August 2018: LYL has already overtaken my previous price target. This ($5.45) is my new 6 month price target. They continue to perform well. . . .

Feb 2019: 12 month price target will depend on new contracts and commodity prices (esp. gold) which will in turn depend on what's happening in the world. Very hard to predict. . . .

Update: 31-Aug-19: Overtaken my updated PT. New PT = $6.77, based on quality management, quality company, and tailwind of higher gold price. . . .

29-Feb-2020: Update: Due to delays experienced across the industry with the timing of contract starts and new contract awards, it may take a bit longer for LYL to hit my latest $6.77 PT, so faced with new information, I'm reducing it back down to $5.80, which is a level I think they can reach over the next 6 months (by early September 2020) with a couple of reasonably sized new contract wins, and their usual outstanding performance on existing contracts.

29-Aug-2020: $5.80 is still fine for a 12-month PT. They went over $6 in Jan/Feb this year, and would have probably maintained those levels if it wasn't for the pandemic. LYL specialise in designing, building and optimising gold processing plants, and that's a great space to be at the minute. The downside is that they have traditionally done a lot of their work in Africa, South America, and other risky places to operate. Back here in Australia, GR Engineering (GNG) seem to get most of that work. Ideally I'd like to see the two companies merge, or LYL acquire GNG, but that may never happen. Would be good if it did tho... I hold both. GNG is a long term hold for me. LYL is a company I tend to buy when they look undervalued and sell when they look expensive. They look undervalued here (below $5) so I'm holding them.

LYL do a lot of other stuff also - not just gold plants. Have a look at their website for more on that.

https://www.lycopodium.com/

They were originally (many moons ago) the engineering arm of Monadelphous (MND), which was spun out, and in recent years the two companies have formed a JV called Mondium which has been gaining traction, winning larger contracts each year. I also hold MND shares.

Update: 01-Mar-2021: This is another company that seems to be happy to sit at or around the price target that I set 12 months ago - $5.80 in this case, but I should acknowledge that prior to that it was $6.77 and I reduced it to $5.80. The $6.77 PT (in 2019) did not get taken out. $5.80 seems to be around the mark, and I would be raising it if gold was on a tear, but it ain't, so I won't. I think LYL will likely bounce around this level for a while, probably falling away on no news, then coming back up when new contracts are announced. I still hold LYL shares - and GNG shares. GNG had a corker of a day today, up another +5.84% to $1.45. Of the two, you'd have to say GNG has the far superior chart at this point - it's exactly what you want to see - all bottom left to top right at a very good clip. LYL is bouncing around their 12-month high but they don't have the same north-bound momentum that GNG currently do. I'm happy to be holding both, particularly GNG with their recently declared 5 cps fully franked interim dividend.

I'm leaving my PT for LYL at $5.80 for now, but will raise it if they break through $6 with any conviction. If they do that I think they're heading for around $6.70 by this time next year.

Update: 30-Aug-2021: Still happy with $5.80 for a PT for LYL, but that other former $6.70 PT for March 2022 might be a bridge too far from here (currently $4.75). LYL reported on 23-Aug-2021 and rose +4% on the day - from $4.61 to $4.80, but they haven't shot the lights out. GNG is looking better than LYL at this stage, and I do have significantly more invested in GNG than in LYL at this point. I have maintained a small RL position in LYL, but have a much larger one in GNG for their dividend - latest one is 7 cps (FF) for GNG, so their dividend yield is almost 6%, plus franking credits (12c/year FF). LYL have declared a 15 cps final div, so when added to their 10 cps interim dividend, they are on a 5.26% yield, plus franking, and LYL fully frank their divs also. Both do very similar work, however most of LYL's work is outside of Australia, and most of GNG's work is at home - within Australia, although not all. Both have liquidity issues due to being microcaps (LYL is < $200m, GNG is < $300m market cap) and having very high insider ownership. Holders are usually not interested in selling, so there can be precious little available to buy.

Their results can also be lumpy due to the shorter term nature of their EPC work, although GNG also have recurring revenue from their Upstream PS division - but check out GNG for further details on that - this is supposed to be about LYL. Both LYL and GNG have high quality management with heaps of skin in the game, both companies avoid debt and always maintain net cash on the balance sheet, both have excellent risk management strategies in place which clearly work, even when their clients get into financial difficulty occasionally and have trouble paying their bills. GNG & LYL have good track records of being conservative with their accounting and with their guidance, and collecting on their bad and doubtful debts more often than not.

LYL often work for larger companies on average than GNG do, although that is a generalisation and isn't always the case. I like them both, Two of my favourite engineering and construction companies. My other favourite in the space is MND - Monadelphous - but Mono's do other types of E&C to what Lycopodium and GR Engineering Services do. Mono's also have a variety of different divisions so they are much bigger with many more sources of revenue, including recurring revenue from multi-year operations and maintenance contracts. Of the three, currently GNG is performing the best, and MND is the safest, but LYL will have their day in the sun again one day. If they get back down to $4, I'll probably load up.

$7 is probably a good 5 year PT for LYL, so $7 by September 2026.

