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Gold/Mining/Energy : Strictly: Drilling and oil-field services -- Ignore unavailable to you. Want to Upgrade?

To: johny who wrote (21883)	5/12/1998 1:08:00 PM
From: 007	Read Replies (1) \| Respond to of 95453

TCMS: The Good, The Bad & The Ugly Let's do this in reverse order. The Ugly It looks undervalued, but the balance sheet is probably the ugliest aspect to TCMS. 40% of equity is goodwill, so it really isn't close to being under book value once you remove the goodwill. It's really trading at 2 times tangible book value at present. However, they do have two shipyards under long-term lease (one is a lease/purchase) which I consider nice intangible assets in today's rig market. Long-term debt (now around $20M) is about 50% of tangible book value and rising as they continue to be acquisitive. Will future acquisitions require a dilutive secondary? Will increased debt payments reduce future profits excessively? The Bad They are a new entity. Can they effectively integrate all of the operations and realize those celebrated synergies? As a new company, they haven't any actual earnings history, except for last quarter when they earned .03. That's not a lot of money for a $10 stock. Can they really make money? The Good They are dominant in their transition zone pipelaying niche. Pipelaying is hot and unlikely to slow down any time soon. They have a $45M backlog with $120M in bids outstanding. They are adding a new pipelaying barge next month. They're likely to announce more contracts soon. They have added new deepwater fabrication facilities to focus on refurbishing semis and jackups. This is a hot market and not likely to slow down any time soon. They're likely to announce a refurb contract soon. TCMS is expected to earn .29 this quarter, $1 for the Y98 and $1.50 for Y99. My Opinion As for valuation, I think it's fairly valued given the present situation. TCMS needs to prove itself with strong earnings this quarter. If it comes in at .30, doubts about earnings capacity and projections will be cast aside. The $1 estimate will become the guiding number and it will be viewed as an undervalued high growth stock. With a float of just 5M, it could rise very quickly. Because they are growing in two of the hottest offshore areas, and because $10 is bottom for this stock, I think it's an excellent long-term buy now. However, purchasing it now should require patience until we get closer to the next earnings release. The next 6 weeks will probably be the most difficult because it's likely to move up and down. After that it should rise ahead of earnings. Ideally, you tuck a bunch of this away during its last foray into the 10's. For the less patient, other good times to buy may be ahead of the earnings announcement, after the earnings annoucement, or when it breaks out at $14. For more info check the TCMS thread. Good Luck, 007