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#2020 Contract Wins
Last edited a month ago

01-Jun-2020:  Monadelphous Contracts Update

Engineering company Monadelphous Group Limited (ASX: MND) today announced it has secured a number of construction and maintenance contracts in the resources and energy sectors with a combined value of approximately $150 million.  
 
In the iron ore market in the Pilbara region of Western Australia, the Company has secured the following new work:

  • A contract under its existing BHP WAIO Asset Panel Framework Agreement associated with the dewatering of surplus water at Mining Area C;
  • A three-year contract with Rio Tinto for the provision of maintenance services and minor projects on its Pilbara marine infrastructure; and
  • One-year extensions to its two existing fixed plant maintenance and shutdown crane services contracts with Fortescue Metals Group.  

In addition, Monadelphous has been appointed to BHP’s WAIO Site Engineering Panel for a further term of two years, to provide civil, structural, mechanical, piping and marine services at BHP’s Mine Site and Port Operations in the Pilbara.  

In Papua New Guinea, the Company has been awarded a new three-year contract to provide minor capital project services, including civil, mechanical, structural, piping and blast and paint at Newcrest Mining’s gold mining operations on Lihir Island. Monadelphous has been providing services at Lihir Island since 2017.  
 
The Company has also secured a four-year contract to continue providing mechanical and electrical maintenance and turnaround services for a customer’s midstream operations in the Queensland coal seam gas market. 
Monadelphous Managing Director, Rob Velletri, said the Company continues to build on its relationships with long-term customers in both the mining and oil and gas sectors. 
 
“As always, we remain focused on the safe and efficient delivery of high-quality service solutions and we are pleased to continue to be recognised as a partner of choice by our customers” he said.   

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Disclosure:  I hold MND shares.

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#Broker / Analyst Views
Last edited 2 months ago

04-May-2020:  Summaries of the latest updates/notes to clients from Macquarie and UBS follow below (sent out today after MND's Business Update late Friday):

MND: MONADELPHOUS GROUP LIMITED, Sector:  Mining Sector Contracting

Overnight Price: $9.48 [Closing Price Today:  $9.20]

Macquarie rates MND as Neutral -

Monadelphous has updated the market and highlighted supply-chain issues that are causing delays on current projects. New projects are also being deferred.

The company has experienced a material reduction in maintenance activity levels as non-essential work is reduced and discretionary maintenance expenditure curtailed.

Macquarie assesses the balance sheet is strong but prefers to retain a Neutral rating until there is greater clarity on the outlook. Target is reduced to $11.16 from $13.80.

Target price is $11.16 Current Price is $9.48 Difference: $1.68

If MND meets the Macquarie target it will return approximately 18% (excluding dividends, fees and charges).

Current consensus price target is $14.48, suggesting upside of 52.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

Macquarie forecasts a full year FY20 dividend of 29.50 cents and EPS of 41.00 cents.
At the last closing share price the estimated dividend yield is 3.11%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 23.12.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 55.5, implying annual growth of 3.3%.

Current consensus DPS estimate is 39.0, implying a prospective dividend yield of 4.1%.

Current consensus EPS estimate suggests the PER is 17.1.

Forecast for FY21:

Macquarie forecasts a full year FY21 dividend of 41.10 cents and EPS of 56.20 cents.
At the last closing share price the estimated dividend yield is 4.34%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 16.87.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 67.6, implying annual growth of 21.8%.

Current consensus DPS estimate is 46.8, implying a prospective dividend yield of 4.9%.

Current consensus EPS estimate suggests the PER is 14.0.

All consensus data are updated until yesterday and require a minimum of three sources.

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UBS rates MND as Buy -

Monadelphous has pointed out the restrictions relating to the pandemic are causing significant delays or deferrals in engineering and maintenance projects.

If there is no improvement in current trading, the company expects FY20 revenue to be similar to FY19.

UBS notes there is upside to forecasts if operations normalise ahead of the second quarter of FY21.

Buy rating maintained. Target is reduced to $13.35 from $14.07.

Target price is $13.35 Current Price is $9.48 Difference: $3.87

If MND meets the UBS target it will return approximately 41% (excluding dividends, fees and charges).

Current consensus price target is $14.48, suggesting upside of 52.8% (ex-dividends)

The company's fiscal year ends in June.

Forecast for FY20:

UBS forecasts a full year FY20 dividend of 22.00 cents and EPS of 38.00 cents.
At the last closing share price the estimated dividend yield is 2.32%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 24.95.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 55.5, implying annual growth of 3.3%.

Current consensus DPS estimate is 39.0, implying a prospective dividend yield of 4.1%.

Current consensus EPS estimate suggests the PER is 17.1.

Forecast for FY21:

UBS forecasts a full year FY21 dividend of 21.00 cents and EPS of 43.00 cents.
At the last closing share price the estimated dividend yield is 2.22%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 22.05.

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 67.6, implying annual growth of 21.8%.

Current consensus DPS estimate is 46.8, implying a prospective dividend yield of 4.9%.

Current consensus EPS estimate suggests the PER is 14.0.

