Mining, Engineering and Construction Services companies

Forum Topics Mining, Engineering and Construction Services companies

Bear77

a month ago

20-Aug-2024: This forum thread is about the ASX companies that provide mining services as well as those that provide engineering and construction services; some do both.

Mono's (MND) reported today, a company I held for many years but do not currently hold because I thought that they looked a bit expensive considering a few of their metrics have been declining (heading the wrong way) over recent years.

Monadelphous-Reports-2024-Full-Year-Results.PDF

Monadelphous 2024 Full Year Results Presentation.PDF

Considering their lack of major E&C projects and Albemarle's Kemerton Lithium Hydroxide plant expansion being put on hold and MND being stood down from that job, their results were reasonable:

Revenue $2.03 billion (including Monadelphous’ share of joint venture revenue), up 11% on FY23
Record full year revenue for Maintenance and Industrial Services (MIS) – $1.32 billion (much of it recurring revenue, which they are trying to increase clearly)
Engineering Construction (E&C) revenue $712.7 million, up 31.5%
Secured more than $3.0 billion in new contracts and extensions - includes contracts awarded from 1 July 2023 to today, less a $200 million reduction in construction work-in-hand resulting from termination of contracts for convenience by Albemarle announced after year end, following Albemarle’s recent review of its asset and cost structure.
EBITDA margin 6.28%, up from 5.96% pcp
Net profit after tax up by 16.2% to $62.2 million, EPS 64.1c
Full year dividend of 33cps (pcp 25 cps), making total FY24 dividends of 58cps (adding the 25 cps interim and the 33 cps final div's together), dividend payout ratio 91% (up +18.4% on the 49cps of dividends paid in the previous year).
Cash flow from operations $187.7 million; cashflow conversion rate 169%
Significant pipeline of opportunities in resources and energy sectors

The big surprise may have been the increased dividend and the increased dividend payout ratio (91%).

The market liked it - MND are currently up +10% (+$1.18) to $13 today, with an hour to go, bringing them back to where they were trading at in early July, but still around 7% below the $14 level we saw around a year ago.

I thought they looked fully valued at around $14, and I would have got interested if they dropped back to $10 or below, but they only got down to around $11.40 in the sell-down early this month.

MND are mostly E&C contractors.

Macmahon Holdings (MAH) are mining contractors, the type that do the actual mining for mine owners - and they also reported today and rose by around +8%. They are currently up +7.7% @ 31.25 cps, but they got up to 32.5 cps this morning, being +12% above their 29 cps close yesterday.

NRW Holdings (NWH) are both - they do mining services as well as engineering and construction, and they reported last week, on Thursday 15th August, and their share price rose +9.7% on the day to close at $3.50 (where they are right now as I type this).

Other ones to watch:

The Environmental Group (EGL), reporting this Thursday, 22nd August; and
Duratec (DUR), reporting on Wednesday 28th August.

Another company that reported today, XRF Scientific (XRF), once again exceeded market expectations, and they're currently up +5.7%, however they traded as high as $1.51 earlier which was +7% above yesterday's $1.41 close. XRF are not contractors, but they are still a "picks and shovels play" on mining, as they provide the testing gear (and consumables) for the testing labs and the larger miners who do their own on-site sample testing.

Of the companies I've just mentioned, I only currently how NRW (NWH) in real life (real money portfolios), however I have also held XRF, DUR, EGL, MAH and MND in real money portfolios in the past - XRF, DUR and EGL were all in the portfolio I sold up in June. I currently hold those three in my Strawman.com virtual portfolio here.

It seems to me that these contractors (so all but XRF who tend to look fully valued or close to it much of the time but whose share price keeps rising anyway because their business keeps getting bigger and better) are finally getting some love, albeit probably because the market had low expectations and they appear to be beating those expectations when they report.

Bear77

a month ago

22-Aug-2024: Another "picks and shovels" play on gold is Codan (CDA), who own Minelab, who make and sell the World's best hand-held gold detectors, which are going to be in demand with the rising gold price. They also have a very well performing Communications (Comms) division that make specialised radios and other Comms equipment, including AV gear for transmitting live video and sound - such as when a TV station is doing live interviews at the conclusion of a sporting event like a footy game or a cricket match.

