06-Sep-2024: "IPD Group (IPG): Record Orders Fuel the Recovery in Organic Growth", Taylor Collison, Update [BUY, 12m TP=$5.80, published by TC on 02-Sep-2024]

I don't hold this one, but there's a free broker report (courtesy of the ASX free Friday broker reports email) on them by TC, FWIW. They are into engineering, but I haven't had a close look at exactly what they do, so they might be manufacturers more than contractors, but I'm probably going to have a look at them over the next week and see if there's anything of value there. They reported on the 30th August, and the market liked it enough to send their SP up +9.23% on the day, and they're now trading at just over $5, so there's still some upside between here and TC's 12-month target price (TP) for IPG of $5.80, IF TC are right.

Most brokers tend to be bullish on the companies they cover, because the companies are either already clients or are potential clients of that broker, so take it all with a grain or three of salt, but there are sometimes some interesting details in these reports, like an overview of what the company does for instance, and their various divisions, and how those divisions have traditionally contributed to group earnings, that sort of thing. It's the "forward looking statements" that you have to watch out for.

TC's update starts off bullish, as you would expect: Revenue growth of 28% and adj. EBIT growth of 47% included recent acquisitions. Like-for-like (LFL) revenue and EBIT growth was 2 and 3 percent respectively. Disappointing, and down on IPD’s recent record, but no big deal. The devil is in the detail. Core IPD and Ex Engineering grew by double-digits, whilst CMI (5-month benefit) had LFL EBIT declines. Issues at CMI look mostly temporary. IPD carries a record order book, has new products launching and project wins, plus FY25 gets a full period of earnings from CMI. Growth ahead. 

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I'll still have a look, but unlikely to spend too much time on this one. Here's their results announcement - idp-group-FY24-Results-Announcement.PDF [30-Aug-2024]

Everything appears to be trending up at a good clip except for a smallish decline in gross margin - but no biggy when their NPAT was up +44.7% on Revenue that was up +28%. One of the most important metrics, EPS, was up a very healthy +30.1% from 18.6 cps to 24.2 cps. Not sure what sort of base this is coming off - have to have a look at that during the week, but not horrible, so far.

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.