All consensus data are updated until yesterday and require a minimum of three sources.

 

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[I hold MND shares and was buying more today]

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#Media
Added 2 months ago

04-May-2020:  https://www.australianmining.com.au/news/monadelphous-construction-projects-hit-by-covid-19/

Temporary issues, entirely expected, nothing structural, closure of NZ Water business a small surprise but nothing to worry about, bargain at around $9.20 - where I just topped up.

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#Market Updates
Last edited 2 months ago

01-May-2020:  Market Update

Engineering company Monadelphous Group Limited (ASX: MND) wishes to provide a market update regarding the impact the coronavirus (COVID-19) is having on its business and operations, as well as the outcome of a strategic review undertaken into the Company’s Water Infrastructure business.  
 
COVID-19 operational impact 
 
Measures taken by governments and industry across the world to prevent further spread of the virus have impacted the economy, resulting in the delay, suspension, deferral or reduction of services across a range of the Company’s projects and worksites, as well as materially disrupting productivity levels. Monadelphous continues to take all necessary measures required to proactively manage the business through this unprecedented period to ensure the safety of its employees and sustain business continuity. 
 
The Company’s Engineering Construction division has experienced supply chain issues causing delays on large resources construction projects currently in progress, as well as a number of temporary deferrals to potential new construction contract award dates. In its Maintenance division, the Company has experienced a material reduction in activity levels, particularly in fly in fly out operations with customers reducing non-essential work, delaying discretionary maintenance expenditure and deferring shutdowns. 
 
While it is the Company’s intention to ensure that it continues to meet its continuous disclosure obligations, due to the heightened level of uncertainty and disruption in the economy, it remains unable at this time to provide definitive revenue guidance for the financial year ended 30 June 2020. However, should the activity levels that the Company is currently experiencing continue to the end of the financial year, revenue would be similar to that of the previous corresponding period. Margins in the second half of the financial year are expected to be significantly challenged as a result of the extent of the disruption and the impact it has had on the Company’s operations. 
 
As previously highlighted, the short- to medium-term financial performance of the business is, and will remain, dependent on the extent and duration of the impact to the Company’s operational activity and productivity levels resulting from the outbreak of COVID-19. 
 
Strategic review of Water Infrastructure business 
 
Several water projects approaching completion have recently experienced an escalation in contract disputes and disappointing levels of profitability.  
 
After undertaking a strategic and operational review of its Water Infrastructure business in Australia and New Zealand, the Company has decided to discontinue its operations in New Zealand and consolidate its east coast engineering construction operations into a single Eastern Australian business unit. The restructure will enable the Company to reduce costs and focus on improving the quality of its earnings from the water sector. 
 
As a result of the decision to refocus the business and the disappointing project outcomes, the Board of Directors will make a provision of $14 million before tax in the financial report for the year ended 30 June 2020 for project underperformance and restructuring costs.  
 
Strategic response 
 
The Company has taken, and will continue to implement, a large number of actions to protect the business during this period of market turmoil, and has implemented a targeted cost reduction plan across the business to ensure the company operates as productively and profitably as possible.

To support these cost reduction measures the Chairman, the Managing Director and the Non-Executive Directors have all agreed to a 30 per cent reduction in salary and fees for the next six months. The Executive and General Management teams have also agreed to salary reductions for the same period ranging between 10 and 20 per cent.

Monadelphous Managing Director Rob Velletri said “We will continue to work closely with our customers during these challenging and uncertain times. Our disciplined and prudent management, loyal workforce and strong balance sheet mean that we are well positioned to deal with the challenges ahead, and the opportunities that will arise in time. I am confident that the actions we have taken to refocus the Water Infrastructure business will deliver more profitable and sustainable pipeline of opportunities over the longer term.” 

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[Disclosure:  I hold MND shares.]

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#Results
Added 5 months ago
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#2020 Contract Wins
Added 6 months ago

13-Jan-2020:  Monadelphous announced that their 60% owned JV with Lycopodium, Mondium (LYL own the other 40% of Mondium) has won their biggest contract ever, valued at approximately A$400 million, with Rio Tinto (RIO) for the design and construction of the Western Turner Syncline Phase 2 (WTS2) mine, located in the Pilbara region of Western Australia. 

Click here for MND's announcement and here for LYL's announcement.

Hartley's have also released a broker/analyst update on this news - raising their 12-month PT (price target) for LYL from $5.70 to $6.76 (and maintaining their Buy recommendation for LYL).  They also explain how LYL treat this revenue from an accounting perspective and how it is likely to affect their profitability going forwards (the impact of the contract on their bottom line).  You can access that report here.

MND are a LOT bigger than LYL, so while this is a very big contract for Mondium (around 4 times bigger than their previous biggest contract), and is also a big deal for Lycopodium, it is less material to a company the size of Monadelphous, who have a number of JVs in addition to their usual direct contracting work.  This may explain why LYL is up just over 5% since the announcement, but MND finished the week up less than 1%.  I hold both MND and LYL.

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#Media
Added a month ago
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#Company Presentations
Added 8 months ago
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