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Added 2 days ago

GNG FY2020 H1 Results (nothing special, but positive outlook):

25-Feb-2020:  HY20 Financial Results - Media Release

Half Yearly Report and Accounts

Appendix 4D - Preliminary Half Year Report

Last edited a week ago
#New Contract Wins

GR Engineering Services (GRES, ASX:GNG) have released two new announcements concerning their Upstream PS division this week:

20-Feb-2020:  Upstream PS awarded Blacktip Maintenance Contract Extension

17-Feb-2020:  Northern Endeavour FPSO operations and maintenance contract

Neither of these announcements are particularly material - they're certainly not game-changers for GNG, but it does highlight that they do have a division within the company (Upstream Production Solutions) that services the energy (oil/gas) industry and has significant recurring revenue, which is important when their main (minerals processing plant design and construction) business has such chunky/lumpy revenue that is not recurring.  Their EPC contracts vary greatly in volume and value and their income from that main division tends to be all over the shop from one year to the next.  The lack of consistency - in terms of revenue and earnings - from that main division scares many people away, but having followed them closely for years, I take comfort in their conservative management, who avoid debt like the plague, always maintain a healthy net cash position, and do a very reasonable job in terms of risk management and risk mitigation considering the industry they are exposed to - being junior miners, explorers moving into the development stage, and small project developers - who often have no cashflow yet and sometimes have funding issues.  AND they have Upstream PS there as well, with their vital recurring revenue.  GNG are down currently, and their SP can certainly whipsaw around quite violently at times, but they remain a core holding of mine.  You need to have a high risk-tolerance - or else the ability to ignore daily SP movements - to hold them, but they ARE profitable, they have excellent management (who all have significant skin in the game) and they are very good at what they do - so have a great industry position also.  There's plenty to like.  Let's see what happens when they report during the next few days.

Added 3 weeks ago
#New Contract Wins

10-Feb-10:  EPC Contract - Abra Base Metals Project

GR Engineering Services Ltd (GNG) is pleased to announce that it has been awarded a conditional engineering, procurement and construction (EPC) contract with Galena Mining Limited’s (G1A) subsidiary, Abra Mining Pty Ltd, for the supply of a 1.2 million tonne per annum lead sulphide floatation process plant and ancillary infrastructure for the Abra Base Metals Project located in Western Australia. 
The Contract sum is $74m and will be undertaken on a guaranteed maximum price (GMP) basis. The Contract remains subject to GR Engineering being issued with a full notice to proceed, which is dependent on Abra Mining achieving financial close on its proposed project financing facilities. 
GR Engineering has commenced early engineering works up to an agreed capped amount. 
Commenting on the award of the Contract, Mr Geoff Jones, MD of GNG said: 
“We are pleased to have been awarded the Contract for the delivery of the Abra Base Metals Project, which has followed GR Engineering’s involvement to date in the project’s feasibility study and preliminary design work. We look forward to working with the Galena team to safely and successfully deliver the Abra Base Metals Project.”


That's a significant contract.  They also recently announced what appeared to be a much smaller (US$4.5m) contract in Mexico, but upon further inspection that order was just for preliminary works ahead of the official award of an EPCM contract which would be worth a lot more:

30-Jan-2020:  San Dimas Silver Mine EPCM Project

That one was on the back of GNG's recent acquisition of Arizona-based Hanlon Engineering and Associates in the US.  Hanlon is a multi-disciplinary engineering services firm that provides engineering, procurement and construction management (EPCM) services to the mining sector in North America.  GNG's MD, Geoff Jones, said that the acquisition of Hanlon was aligned with GR Engineering’s growth strategy, and would increase the Company’s existing footprint within the Americas. 
“We are pleased to be acquiring the Hanlon business. Hanlon has a strong local brand with an excellent safety record and longstanding relationships with major mining clients. Hanlon has an experienced management team capable of taking advantage of the numerous growth opportunities that exist in the Americas."
Based on Hanlon’s current workflow, identified growth prospects and GR Engineering’s existing pipeline of work in the Americas, GR Engineering anticipates that the business will immediately contribute to GR Engineering’s revenue and become EPS accretive for the Company in the financial year ending 30 June 2021. No material earnings impact is forecast for the current financial year (FY20).  

16-Jan-2020:  Acquisition of US Business

However, the BIG announcement, that moved the SP almost +20% on the day, was this one:

13-Jan-2020:  EGR: EcoGraf signs GR Engineering for WA Battery Facility

Why that put a rocket under GNG is a bit of a mystery considering (a) there was no corresponding announcement by GNG themselves - that announcement was from EGR, (b) the two companies have so far only signed a non-binding letter of intent (LOI), rather than any formal contract (conditional or otherwise), and (c) EGR haven't even fully secured the land yet that they want to build this thing on so it's highly unlikely they have yet secured the funding needed to build it.

