MVK - Maverick Tube
MVK - a company manufactures pipe/tube for energy industry and industrial application. With subsequent M&A activities since 2002, it is transforming itself from a steel/iron tube manufacturer to an oil/equipment service provider (rig). Furthermore, it is a remarkable thing that MVK reports a net income of 1.5 dollar per share for 4th quarter 2005. Traded at $49, its forward P/E is 8.
Given its 1/4 income is derived from industrial application, and 3/4 incomes from oil related products. I calculate the P/E valuation as follows:
A conservative P/E valuation at steel/iron industry is around 8. (I use [NSS] and [SCHN] as peer group), and P/E valuation for Oil equipment services at 16 ( use BJ Service[BJS] and Halliburton[HAL] as peer group).
That comes to a P/E valuation of 14 (8*0.25 + 16*0.75) for MVK, an apparent value compared to its current price with a forward P/E at 8.
It is not without risk:
1). This year's high rig demands and price are factored into next year's projection, any oil industry supply/demand change may bring significant impact to the net income.
2). At a pace of at least 1 merge per year, Marvick already have a number of merged units under its belt. It is yet to prove that all the M&A issues are addressed.
In summary, this is a transformed oil/service equipment company still valued as a steel/iron product company. I expect its P/E to be adjusted in 2006 up to 11, and at estimated 2006 incoe $6 share, it value the stock at 66, a 30% premium to the current price.
Given its 1/4 income is derived from industrial application, and 3/4 incomes from oil related products. I calculate the P/E valuation as follows:
A conservative P/E valuation at steel/iron industry is around 8. (I use [NSS] and [SCHN] as peer group), and P/E valuation for Oil equipment services at 16 ( use BJ Service[BJS] and Halliburton[HAL] as peer group).
That comes to a P/E valuation of 14 (8*0.25 + 16*0.75) for MVK, an apparent value compared to its current price with a forward P/E at 8.
It is not without risk:
1). This year's high rig demands and price are factored into next year's projection, any oil industry supply/demand change may bring significant impact to the net income.
2). At a pace of at least 1 merge per year, Marvick already have a number of merged units under its belt. It is yet to prove that all the M&A issues are addressed.
In summary, this is a transformed oil/service equipment company still valued as a steel/iron product company. I expect its P/E to be adjusted in 2006 up to 11, and at estimated 2006 incoe $6 share, it value the stock at 66, a 30% premium to the current price.
posted by Siyu LI at
9:50 PM
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