Trican Well Service (TCW-T) (revisited) top pick from Teal Linde on BNN.ca Market Call Tuesday May 21st @ 1200ET
From a valuation perspective, Trican’s net tangible asset value is over $600 million or approximately $2.00 per share. Recognizing its equipment would likely fetch less than tangible book value if auctioned off in today’s weak market, we will apply a 25 per cent discount to the net tangible book value to arrive at the company’s estimated liquidation value, which would be approximately $1.50 per share. Therefore, at its recent share price of $1.34, Trican is trading below its liquidation value. With a minimal debt-to-service ratio, Trican has the ability to endure through this downturn until the cycle eventually improves. Therefore, for the patient investor, Trican offers a “Heads you win, tails you lose a little,” proposition. A return to tangible book value of $2.00 offers around 50 per cent upside. Also, a return to $5.00 reached in 2017 offers over 250 per cent upside with downside appearing more limited. |
