(By Balachander) CIBC World Markets Inc. analyst David Galison initiated coverage of shares of Bri-Chem Corp. (TSE:BRY) with a "Sector Outperformer" rating and price target of $4.75.
While its Canadian fluids division will likely face headwinds in 2012 (due to weak oil and gas prices), Galison believes the company is well positioned to grow beyond Canadian drilling fluids.
Bri-Chem distributes industrial drilling fluids and steel products to the energy, construction and industrial sectors, as well as makes expanded seamless steel pipe products.
Through the 2011 acquisition of Stryker, Ltd., Bri-Chem is focused on expanding into the significantly larger U.S. drilling fluids market. Bri-Chem is also in the process of creating significant additional value for shareholders through the rampup of a large diameter (14"-36") seamless steel pipe mill, the anlayst said.
"Despite this growth outlook, Bri-Chem trades at a significant discount to its peers," wrote Galison. "While some investors might argue that it should trade at the low end of comparables in the energy drilling field services industry, we believe a comparison to other logistics suppliers & steel service centers is warranted."
The stock ended previous trading at $3.10.