Codan are a high quality company for sure, but I thought they looked fully priced up around $12 to $13 and I haven't held Codan IRL since June, and I reduced my position here yesterday ahead of their results today. D'ohh! Codan are currently up over +8% on these results at around $14/share, and they have traded this morning as high as $14.56, which was +12.6% above their $12.93 close yesterday - which was already near their previous year high. They certainly made a new year-high today!

Lesson learned: Back quality management!

And back to mining and E&C services companies...

Lycopodium (LYL) reported yesterday and were sold down, presumably because (1) their dividend was reduced instead of increased, (2) they ROE slipped about 4%, but is still over 40%, and they have less cash now (cash down 18% compared to pcp). The positives far outweighed those small negatives however and I wrote here about that here (scroll down through my "Val" - which I also updated yesterday - and the new straw will be below that) - and here.

Today, another very similar company to LYL reported, GR Engineering Services (GNG), and despite having had BHP shelve the West Musgrave project (see here: Market-Update---West-Musgrave-Project.PDF) in July, GNG maintained their very high final dividend at 10 cents per share (cps) which means their full year dividends for FY24 (interim + final divs) adds up to 19 cps, same as FY23, and that means that at yesterday's closing share price of $1.855, GNG are paying a dividend yield of 10.2% and that's fully franked, so if you add in the full value of those franking credits (which I can use), the "grossed up" dividend yield is 14.3%. Again, this is another company (like LYL) who specialise in gold mills (so, tailwinds), have zero net debt, have high insider ownership (17% of the company owned by Directors and company founders and their families) and are conservatively run, but run well. They aren't growing as fast as LYL are though - they are smaller and have lumpier revenue and earnings.

GNG reported $74.6 million net cash, -13.3% lower than the $86 million they had at 30 June 2023, and their ROE is also very high at 47% (based on today's results), and it's been over 45% for the previous 3 financial years also according to Commsec, but the main difference in the eyes of the market appears to be that the market had lower expectations of GNG and GNG did maintain their very high dividend, so GNG is up today, currently trading just over $1.90 and they've traded this morning up to $1.95. I was buying GNG two days ago at $1.81 (average), so that's one thing I did get right this week (selling down Codan yesterday here on SM, not so much...)...

Like LYL, GNG is a highly illiquid stock where large volume trades can significantly move the share price, but unlike LYL who had a detailed and positive outlook statement yesterday, GNG's outlook statement was more, "We'll let you know in a couple of months.":

"FY25 Update and Outlook: GR Engineering has a solid contracted pipeline and has been building its orderbook for FY25 and future periods. GR Engineering intends to provide FY25 guidance at its 2024 Annual General Meeting, to be held on 27 November 2024, when it is likely to have more certainty in relation to the timing of key projects."

'Nuff said. Oh, except their EPS, earnings and margins were all higher, on lower revenue:

Source: GNG-FY24-Financial-Results---Media-Release.PDF

I hold GNG (third largest real life position, plus here also).

The Environmental Group (EGL) also reported today, and the market liked that one also. EGL closed yesterday at 34.5 cps, and are currently up 1 cent at 35.5 cps (+2.9%), but they've traded as high as 36.5 cps (+5.8%) today on the back of this report.

It was a good one, as expected:

Margins improved even further as evidenced by their much higher growth in EBIT (+52.8%) and NPAT (+68%) compared to their +18.8% revenue growth.

Source: EGL Results Presentation.PDF Note: Their presso is too large to upload here, and their website investors' page (https://environmental.com.au/investors/) hasn't been updated yet today to include today's announcements and presentation, so I had to link to the ASX site version with its "r personal use only" watermark up the left edge of every slide. - A clean version should be uploaded to EGL's website shortly (hopefully).

I hold EGL here, but not currently in any real money portfolios - it is a company I like however, a lot!

Duratec (DUR) slated to report next Wednesday (28th). Keep 'em coming!

Bear77

4 weeks ago

28-Aug-2024: Duratec (DUR) FY24-Results-Announcement.PDF

Plus: Duratec Results Presentation.PDF and Duratec FY2024 Annual Report.PDF

Analysis: https://strawman.com/reports/DUR/mikebrisy [click that link and scroll down for the straw that @mikebrisy posted on DUR's results today - I can't add anything of value to that - he's got it covered.]