Dolphin Drilling (Sell, TP: NOK0.20) - Equity meltdown in action
After its stock was suspended from trading since mid-Monday, Dolphin Drilling released a statement related to what appears to be an unsuccessful refinancing effort. In a scenario with an unfavourable ruling on the UK tax claim, we see a total capital need of cUSD70m–75m through 2026e, of which we believe cUSD50m–55m should be fresh equity, assuming the shareholder loan is converted/extended. For 2027e, further capital is likely to be required for the Blackford 5-year survey. Based on the combination of the significant equity need (versus its market cap), relatively high leverage (versus asset quality and backlog), difficult rig market outlook and the backlog situation, we believe the current market cap is likely to be marginalised in a potential upcoming refinancing. We have downgraded to SELL (HOLD) and cut our target price to NOK0.2 (3.5), representing cUSD5m of equity value.
DNB Markets is the investment banking arm of DNB Bank ASA and is focused primarily on the Nordic region, as well as internationally on niches such as global shipping, energy and related services, and seafood. DNB Markets offers services in FICC, Equities and Investment Banking advisory from offices in Oslo, Stockholm, London, Singapore and New York. Equity research coverage is offered on c250 Nordic companies. DNB was ranked no.2 in Extel Nordic Research 2017. The DNB Markets’ Credit and FICC Macro & FX Research teams are repeatedly highly rated by Prospera Nordic Institutional Investor Surveys.
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