Drilling segment EBITDA of $19.1m was in line with the update in July. Key though, was the steady improvement in EBITDA margin through FY18 (from ~10% in Q1 to ~18% in Q4). This is moving toward the 20%+ margin we believe SWK needs to generate appropriate returns on assets and equity. It reflects a strategy to roll over contracts at higher prices and the discipline to walk away from clients unprepared to accept higher rates. We believe the Drilling business (blended valuation $0.32) more than supports the current price. We add another $0.06 for Orexplore to get a valuation of $0.38 (prior $0.37). BUY.
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