Mitcham Industries, Inc. (NASDAQ: MIND) reported 3rd quarter earnings of $727 million ($0.07/share) that beat my forecast and crushed the First Call consensus estimate of $0.04/share.
MIND is on a fiscal year that ends January 31. They will report 4th quarter results on April 5th.
• Mitcham’s business is directly tied to world oil prices. The recent surge in oil prices means the majors and large-cap E&P companies have more capital to spend on exploration.
• Outside of North America the demand for seismic has increased sharply and there are signs it is improving here as well.
• Year-over-year, Mitcham’s revenues improved by 37%, with sales revenues climbing 117%, more than offsetting an 11% decline in leasing revenues.
• Mitcham’s equipment leasing revenues are expected to increase sharply over the next two quarters as the large-cap E&P companies are all announcing increasing exploration spending in 2011.
• Higher demand was cited in South America, the Middle East and in Europe, as well as improved performance in the marine leasing business worldwide during the 3rd quarter (with the exception of a decline in the Gulf of Mexico).
• U.S. land seismic rental demand has improved slightly due to the increased activity in the oil shale plays.
• The Seamap subsidiary had a very strong quarter despite no major system deliveries. Sales of parts, service revenues and repair work were up sharply during the quarter.
Outlook: Mitcham is expecting big things out of Russia, with essentially all of the lease pool expected to be utilized this winter. Business in Canada should be strong, but flat on a year-over-year basis. Management is encouraged by high levels of bid activity in the international markets for its leasing segment and cited Southeast Asia and South America, as well as seasonally in Russia and Canada, as good markets, with Europe and the Middle East improving. Seamap should have a significant effect on next year’s earnings based on the growing demand for new marine equipment as contractors expand capabilities and upgrade existing technology.
MIND is now trading at just over book value. I believe there is significant upside in this stock for us over the next six months as Q4 and Q1 results should be very strong.
I have increased my earnings forecast for FY 2012 to $0.76 and raised MIND’s Fair Value estimate to $16.50/share which is just 5X FY 2012 projected cash flow per share. A company with a balance sheet this strong and with a track record of financial discipline should be trading at a much higher multiple of CFPS than where it sits today.
Mitcham Industries, Inc., a geophysical equipment supplier, offers for lease or sale, new and "experienced" seismic equipment to the oil and gas industry, seismic contractors, environmental agencies, government agencies and universities. Headquartered in Texas, with sales and services offices in Calgary, Canada; Brisbane, Australia; Singapore; Ufa, Bashkortostan, Russia; Lima, Peru; Bogota, Colombia and the United Kingdom and with associates throughout Europe, South America and Asia, Mitcham conducts operations on a global scale and is the largest independent exploration equipment lessor in the industry.
MIND
Re: MIND
MIND will release Q4 results on Tuesday, April 5. You should all listen their conference call. It will tell us a lot about the coming increase in exploration spending for seismic and drilling.
I will update my MIND forecast model after the CC.
I will update my MIND forecast model after the CC.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: MIND
Global Hunter preview to MIND's results:
"Updating estimates to account for higher activity
Summary:
l We are increasing our FQ4 2011 EPS estimate to $0.29 from $0.18. Consensus currently stands at $0.21, with the other estimates on the
street being $0.20 and $0.25.
l We now model ~29% sequential top-line growth, up from our prior estimate of ~9% and the consensus expectation of ~1%.
l We forecast leasing revenues to post a sequential improvement of ~25% as international demand likely held firm throughout the quarter, robust
seasonal activity in Canada should produce sequential top-line growth, and Russia likely had a sell-out quarter. Also, indications are that US
overcapacity is abating, although we expect demand remains below international markets, which accounted for ~80% of MIND's business
last quarter.
l We are not expecting any major awards from Seamap, but rather continued strength in its aftermarket business, similar to last quarter. GunLink
and BuoyLink orders remain more of an early-F2H 2012 event, particularly with the two 14-stream 3D seismic Polarcus (PLCS.NO) vessels
expected to be delivered in C1H 2012.
l Also, Latin America, while a terrible market for the surveyors, is a great market for MIND and its focus on adding channels to that market
should lead to ongoing earnings that somewhat offset the seasonality of Russia and Canado.
l Investors have anticipated a solid quarter, with the stock running >20% in the last week to our $13 price target. Our rating and price target
are under review pending the quarter, but our inclination suggests our F2012 EPS estimate of $0.50 is low and that at its current valuation the
stock likely moves higher, particularly if management relays a bullish outlook, which we expect.
l Our revised estimates vs. consensus are as follows:
m Revenues - GHS: $23.7MM vs. consensus: $20.2MM
m EBITDA - GHS: $10.5MM vs. consensus: $9.3MM
m EPS - GHS: $0.29 vs. consensus: $0.21
l The company reports today AMC and will hold its conference call tomorrow at 9 a.m. EST. Dial-in: 480-629-9771."
"Updating estimates to account for higher activity
Summary:
l We are increasing our FQ4 2011 EPS estimate to $0.29 from $0.18. Consensus currently stands at $0.21, with the other estimates on the
street being $0.20 and $0.25.
l We now model ~29% sequential top-line growth, up from our prior estimate of ~9% and the consensus expectation of ~1%.
l We forecast leasing revenues to post a sequential improvement of ~25% as international demand likely held firm throughout the quarter, robust
seasonal activity in Canada should produce sequential top-line growth, and Russia likely had a sell-out quarter. Also, indications are that US
overcapacity is abating, although we expect demand remains below international markets, which accounted for ~80% of MIND's business
last quarter.
l We are not expecting any major awards from Seamap, but rather continued strength in its aftermarket business, similar to last quarter. GunLink
and BuoyLink orders remain more of an early-F2H 2012 event, particularly with the two 14-stream 3D seismic Polarcus (PLCS.NO) vessels
expected to be delivered in C1H 2012.
l Also, Latin America, while a terrible market for the surveyors, is a great market for MIND and its focus on adding channels to that market
should lead to ongoing earnings that somewhat offset the seasonality of Russia and Canado.
l Investors have anticipated a solid quarter, with the stock running >20% in the last week to our $13 price target. Our rating and price target
are under review pending the quarter, but our inclination suggests our F2012 EPS estimate of $0.50 is low and that at its current valuation the
stock likely moves higher, particularly if management relays a bullish outlook, which we expect.
l Our revised estimates vs. consensus are as follows:
m Revenues - GHS: $23.7MM vs. consensus: $20.2MM
m EBITDA - GHS: $10.5MM vs. consensus: $9.3MM
m EPS - GHS: $0.29 vs. consensus: $0.21
l The company reports today AMC and will hold its conference call tomorrow at 9 a.m. EST. Dial-in: 480-629-9771."