Professional Documents
Culture Documents
By: Rohan Sharma, Thomas Yang, Mitchell Li, Yash Patel, David Chan
Company Overview
Business Overview
Competitive Advantage
D/E: 0.2 x
D/A: 36.38%
Segmented Analysis
300
200
Othe
r
400
215.3
117.5
100
0
Badger Daylighting
Overview
Thesis
Valuation
Risks &
Catalysts
Execution
Company Overview
How Do Hydrovacs Work?
Overview
Thesis
Valuation
Risks &
Catalysts
Execution
Company Overview
Highly-Experienced Management Team With Proven Track Record
Name
Tor Wilson
Gerald
Schiefelbein
John Kelly
Position
CEO/President
CFO & VP
COO
Background
Gerald joined
Badger in June
2014. Prior positions
include CFO for
Ivanhoe Energy and
BP Americas based
crude oil and refined
products trading
organization.
Overview
Thesis
Valuation
Risks &
Catalysts
Execution
Industry Overview
Impact of oil crash on Utilities, Energy and Infrastructure Industries
130%
120%
110%
101%
98%
100%
90%
80%
70%
60%
50%
40%
iShares US Utilities Index
Crude Oil
Impact of the decline in oil prices in negligible on the utilities and Infrastructure sectors.
Overview
Thesis
Valuation
Risks &
Catalysts
Execution
Industry Overview
Trends in the Utilities Sector
-
The sector has been consolidating consistently over the last few
years with deal sizes averaging $15B for an average premium of
20%
Consolidation is driven by low-cost capital and the push toward
pure-play regulated companies
Other drivers for the trend in aggressive M&A activity include:
- Cost cutting in a near-zero-growth environment
- Growing size and scale of resources required for large-scale
project orders
35
50
45
30
40
25
35
30
20
Low oil prices may pose a threat to business prospects for small
and under-capitalized oilfield-service providers in 2015, while
presenting merger and acquisition opportunities for larger and
better-capitalized competitors
Servicers leveraged to US and Canadian land drilling may be
most at risk, as capital spending on exploration and production
drops
While oil-services companies will likely rein in spending to buy
time until a potential oil price recovery, that trend can only last
so long
During this period, well-capitalized will be able to hibernate their
way through while the competition thins out in the meantime
Overview
Thesis
Valuation
25 Deal Count
15
20
15
10
10
5
0
Deal Size
Risks &
Catalysts
Deal Count
Execution
0.15
$80
0.1
$76.24
$75
$70
0.05
$68.02
$65
f(x) = 0.15x - 0
-0.1R = 0.04 -0.05
0
+ 0.01
0 f(x) = 0 ln(x)0.05
0.1
0.15
$60
$55
-0.05
$50
-0.1
$45
-0.15
$40
Overview
Thesis
WTI Futures
Valuation
Risks &
Catalysts
Brent Futures
Execution
Canada: 51
Cities
$65,825.00
$406.00
US: 66
Cities
Overview
Thesis
Valuation
Risks &
Catalysts
$3,229.00
$63,002.00
Execution
1,200
957
1,000
791
800
630
600
400
200
334 313
241 285
212
136 162 184 185
407 412
504
12.5x
10.0x
9.4x
7.5x
7.0x
6.8x
6.1x
5.0x
Overview
Thesis
Valuation
Risks &
Catalysts
Execution
Ticker
Price
Calfrac Well
Services
Total Energy
Services
Lonestar West
Matrix Service
Company
Essential Energy
Services
Metric
Mean
Median
Badger
Daylighting
P/E 2015E
EV/EBITDA 2015
E
Mkt
Cap
(MM)
763.3
TSX:CFW
$7.98
$47.1 423.5
TSX:TOT
6
64.7
TSXV:LSI
$2.35
NasdaqGS:MT $17.7 597.5
RX
6
148.5
TSX:ESN
$1.09
Mean
Badger`s
Denominat
or$22.2
TSX: BAD
5
20.0 x
1.36
7.9 x
118.0
EV
$835.5
P / Cash
EV /
Net
ROA
Flow
Debt /
EV
P/E
EV / EBITDA
EV / Sales Tangible
BV
Equity
2015 2016 LTM 2015
2015 2016
2015
(MM) LTM
E
E
E
LTM
E
E
LTM
E
9.5 x nm 31.9 4.6 x 2.4 x 4.0 x 10.3 5.5 x 0.6 x 0.8 x
1.7 x
0.9 x 3.6%
1,419.
