Archive for the ‘FI’ category

Frank’s International (FI)

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Franks International (FI)
Stock Price: $24.50
Diluted shares: 190.4MM
Market cap: $4.7BN
Working capital surplus: $771MM
Debt: $0
EV: $3.9BN
2013E EBITDA: $428MM ($329MM through 3Q13, and $260MM rev in 4Q13 x 38% EBITDA margins = $428MM)
Multiple: 9.1x EBITDA

Brief overview: After operating for 75 years as a family owned business, Franks went public in August 2013. Following a successful IPO (priced at $22; opened at $26.50 and traded up over $32 in October), the stock got hit in Nov-13 after its first earnings announcement as a public company (analysts were expecting top-line growth; FI revenues declined 8% sequentially and were up only 1.4% Y/Y as 1 customer pushed an order back to 1H14). The recent drop provides a much better entry point into a truly great business (EBITDA margin of 41.3% in the first nine months of 2013; 2 companies – Franks and Weatherford – control >50% of the global tubular services market) with significant scale (90 sales and support offices in 60 countries on 6 continents), a management team that knows what they are doing, barriers to entry via intellectual property (104 U.S. patents and 136 related international patents; 37 U.S. patent applications pending and 111 related international patent applications pending), and operations in a niche that should grow double-digits over the next couple of years.

Given these characteristics, this business deserves a low-teens EBITDA multiple. Minimum.