Update: 24-Aug-2022: LYL reported for FY22 today, and it was very good. All covered in various straws. They are now on a 9% dividend yield, or a 12.6% grossed-up yield (that includes the full value of their franking credits). Their FY22 dividends are more than double what they paid in FY21.

I am updating my valuation to $7.40 to reflect the significant growth the business has achieved in FY22 and the positive outlook they have for FY23.

Update: 23-Feb-2023: Six months on, and LYL have released one of the best half year reports I've seen this year, perhaps THE best one. I won't talk about it too much because it's been well covered in the straws and valuations by @Scott (see here) and @Rick (see here). However, this latest half year report by Lycopodium is a cracker. Particularly given the industry headwinds, especially around the pandemic and the associated recruitment and staff retention challenges experienced across the sector.

FY2023 H1 Results Announcement

FY2023 H1 Report

FY2023 H1 Results Presentation

That's from page 1 of their announcement (link above) but I've added the percentage increases (in the green boxes, plus the green arrow) because they seem too shy and bashful to point out how well they've done. They're not big on blowing their own trumpet, this mob!

Their full year guidance of approx. $320m in revenue and $40m NPAT is simply double what they managed in the first half ($159.9m and $20m), so I have no doubt they will exceed those numbers, as they usually do. Underpromise and overdeliver. That's their MO. I hold LYL both here and in real life, and I always have high expectations of both LYL and GNG (who do the same stuff but with a more Australian focus, LYL specialise in West Africa and other risky places and they are very, very good at risk management), but LYL even beat my own high expectations sometimes. They are THAT good!

LYL closed at $7.64 on the 21-Feb-2023 (Tuesday), the day before they released these results, comfortably meeting my previous price target (set six months ago) of $7.40.

On Wednesday, on the back of these results, they rose +76 cents (+10%) to close at $8.40. Today (Thursday) they rose another 7 cents to close at $8.47. Based on their most recent full year dividend of 36 cps plus this one (another 36 cps), that's 72 cents per share per year now, which means their dividend yield is 8.5%pa based on today's price, and 9.4%pa based on Tuesday's closing price. Based on my average buy price (IRL) of $6.05 (yes, I've averaged up on this one), they're on an 11.9% yield, and that's not taking any of the franking credits into account. And their dividends are all fully franked. To get the grossed up yields (to include the full value of the franking credits, you can take those yields and multiply them by 1.42857 - or just add 43% more on.

That's a handy tip for anybody that wants to work out the franking credits they're going to get on a dividend. Work out the total amount you're going to get in the bank, and if that dividend is fully (100%) franked at the 30% corporate tax rate, you can use the following formula:

30 / 70 x X

where X is the full amount you're going to receive in the bank, "/" means "divided by" and "x" (the small x) means "multiplied by".

If the dividend is coming from a small LIC (like SNC) or any smaller company who qualifies for the lower 25% tax rate, you would use this formula:

25 / 75 x X

The first two numbers in the formula always need to add up to 100 for the formula to work. The first number is the corporate tax rate that applies and the second number is 100 minus the first number. The reason you can't just add 30% to the amount you're going to receive is that a fully franked dividend includes the tax payable on the entire value of the dividend and the franking credits, because the franking credits count as both income and a tax credit, so they have to cover the tax payable on the franking credits plus the amount you're going to get in the bank, which usually works out to 42.857142857% or 30 / 70.

That formula gives you the dollar value of the franking credits you're going to receive. If the dividend is only 85% franked, you would add "x 0.85" to the end of the formula, so for MFG's latest dividend the franking credits would be:

30 / 70 x X x 0.85

For Altium's latest dividend, which is 40% franked, you would change the 0.85 to 0.40 (or just 0.4 or even .4, as the extra zeroes in this case are superfluous).

30 / 70 x X x 0.40

So - if you held 8,000 LYL shares, you would get $2,880 (being 8000 x 0.36) in the bank on the 6th April, plus $1,234.28 in franking credits (or $1,234.29 if they round to the nearest cent instead of ignoring everything after the second decimal place). That $1,234.28 is:

30 / 70 x 2880

Anyway, sorry about the excruciating level of detail (helpful no doubt to some, very obvious to others), but that is all to say that LYL were on a VERY good dividend yield before these results, and they still are, even with the share price rise we've seen this week.

And while they are certainly a good income stock, they are also a growth stock. Their core revenue is lumpy by nature - being one off engineering, procurement and construction (EPC) contracts, often with an "M" tacked on - meaning that they manage the projects as well, but they keep winning more and more work. Some of their more recent work has not included the "C" - it's been "EPM" work, so Engineering, Procurement and Management of projects, especially some in West Africa. That, no doubt, is also part of their risk management. They will often let others do the actual boots-on-the-ground construction in these higher-risk areas of the world, and get paid very well for designing the plant, procuring all the parts and equipment and material required to build it, and managing the whole process.

But that better belongs in a Bull Case straw I suppose. Superior management who are exceptional at risk management in some of the more risky parts of the world to build gold plants.

