MAJOR DRILLING $15.32 (Toronto symbol MDI; TSINetwork Rating: Speculative) (www.majordrilling.com; 1-866-264-3986; Shares outstanding: 74.9 million; Market cap: $1.1 billion; Dividend yield: 1.0%) is a large contract drilling firm that mainly serves the mining industry.
In the three months ended October 31, 2011, Major’s revenue rose 67.3%, to $213.9 million from $127.8 million a year earlier. Earnings per share jumped 168.8%, to $0.43 from $0.16.
During the quarter, many of Major’s customers increased their drilling activity to take advantage of record gold prices and high base metal prices. Gold mining firms supply 48% of Major’s revenue, followed by base-metal and uranium miners (35%) and energy, coal and groundwater test drillers (17%).
In September 2011, Major bought Bradley Group, a family-owned company based in Quebec, for $80 million. Bradley brings roughly $132 million of annual revenue and 124 rigs, to bring Major’s fleet up to 695. Bradley also increases Major’s presence in northern Quebec and northern Ontario, as well as Colombia, Mexico, Suriname and the Philippines.
Major raised its twice-yearly dividend by 9.1% with the November 2011 payment, to $0.08 a share. The stock now yields 1.0%. The company holds cash of $62.1 million, or $0.85 a share. Its long-term debt of $55.5 million is only 5.0% of its market cap.
With its specialized drilling capabilities and strong balance sheet, Major Drilling remains better positioned to profit than many of its competitors.
Major Drilling is a buy.
