We initiate coverage of Borr Drilling with a BUY recommendation and target price of NOK 54
The company is still in its cocoon, and we believe it is about to become a butterfly at an opportune time in the cycle. Recent chatter links the company to 15 of Transocean’s mainly modern jackups at USD 1.2bn en bloc (avg USD 80m apiece). With an experience management and bottom cycle acquisitions, we forecast a low cash break-even and high revenue/day vs comparative peers.
In addition to aggressive growth at the bottom of the cycle, we expect increased focus from positive investment banker analysts will drive the share price going forward. Further growth driven equity issuances could also contribute to an increase in free float and a primary listing on Oslo Bors or other stock exchanges, increasing investor demand.
Valuation: We have utilized a generic steel value model on each rig, but our target price bias is towards forward earning multiples as a more significant indicator of future share price. Using shipping as a proxy, the two measures tend to move in tandem.