Mining services company, DDH1 Limited (proposed ASX: DDH), are set to debut on the ASX next month, with demand for the stock seeing the offer fully subscribed well before it’s expected offer close date of February 26.
The company, which have raised $150M in capital at an offer price of $1.10 per share, are expected to list on March 9 with an indicative market capitalisation of over $376M. The market cap valuation would give the company an enterprise value (EV) of 5.3x, earnings-per-share (EPS) of $0.09, and a price-to-earnings (P/E) ratio of 12.5x. The company’s P/E ratio compared to the ASX metals and mining industry (ASX: XMM) of around 18x, could be one reason investors were quick to snap up the offer.
Impacts from the pandemic have resulted in hesitation from many sectors in relation to listing on the exchange. What has remained consistent in such an economically uncertain few months is the number of mining companies going public. For example, there are currently 12 companies expected to list in March this year, 7 of those companies have primary activities in mining or mineral exploration, indicating the popularity of these offers. The index has also had a strong performance over the past 12 months, the XMM up 22.48% from this time last year.
Mining services companies don’t include the inherent risks that mining and mineral exploration companies hold. Instead providing these companies with services such as drilling, excavating, transport, metal testing, and the hiring and training of staff. DDH1 offers its clients air core drilling, reverse circulation drilling and diamond core drilling.
The company began operations in 2006 and obtained an investment by Oaktree Capital, paving the way for the company to acquire two additional drilling companies, expanding the company’s operations in Australia, the company now operating a fleet of 96 mineral drilling rigs. DDH1 report that a high degree of emphasis on safety within their operations and using advanced equipment by highly skilled drillers, also results in a minimalised impact on the environment.
The company have been able to significantly increase their revenue year-on-year since FY2018, with the trend set to continue in the first half of FY2021 at over $280M. DDH1 also increasing their Net Profit After Tax (NPAT) from $16.8M in FY2018 to $29M in FY2020.
Of the $150M raised under the offer, $109M will be distributed to existing shareholders. The company also intend to repay $29.9M of existing debt, with DDH1 noting they will also apply cash to ensure the debt is fully repaid. The remaining $11.1M will be attributed to the cash costs of the offer.
Bell Potter, Aitken Murray Capital, Macquarie Capital (Australia), and UBS (Australia) are acting as Joint Lead Managers on the deal.
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