1 year high is simply set by increased interest exactly because of the rise in the stock price. Link to comment Share on other sites More sharing options...
Packer16 Posted October 27, 2013 Share Posted October 27, 2013 The author of the SA article brings up some pretty good points but doesn't quantify the probability of it occurring but says if does occur the dividend will decline. I have tried quantify it a little bit below: Although this is a possibility, the bear thesis is dependent upon a rig breaking down so the real question is what is that probability or the implied probability from the current pricing. If we assume a 15-yr life of the remaining rigs, the implied dividend yield at today's price is 16.4% - 6.6% (15 yr amortization) = 9.8%. This is slightly higher than a CCC bond yield. CCCs bond have a cumulative 46% to 50% probability of default over 5 and 10 years. Therefore at current prices, the implied probability of failure is about 50%. To get to a 6 to 7% probability you have to have a BBB rating or a 3.8% yield. This would imply a fair value at 10.4% yield (3.8% + 6.6%) or a price of $38. I don't know the probability of failure but maybe some here can help with that. TIA. Packer Link to comment Share on other sites More sharing options...
gary17 Posted October 27, 2013 Share Posted October 27, 2013 I'm not a rig engineer but could probably ask around. Give me some time. But as a start. Failure rate will likely has to do with weather and the mechanical equipment on the rig. If the parent company has years of experience in the ocean related industries I think we can expect mechanical failure to be low. Rig failure due to weather would probably be looking at the probability of 50 year and 100 year storms. I'm not sure what those are at this point, but I'm sure that number can be found after some digging. One thing for sure. - No engineer in his right mind would let something with a 50% failure rate be out there.... If I have to guess I'd say the acceptable failure rate is in the range of 5% or less The author of the SA article brings up some pretty good points but doesn't quantify the probability of it occurring but says if does occur the dividend will decline. I have tried quantify it a little bit below: Although this is a possibility, the bear thesis is dependent upon a rig breaking down so the real question is what is that probability or the implied probability from the current pricing. If we assume a 15-yr life of the remaining rigs, the implied dividend yield at today's price is 16.4% - 6.6% (15 yr amortization) = 9.8%. This is slightly higher than a CCC bond yield. CCCs bond have a cumulative 46% to 50% probability of default over 5 and 10 years. Therefore at current prices, the implied probability of failure is about 50%. To get to a 6 to 7% probability you have to have a BBB rating or a 3.8% yield. This would imply a fair value at 10.4% yield (3.8% + 6.6%) or a price of $38. I don't know the probability of failure but maybe some here can help with that. TIA. Packer Link to comment Share on other sites More sharing options...
siddharth18 Posted October 27, 2013 Share Posted October 27, 2013 The author of the SA article brings up some pretty good points but doesn't quantify the probability of it occurring but says if does occur the dividend will decline. I have tried quantify it a little bit below: Although this is a possibility, the bear thesis is dependent upon a rig breaking down so the real question is what is that probability or the implied probability from the current pricing. If we assume a 15-yr life of the remaining rigs, the implied dividend yield at today's price is 16.4% - 6.6% (15 yr amortization) = 9.8%. This is slightly higher than a CCC bond yield. CCCs bond have a cumulative 46% to 50% probability of default over 5 and 10 years. Therefore at current prices, the implied probability of failure is about 50%. To get to a 6 to 7% probability you have to have a BBB rating or a 3.8% yield. This would imply a fair value at 10.4% yield (3.8% + 6.6%) or a price of $38. I don't know the probability of failure but maybe some here can help with that. TIA. Packer I'm not an expert on how bonds are priced, so I'm unable to vet your assumptions, and to that extent - your conclusion, but it does seem logical that if the current price implies 46%-50% of a rig blowup, then we're far from "fair value" yet, because half the rigs in the world simply don't blow up! Link to comment Share on other sites More sharing options...
