October 28, 2008 / 3:00 PM / 9 years ago

UPDATE 1-Jennings Capital starts Major Drilling with "buy"

(Recasts; adds analyst comments)

Oct 28 (Reuters) - Jennings Capital started coverage of Major Drilling Group International Inc MDI.TO with a “buy” rating, and said the world’s second largest mine driller holds a strong competitive position with a growing rig fleet and a balance sheet that can support more acquisitions.

Major Drilling is better positioned to weather tougher times than most drillers, analyst Russell Stanley said in a note to clients.

“Approximately 70 percent of Major Drilling’s current revenue comes from major mining companies that do not need access to the capital markets to fund their programs,” Stanley, who set a price target of C$25 on the company’s stock, said.

“Moreover, almost 70 percent of revenue comes from projects that management considers part of the Specialized Drilling market segment. This business faces little direct competition, meaning better pricing power and margin protection than the Conventional market segment,” the analyst said.

Shares of Major Drilling were trading up 30 Canadian cents at C$15.05 Tuesday on the Toronto Stock Exchange. (Reporting by Adheesha Sarkar in Bangalore; Editing by Pratish Narayanan)

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