The DDH1 Limited (ASX: DDH) share price has hit the ASX boards this afternoon following the successful completion of its initial public offering (IPO).
At the time of writing, the drilling company's shares are down a very disappointing 26% from its issue price to 81 cents.
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What is DDH1?
DDH1 was founded in 2006 and provides a range of specialised drilling services to companies mining or exploring for mineral deposits in Australia.
Management notes that mineral exploration and mining companies have an ongoing need for drilling services to provide them with rock samples for analysis of their mineral content and other geological, chemical, and structural properties.
These companies typically use service providers such as DDH1 rather than undertaking this activity in-house.
Among its 102 customers are the likes of BHP Group Ltd (ASX: BHP), Evolution Mining Ltd (ASX: EVN) Newcrest Mining Ltd (ASX: NCM), Rio Tinto Limited (ASX: RIO), Roy Hill Iron Ore, and St Barbara Ltd (ASX: SBM).
In FY 2020, the company reported pro forma revenue of $249.8 million and EBITDA of $64.5 million. This is expected to grow to $280.2 million and $69.3 million, respectively, in FY 2021.
The DDH1 IPO
DDH1 raised $150 million from investors via the issue of 136,363,636 shares at an issue price of $1.10 per share.
Combined with the other 205,866,215 shares held by existing shareholders, this gave DDH1 a market capitalisation of $376 million upon listing.
According to the prospectus, the proceeds will be used mainly to provide certain existing shareholders with an opportunity to realise part of their investment in the company.
In addition, the company will use some of the funds for the repayment of debt and the payment of certain expenses incurred in relation to the offer.
DDH1 also notes that the listing will give it access to capital markets. It expects this to provide additional financial flexibility to pursue further growth opportunities.
Management commentary
DDH1's Managing Director and CEO, Sy Van Dyk, commented: "The growth and success of DDH1 to date is testament to the commitment of the whole team, which strives to ensure the safety of all stakeholders while delivering exceptional service to our clients."
"Our long-term client relationships are built on the provision of quality drilling services and a deep understanding of our client's business needs. The Company's significant market position reinforces the strong levels of industry recognition."
"There is growing demand in the Australian mineral drilling sector for DDH1's services because of increased exploration, development and production spending by minerals exploration and mining companies. As an ASX-listed company with a strong balance sheet, a committed shareholder base, a disciplined approach to growth and access to capital markets, DDH1 is well positioned to pursue its growth strategy."