However, as their presso points out, they are active in a number of industries, they have more than one string (gold plants) to their bow, and they just keep on delivering for their shareholders. I plan to buy more soon once one or two of my other companies goes ex-div.

And they do a lot more than just gold plants of course, like Lithium...

https://www.lycopodium.com/case-studies/

https://www.lycopodium.com/what-we-do/

https://www.lycopodium.com/about-us/our-story/

27-Aug-2023: Update: After FY23 full year results in August:

Raising my price target for LYL to $11.88 (from $9.70 - which they've already reached and passed).

Source: LYL-FY2023-Full-Year-Results-Announcement-22-Aug-2023.PDF

See also: LYL-Investor-Presentation-FY2023-22-Aug-2023.PDF

Souurce: Commsec (trend lines added by me).

Not growing in a straight line all of the time, there are pullbacks, but the overall trend is up and the growth has been substantial.

Current 12m trailing dividend yield is 7.9% plus franking, and all of their dividends have been fully franked. That's a grossed-up trailing yield of 11.2% (including the full value of the franking credits).

And we have share price growth as well:

Source: Commsec (as at Friday 25th August 2023, showing Friday's price movement (-1.72%) at the top.

Disclosure: I continue to hold LYL shares (both here and IRL). Liquidity is still an issue, however it's a great place to park some patient money and watch it grow and produce income at the same time.

03-March-2024: Update: Raising my PT for LYL from $11.88 to $14.25, as they've already shot past my previous price target. They keep on underpromising and overdelivering. Here's their H1 of FY2024 results summary table:

As usual, they did NOT provide any percentages - I've added those (above) on the right side of the table. The cash fluctuates depending on progress payments, completion payments, and so forth, so I'm not fussed about the cash levels - they move up and down a lot, but they always have plenty of spare cash - they are, after all, a small company with a sub-$500m market cap, so $69m of net cash is plenty.

Here's page 1 of that results announcement:

And here's a link to the full announcement: Lycopodium-Half-Year-Results-Announcement.PDF

And to their results presentation for the half: 1HFY2024-Investor-Presentation(LYL).PDF

And below is a share price comparison of LYL, GNG and MND against the S&P/ASX200 TR (total return) Index (XJO) - Lycopodium, GR Engineering and Monadelphous all being quality ASX-listed engineering and construction companies that I hold in real money portfolios (and I also hold two of them here on Strawman.com):

GNG has done OK, but LYL is powering ahead now. Happy to be holding. They're growing at a good clip, they are very profitable, they pay excellent fully franked dividends, they have high insider ownership (great alignment of interests between management and ordinary shareholders), they have superb industry position, they are very well run, and the management like to underpromise and then overdeliver. Not very much NOT to like! And LOTS to like!

21-Aug-2024: Update (post FY24 Full Year Results):

I've written about my thoughts on today's results and the market's reaction here (it may loop back to this valuation, so just scroll down and the straw will be below it).

I would have preferred a higher final dividend, but it's all good - I increased my exposure today both here and in my largest real-money portfolio where it is now my second largest position (10,000 shares worth $123.4 K based on today's $12.34 closing share price) and only $5K below my largest position, WLE (100,000 shares currently worth $128.5 K), so I'd expect LYL will become the largest position in that portfolio soon enough as we get a little bit of a recovery in the share price after today's -12% fall.

Interesting thing I found today on Strawman.com. The system kept telling me my buy order was too large and would exceed the 20% portfolio position limit (no single position can be more than 20% of your entire portfolio value here at the time of purchase or top-up, a rule that also applies in my super which is in an industry super fund). The trouble was that the system here was basing that on yesterday's closing price for LYL, which was $14.02, being $1.68 higher than where they closed today, so that meant that I couldn't move up to 20% of my portfolio here with a buy - I could only end up with 18.5%. Oh well, there's always tomorrow.

Here's a quick recap of today's results:

Dividend down -4.9% vs pcp, ROE down -4% from 44% in FY23 to 42.2% for FY24, Cash down -18% from $82.4 million to $67.6 million (and their cash always bounces around because of the timing of significant milestone payments with their larger projects - but they have net cash and no debt), and everything else up.

Record Revenue, Record Earnings, Record EPS, and on a single digit PE ratio now also.

My previous price target had already been achieved prior to today, so I'm moving it up again, this time to $14.85.

Disclosure: Yes, I hold Lycopodium shares.

Lycopodium replaced Monadelphous Group (MND) - a couple of years ago - as my favourite ASX-listed company. Other favourites include ARB Corporation (ARB) and GR Engineering Services (GNG) and a few gold producers (NST, GMD, RMS).

They can be very illiquid, because 33% of their shares are owned by their Board, Management, Founders, and their families, but worth taking the time to accumulate a position, IMO.

They're in the All Ords Index, and I don't think it will be too much longer before we'll see them in the ASX300 Index also, and at that point they'll absolutely be added to my SMSF (direct shares are limited to ASX300 stocks because it's in an industry super fund).

For now I hold them outside of my super, and here on SM also where they are my largest position.

https://www.youtube.com/watch?app=desktop&v=-Mp5i9Zhqdg