writser Posted October 27, 2013 Share Posted October 27, 2013 I think that the risk of a platform failing 'completely' is very small and imho I'm not sure it should be the focus of our attention. These things were built to last. I'm willing to accept that in a small percentage of future outcomes a terrible accident will happen and I will lose my principal. But for valuation purposes, is it that relevant? What I perceive as having a bigger impact on valuation is that, just as with old cars, what will cost you the most in the end is usually not a big crash but all the minor hiccups / parts that have to be replaced every once in a while. If you have to tug your rig back to the 'garage' a few times while it should be generating cashflow it will depress your returns quite a bit. Not sure how to quantify this because I have no clue how robust these platforms are. What is the (un)expected downtime? Maintenance CapEx? Link to comment Share on other sites More sharing options...
gary17 Posted October 27, 2013 Share Posted October 27, 2013 All these are risks just like any investment. But the parent company is clearly comfortable with it. What I am still skeptical of why if this is such a wonderful business why isn't it privately held? Especially when it was a third of the price Link to comment Share on other sites More sharing options...
siddharth18 Posted November 14, 2013 Share Posted November 14, 2013 Here we go... http://i.imgur.com/8bTF0Vx.png WilPhoenix: Revenue efficiency for the quarter was 97.9%. WilHunter: Revenue efficiency for the quarter was 99.8%. In November, Awilco Drilling committed to order a new BOP and associated long lead items for each rig to be integrated at the respective times of the next 5-year SPS’s. The additional cost for the new BOPs and related equipment, including installation and integration, is estimated to be USD 22.5 million per rig. As the Company believes the remaining fatigue life of each rig to be 18 years, he additional investment should maximise the potential service life of the rigs while reducing operational risk and maximising the potential customer base. More: http://hugin.info/147077/R/1743098/586237.pdf Link to comment Share on other sites More sharing options...
DTEJD1997 Posted November 14, 2013 Author Share Posted November 14, 2013 Well I am glad I'm not the only one who stayed up late to see the report. Looks like they are RAISING the dividend! ;D Next dividend is $1.10/share. Very good to see management is keeping their word and dividending out all the cash flow. Tremendous earnings for the quarter...probably not going to be able to maintain these utilization rates. Now, the question is whether Awilco will go UP or do they go DOWN on this report? Guess we will see! Link to comment Share on other sites More sharing options...
siddharth18 Posted November 14, 2013 Share Posted November 14, 2013 Well I am glad I'm not the only one who stayed up late to see the report. Looks like they are RAISING the dividend! ;D Next dividend is $1.10/share. Very good to see management is keeping their word and dividending out all the cash flow. Tremendous earnings for the quarter...probably not going to be able to maintain these utilization rates. Now, the question is whether Awilco will go UP or do they go DOWN on this report? Guess we will see! They just continue to deliver...remember how last time people thought that their utilization rate was unsustainable and this quarter they beat that. Reversion to mean is something to keep in mind and I agree that it probably won't much get better than THIS. What do you make of their decision to order a new BOP? Was it something that was necessary? Or are they forward-looking and trying to proactively keep the quality/condition of the rigs in pristine condition? Link to comment Share on other sites More sharing options...
Hielko Posted November 14, 2013 Share Posted November 14, 2013 From the presentation that was just put online: In November, Awilco Drilling committed to acquire new premium BOP systems for each rigs, so as to: • Ensure continued compliance with regulatory and customer requirements and address potential strengthening of standards • Mitigating operational risks – BOPs are typically the #1 source of semi-sub rig downtime • Mitigating project risks – Refurbishing existing BOPs increases yard stay duration risk • Maximising potential customer base – Certain supermajors may otherwise be excluded • Maximising rig lifetime – Rig remaining fatigue life = 18 years; market expected to remain in balance Link to comment Share on other sites More sharing options...
gary17 Posted November 28, 2013 Share Posted November 28, 2013 Pretty substantial decline in Oslo today ... But the US market closed ... Link to comment Share on other sites More sharing options...
Packer16 Posted November 28, 2013 Share Posted November 28, 2013 I wonder if it is trading ex-dividend today in Norway. Packer Link to comment Share on other sites More sharing options...
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