Borr Drilling Limited

Section 1: Company Overview and Fundamentals

1.1 Company Overview:

Borr Drilling Limited (NYSE: BORR) is an offshore shallow-water drilling contractor providing offshore drilling services to the oil and gas industry. The Company’s primary business is the ownership, contracting and operation of jack-up rigs for operations in shallow-water areas (in water depths up to approximately 400 feet), including the provision of related equipment and work crews to conduct oil and gas drilling and workover operations for exploration and production customers.

Kalkine’s Diversified Opportunities Report covers the Company Overview, Key positives & negatives, Investment summary, Key investment metrics, Top 10 shareholding, Business updates and insights into company recent financial results, Key Risks & Outlook, Price performance and technical summary, Target Price, and Recommendation on the stock.

Stock Performance:

• The stock has corrected by 20.25% in the last three months, similarly a correction of 51.00% in past year.
• The stock is in its lower band of its 52-week range of USD 7.26 and 52-week low price of USD 3.18. Post the announcement of Q3FY24 results the stock has corrected by approx. 23.21% correction, with the current price near an important support zone of USD 2.80-USD 3.00.
• The price is currently trading below both its long-term (200-day) SMA and its short-term (50-day) SMA , with the current RSI of 36.92.

1.2 The Key Positives, Negatives, and Investment summary

1.3 Top 10 shareholders:

The top 10 shareholders together form ~53.66% of the total shareholding, signifying concentrated shareholding. Granular Capital Limited, and Capital International Investors are the biggest shareholders, holding the maximum stake in the company at 17.10% and 7.08%, respectively.

1.4 Key Metrics

In the third quarter of fiscal year 2024, Borr Drilling Limited demonstrated improved financial performance across several key metrics compared to the same period in the previous year. The company’s operating margin increased from 33.3% in Q3 FY23 to 34.6% in Q3 FY24, indicating enhanced operational efficiency. The income before tax margin also rose significantly, from 7.8% to 10.4%, suggesting stronger profitability before tax expenses. Net margin saw a remarkable increase from 0.16% in Q3 FY23 to 8.03% in Q3 FY24, reflecting substantial growth in the bottom line. Additionally, Borr achieved positive returns on both average common equity and total assets. The return on average common equity moved from -3.0% in the previous year to 8.8%, while the return on average total assets improved from -0.9% to 0.9%, signaling enhanced asset utilization and equity returns.

Section 2: Business Updates and Corporate Business Highlights

2.1 Recent Updates:

The below picture gives an overview of the recent updates:

 2.2 Insights of Q3FY24:

Section 3: Key Risks & Outlook

Section 4: Stock Recommendation Summary:

4.1 Price Performance and Technical Summary:

Stock Performance:

• The stock has corrected by 20.25% in the last three months, similarly a correction of 51.00% in past year.
• The stock is in its lower band of its 52-week range of USD 7.26 and 52-week low price of USD 3.18. Post the announcement of Q3FY24 results the stock has corrected by approx. 23.21% correction, with the current price near an important support zone of USD 2.80-USD 3.00.
• The price is currently trading below both its long-term (200-day) SMA and its short-term (50-day) SMA , with the current RSI of 36.92.

 4.2 Fundamental Valuation

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

Markets are trading in a highly volatile zone currently due to certain macroeconomic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is February 12, 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4: The report publishing date is as per the Pacific Time Zone.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

 Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

 Stop-loss: It is a level to protect against further losses in case of unfavorable movement in the stock prices.