Investors in recovery-play oil-rig maker LAM (Lamprell) are having a boring time lately. Starting the year at around 94p, they went up to around 180p in mid-May, but have since drifted down to around 140p, and have been tracking sideways since about mid-June. They’ve made a couple of attempts to break a resistance level of 150p, but just couldn’t manage it. As levels approached 150p, investors must have been excited that this thing was finally going to do the business, only to have it pull back.
I decided to do a quick-and-dirty valuation. I’ve taken a look at some summary accounts from Sharelock Holmes, and it looks like a 10% net profit margin is reasonable for this company. If it can do revenues of £650m, at a 10% NPM, then, if I apply a modest 10X multiple, I get a fair value for the company of … £650m. There are around 260m shares in issue, so that’s a fair value of 250pps. At around 142pps currently, that’s an implied upside of just over 75%.
You can argue about factoring in net cash, working on EBIT basis, and all that, but I’m just trying to work out “is it obviously undervalued”.
Currently no holding, but I’m thinking about it.