x
x
9
474.8 10.9 8.6 x 17.8 6.3 x 5.9 x 4.8 x 4.8 x 7.2 x 1.1 x 1.1 x
1.3 x
0.2 x
20%
x
x
79.5 106.7 37.0 14.2 nm
nm 13.8 10.4 6.3 x 1.7 x 1.6 x
2.1 x
0.2 x
na
x
x
x
x
x
515.3 14.7 14.5 10.2 15.4 10.8 6.5 x 6.0 x 4.0 x 0.3 x 0.3 x
2.1 x
nm
7.5%
x
x
x
x
x
204.7 6.2 x 30.6 7.1 x 2.9 x 3.5 x 3.1 x 6.1 x 3.7 x 0.6 x 0.8 x
0.9 x
0.4 x 2.6%
x
35.5 20.0 18.5
Impliedx
x
x
8.8 x 6.4 x 7.3 x 7.9 x 5.7 x 0.9 x 1.0 x
1.8 x
0.4 x
10%
Sensitivity Analysis
12.8 14.5 16.0
x
x
x
6.3 x 5.9 x 5.7 x 8.1 x 5.9 x 0.9 x 1.0 x
1.9 x
0.2 x 7.5%
EV/EBITDA 2015E
Mkt Cap
Price
20.0 16.8 16.4
14.8
$941.9
9.3 x 8.0 x 9.0 x 8.2 x 7.8 x 2.3 x 2.2 x
5.0 x
0.2 x
x
x
x
6.9 x
7.4 x
7.9 x
8.4 x%
$27.20
$932.20
$826.05
Average Price
Overview
Thesis
$22.33
$24.76
Valuation
Div
Yield
Yield
6.3%
1.8%
na
na
10.2%
4.1%
4.1%
1.6%
8.9 x
19.0 x $22.49
P/E 19.5 x $22.83
2015 E 20.0 x $23.17
$23.29
$23.63
$23.97
$24.08
$24.42
$24.76
$24.88
$25.22
$25.56
$25.68
$26.02
$26.36
20.5 x $23.51
$24.31
$25.10
$25.90
$26.70
21.0 x $23.85
$24.65
$25.44
$26.24
$27.04
Risks &
Catalysts
Execution
(in mm CAD$)
Unlevered Free Cash
Flow
2015E
FY
2016E
FY
2017E
FY
2018E
FY
2019E
FY
$13.8
$9.9
$55.5
$69.7
$46.1
6.00
11.5%
2019E EBITDA
Discount
TerminalPeriod
Multiple
Terminal Value
Discount Factor
$207.0
8.0x
$1,655.7
1.00
2.00
3.00
4.00
5.00
0.90
0.80
0.72
0.65
0.58
$960.7
80.8%
$4.1
$11.1
$7.1
$35.9
Discount
Rate
(WACC)
$40.4
10.5%
11.0%
11.5%
12.0%
12.5%
$1,188.5
Less: Debt
Add: Cash
Total Equity Value
Shares Outstanding
Overview
2019E
FY
$4.6
WACC
% of Total EVFCF
$82.3
$8.6
2019E
FY
2019E
FY
2019E
FY
$79.5
7.00
8.00
9.00
Total Price Per Share
0.52
0.47
0.42
0.38
Terminal EBITDA Multiple
10.00
$25.4
7.5x
$30.0
$29.2
$28.5
$27.8
$27.1
$62.8
2019E
FY
$71.1
$24.0
7.0x
$28.3
$27.5
$26.9
$26.2
$25.5
$54.4
$26.3
8.0x
$31.7
$30.9
$30.1
$29.4
$28.6
$26.7
8.5x
$33.3
$32.5
$31.7
$30.9
$30.2
0.34
$26.8
8.5x
$33.3
$32.5
$31.7
$30.9
$30.2
$1,114.8
37.04
Thesis
$30.10
Valuation
Risks &
Catalysts
Execution
Commodity price risk is minimal given the 4% correlation between BADs share price and oil; however an extended commodity slump
may have broader implications on BADs overall revenue sources
- The current commodity slump is a non-recessionary one
Un-patentable hydrovac technology may affect BADs competitive advantage if others are able to also replicate its economics of scale
benefit
Pricing risk due to BADs tendency to keep its prices relatively constant, relying on effective asset mobilization and increasing asset
efficiency to compensate and maintain stable margins
Currency risk due to the possible emergence of an inverse trend with the USD returning to previous levels against the CAD as a 10% in
the CAD would decrease EBITDA by 5% (and vice versa)
Catalysts
-
$40,000
$35,000
$30,000
$25,000
$20,000
2005
Overview
Thesis
Valuation
2006
2007
2008
2009
Risks &
Catalysts
2010
2011
2012
2013
YTD
Execution
Execution
Investment Thesis
Recommendation:
Buy and Hold
$22.2
Price March
5 Price
13:
Market
Entry
Price:
1.60
Dividend
%
Return:
$29.00
Target Price:
Overview
Thesis
Valuation
Risks &
Catalysts
Execution
Appendix
Appendix
Appendix