Pat McKeough responds to many personal questions about specific stocks and other investment topics from the members of his Inner Circle. Every week, his comments and recommendations on the most intriguing questions of the past week go out to all Inner Circle members. And each week, we offer you one of the highlights from these Q&A sessions. While we reserve our buy-hold-sell advice for Inner Circle members, these excerpts provide a great deal of information and analysis on stocks we’ve covered for the Inner Circle.
This week, an Inner Circle member asked about one of the more versatile resource stocks in Canada. This company provides housing and a variety of other essential services for remote oil and gas rigs and mining sites. Pat looks at the company’s prospects for growth and its plans to begin making acquisitions in foreign markets.
Q: Please give me your opinion on the investment merits of this company: Black Diamond Group. Thanks.
A: Black Diamond Group (symbol BDI on Toronto; www.blackdiamondlimited.com) is a Calgary-based company that builds modular buildings and housing for workers at remote sites, such as mines and drilling rigs. It also provides oilfield services and equipment. Aside from oil and gas and mining, Black Diamond’s customers include electricity, construction and engineering businesses, as well as government agencies.
The company’s Camps division rents and sells remote workforce housing and provides associated services. Its temporary structures include large dormitories, kitchen/dining facilities and recreation complexes. This division is largely focused on western Canada.
The company’s logistics division operates remote lodging facilities for third parties. It also owns the sprawling Sunday Creek Lodge, which provides accommodations for corporate clients in the northern Alberta oil sands. Black Diamond Logistics also transports, installs, dismantles, repairs and maintains modular structures for customers.
The BOXX Modular division rents and sells a broad range of modular work spaces, including office units, storage areas, office complexes, training facilities, lavatories and customized structures.
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Black Diamond reportedly looking to purchase assets in Australia
The Black Diamond Energy Services business provides oilfield services and rents and sells related equipment, such as storage tanks and rig matting (which is used to support rigs and other construction equipment). Energy Services also provides drill-site accommodations, such as quarters for geologists, engineers and other staff.
In the three months ended June 30, 2012, Black Diamond’s revenue rose 9.1%, to $62.0 million from $56.8 million a year earlier. Earnings rose 17.0%, to $11.0 million from $9.4 million. Earnings per share rose 7.4%, to $0.29 from $0.26, on more shares outstanding. The company’s long-term debt of $86.2 million is a low 9.9% of its market cap.
The company is reportedly looking to expand internationally by purchasing related firms and assets, specifically in Australia.
Black Diamond trades at 15.3 times this year’s forecast earnings of $1.38 a share and 11.7 times next year’s estimate of $1.80 a share. The stock yields 3.4%.
In the most recent Inner Circle Q&A, Pat looks at the added risk of Black Diamond’s plans to make acquisitions in overseas markets. He also examines the outlook for resource development. He concludes with his clear buy-hold-sell advice on this stock.
COMMENTS PLEASE—Share your investment experience and opinions with fellow TSINetwork.ca members
Given the generally negative economic news, are you hesitant about stocks that depend heavily on the search for new sources of oil and gas and minerals? Or do you feel that our long-term needs, especially in energy, make these stocks a good investment? Let us know what you think.
Comments
Stadz
My trading/analysis impvroed tremendously when I learned to ignore things such as news, possible manipulation and so on. I focus on what the charts and telling me. Sometimes they are too messy to trade and when that is the case then I just move on to another chart. I have been long (investment) in silver for more than 5 years well knowing the manipulation that occurs in that market but looking at the daily chart you can still see patterns worth trading.
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My trading/analysis impvroed tremendously when I learned to ignore things such as news, possible manipulation and so on. I focus on what the charts and telling me. Sometimes they are too messy to trade and when that is the case then I just move on to another chart. I have been long (investment) in silver for more than 5 years well knowing the manipulation that occurs in that market but looking at the daily chart you can still see patterns worth trading.