Q: Can I get your take on this small cap company please?
They seem to have successfully pivoted away from money losing west African drilling operations last year, and subsequently locked in longterm consistent copper drilling contracts in Chile. I like their recent focus on profits above revenue growth, and they appear to be on pace for what I assume to be conservatively atleast 0.21 eps this year (pretty cheap). I know debt is high but should be able to continue paying it down in this environment. Am I off here? This is a small position in a risk seeking small cap portfolio but I’m considering averaging up on any weakness. Thanks.
They seem to have successfully pivoted away from money losing west African drilling operations last year, and subsequently locked in longterm consistent copper drilling contracts in Chile. I like their recent focus on profits above revenue growth, and they appear to be on pace for what I assume to be conservatively atleast 0.21 eps this year (pretty cheap). I know debt is high but should be able to continue paying it down in this environment. Am I off here? This is a small position in a risk seeking small cap portfolio but I’m considering averaging up on any weakness. Thanks.
5i Research Answer:
We think the thesis as outlined makes good sense. Earnings have been 'chunky' in the past with losses in several years, but it appears more focused now. As noted, debt (and size) are the big concerns, but cash flow has been nicely positive since 2020 and debt has come down $7M since that year. It is very cheap and insiders own 40% and are committed. We would not want a giant position here but for a micro cap it looks decent and the stock has been acting very well.