Q: I have a position in Akita Drilling. It has done really well and it is paying down debt. What would be a catalyst for the stock to capture more interest? Would you add to it at this price level? Do you think I should switch to another small cap in energy?
5i Research Answer:
The stock is very cheap, even with a 29% gain this year. But size is one issue. It is only $82M market cap. The business is also cyclical. A dividend could help, and this may happen once debt is reduced further. The balance sheet is decent now. An increased in spending by oil and gas customers could also be a catalyst. This is possible, but we are not so sure is 'likely' as they also seem more interested in buybacks and dividends than spending more money. AKT also only has one analyst and more coverage would also certainly help. We think it is fine overall. We would HOLD but not add or change.