Archer (Hold, TP: NOK1.50) - Essentially a long-dated option
Following updated guidance of a significant revenue drop in 2020, we have cut our EBITDA forecasts further, putting us 37% below consensus for 2020 and 14% below for 2021. We now believe Archer will breach its leverage covenant (7x) in H2, but expect lenders to be accommodating with waivers as the company recently executed a major refinancing, giving it a liquidity runway until late 2023e. Despite being overleveraged in the current environment, we believe the stock would thus be valued as an option on a market recovery. We reiterate our HOLD, but have cut our target price to NOK1.5 (3), implying a market cap of c4% of the EV.
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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