L.Crawford - why MDR vs. FGI?; GaryB - false rally...
This week will be very important to watch key names in both OSX & EP's - if we see selling into this bounce/rally - we're going lower yet. I like what I saw friday - as most every offshroe driller & name E&P had nice intra-day rallies...
A good time to be an individual stock picker here... some stocks are so historically cheap - given their fundamentals here; that imho; you have to begin establishing positions at these levels if trading and especially so if a longterm holder... but, yet waiting with some unused buying power to see if we go lower yet - and then to be able to add margin leverage at those levels imho. Another 5-10% in many stocks - and I am in 150%.
My targets/watch lists:initial entry targets & levels where I enter full positions AND add margin leverage. - just "my" opinions...
MDR here, each $1 lower loading the boat; GLBL $7 7/8ths & $6 15/16ths load the boat; FLC $12 1/2 - $11 1/2 load the boat; RRC here,loading the boat @ break under $3 1/2ish; UPR $14 1/2 - $13 1/4 load the boat, OEI $9 3/8, $8 1/2; PXD $9 3/8, $8 1/2; CRK $4 1/8 -$3 3/4; EEX - in at $3 3/8 and playing the bounce - selling at $3 15/16 - through a return to $5 over time - or an exit on any weakness as well. Watching RIG & PGO on a market blowoff as well... and of course, MEXP playing the pop on the coming refi news and hopefully the analyst upgrades & reinstitution of coverage & issuing of 2000 #'s...etc.
========================================================= Larry Crawford; why MDR vs. FGI...
Larry, I'll take the "give a man a fish, you feed him for a day - teach him to fish & you feed him for life" - road to my answer on your question on "stanley druckenmillers" selling.... this is not an officer of the company... merely a shareholder.Lots of info out there on this...
MDR vs. FGI:
1st. MDR has had a couple of recent upgrades and table pounding from analysts. FGI is presently the pariah of the patch.
TheStreet.com ran an article about MDR's huge cash position - nearly $11 per share and how this is one of the markets classic fundamental Ben Graham buys... Soros etc. buyers...
TheStreet.com does an article on FGI - discussing their "questionable" accounting methods.... painting the totally opposite picture of MDR to FGI -polar opposites.
MDR has better niche diversification with an especially strong power generation-utility division; which along with their Nat Gas Pipeline work & subsea service- puts them in the sweetspot of perhaps the hottest sector in the Energy World going foward.
MDR owns over 60% of the Worlds' heavy lifting barge capacity.
MDR is fundamentally cheap at :
PE: 13.8 ttm
P/Book: 1.52
P/Sales: .43
Cash: $600 Million - 1//2 of shareprice @ $10.13 per share - poised to make accretive acquisitions: OII among the companies rumored to be a MDR target...
Backlog:Nearly 10 times of that of FGI, much more broadly diversified, heavy in the Nat Gas & Utility sectors; and most importantly - their backlog is growing ytd !
Backlog -
6/30/99 3/31/99
------- -------
(Unaudited)
(In thousands)
Marine Construction Services $ 702,015 $ 407,223
Power Generation Systems 972,902 905,042
Government Operations 742,177 860,981
Industrial Operations 352,615 400,649
Adjustments and Other Eliminations 1,145 (799)
---------------------------------------------------------
TOTAL BACKLOG $ 2,770,854 2,573,096
=========================================================
Nearterm upside:
If anyone has failed to read the analyst community who have commented,time and time again on the number of stacked offshore rigs, the attempts to cancel, delay, litigate and the markets negative attitude toward the debt necessary to take on these newbuilds here; they are grossly uninformed about the cap ex $ simply not being there, nor expected to be there for 18-30 mos. The dayrate environment necessary to preclude any newbuilds is simply no where in sight in any analyst forcast for the next year... add the short position, the lack of any major institutional interest in FGI, the pre-announcement of Holloways retirement in 2 years and it is not hard to understand why FGI is where it is.
As far as potential upside in the next 12-18 mos ? FGI/HLX certainly have at least 3 qtrs of showing the Street their ability to integrate operations and to produce new orders stopping their mutual backlog bleeding... There is simply NOTHING fundamental to support ANY major valuation upside to FGI/HLX in the nearterm. Surely, there may be some short covering and a bounce rally post merger; but this should be viewed as an exit point, or profit taking point for traders... and I think it will prove to be just that.
MDR upside:
1st: we have had dramtic downside via the pressure of Druckenmillers sales of late and especially from the Indonesian Govmt's call for an audit of the awarding of their pipeline deal to MDR. No one expects the contract to be reversed, it appears the negative sentiment is exaggerated here; and it is especially so on a fundamental basis given the minimal impact to backlog & earnings of this one project. MDR is poised for a significant bounce on this announcement and importantly - unlike FGI has the wind behind their sails from 2 of the major brokers on the street - Merrill & Salomon Smith Barney.
upside:
Strong EPS growth: 2000 est is $1.32/ 2001 est is $2.25 - +70%
Valuation: MDR is trading at 50% PE discount & 40% Price/Cash Flow discount to its subsea peers - CDIS CXIPY GLBL
Earnings Capacity is significantly higher than prior 1997 highs; $4.00 vs. $2.60
Strong Subsea niche growth will account for 70% of operating inccome by 2001
Strong International presence in Power Generation sector; with substantial upside leverage to Asian economic recovery & growth.
Bottomline: imho; MDR's fundamentals of cash, its valuation, its nearterm earnings estimates and the support of the Brokerage & Analyst community hear is the near opposite of what FGI has .
MDR is leveraged to subsea & Power Generation & Utility - Nat Gas Pipeline growth; FGI is in a boom & bust High Cap Ex/Dayrate prerequisite driven sector in Offshore Rigs. HLX will add diversification; but does not have the margins, or growth in their niches that MDR has going fowward.
also, simply no comparison in the backlogs...
Don't even see a logical debate here - only an "emotional" one... imho: MDR is a must own here; FGI while the leader in its subsector is dead money, trading bounce rangebound at best. With year(s), not months untill the Cap Ex $ that led to its former valuation may return... MDR is more picks & shovels oriented, more of an early recovery stage company.
play the $3-4 bounce on FGI via HLX when it comes - and then get out imho. Rotate $ into much better values with much, much better nearterm fundamentals... |