However, when a stock has been beaten down as much as GNG had been, it doesn't take very much to reverse that trend and get them heading north again.

On the negative side, GNG did reveal that they would be booking a A$17.4m impairment in their H1FY20 accounts associated with the TOGA (Timor Sea Oil & Gas Australia Pty Ltd (Administrators Appointed)) Group of companies now being placed into liquidation.  GNG's wholly owned subsidiary, Upstream Production Solutions Pty Ltd (Upstream PS) had an Operations and Maintenance Services Agreement (O&M Agreement) with TOGA, and that $17.4m impairment represents receivables for services rendered (payments owed by TOGA to GNG for services that Upstream PS had performed for TOGA).  Upstream PS holds a security interest over the Laminaria Corallina production licences, which rank pari passu with CCI’s security interest over those licences.  CCI is TOGA's senior lender.  GNG may well be able to get some or all of that $17.4m that is owed to them by TOGA, but they (GNG) tend to be pretty conservative with their accounting, so they've booked the impairment at this stage for the full amount.

07-Feb-2020:  Timor Sea Oil & Gas Australia - Update

Today however, I expect the market to be more focussed on their latest announcement - of their new $74m EPC contract with Galena for delivery of the Abra Base Metals Project in WA.  GNG are always involved in a number of feasibility studies for various different companies and a number of those FS's do lead to EPC contracts, as this one has.


Disclosure:  I hold GNG shares.

Added 3 months ago
#Company Presentations
Added 4 months ago
#New Contract Wins
Last edited 4 months ago
#Business Model/Strategy

21-Apr-19:  GR Engineering Services (GRES, ASX:GNG) are a core position of mine.  I don't hold them in my SMSF, but that's only because they have never been in the S&P/ASX300 index (or above), which is one of the prerequisites of CBUS Self-Managed Super for direct investments.  I hold them in my main trading portfolio instead, but I always own a core holding there, and I trade around that, so buying more when they look cheap (as they do now - down around $1/share) and selling down (trimming my position) when the GNG SP looks like it might have gotten ahead of itself.

Business Model/Strategy:  GRES is an engineering contractor who specialises in gold processing plants, but also do other precious metals, base metals and mineral sands.  They tend to leave the coal and iron ore projects to others.  GRES are usually involved in numerous studies at any given time (PFSs=Pre-Feasibility Studies, DFSs=Definitive Feasibility Studies, BFSs=Bankable FSs, etc.), many of which lead straight into EPC (Engineer, Procure, Construct) or EPCM contracts (the "M" means they also manage the entire construction project) - where those FSs show the projects to be robust and commercially viable (and the project's owners can secure the capital to proceed to the construction phase).

As contractors, their revenue and profits are inherently lumpy, as their clients rely on favourable commodity prices as well as a favourable business environment (the ability to raise money to build mines and processing plants) and the ducks don't always line up for them.

That's one risk.  Another is that they're a small company.  Based on their current $1.02 SP, their market capitalisation is less than $160m, so liquidity can also be a problem (there are not always many buyers and sellers for GNG shares, and the gaps between the bids and offers can be substantial at various times).  That can be an opportunity for a patient buyer, but a substantial headache for an impatient seller.

The third risk is that many of their clients are small, and only beginning their journey, and not all of them navigate their way through to profitability as well as others, which results in some of GRES's clients occasionally not paying their bills, meaning GRES occasionally report write-offs associated with non-payment of money owing to GRES by certain clients.  This recently occurred with Eastern Goldfields (ASX:EGS) who are now in Administration.  GRES had performed some refurbishment work at EGS's Daveyhurst Gold Plant (located in the eastern goldfields region of WA), and GRES will never be paid for much of that work.  This comes with the territory and GRES have been successfully navigating through such landmines for many years now.  They do get a few that blow up on them like that sometimes, but it never mortally wounds them, due to their superb risk management.  Their profitability is high enough that they can absorb such losses, as long as they don't get too many of them around the same time.

Plenty of risks there.  So - why own them?

Well, they have some significant positives.  One is that their founders still run the company and are substantial shareholders in it.  Another is that they really dislike debt, and avoid it wherever possible, always maintaining a net cash position.  They also don't have capital raisings.  They fund their operations from their own profits and cashflow, and that includes gearing up for new substantial projects.  They pay above-market dividends.  I've owned shares in GNG for a number of years and during that time they've never asked me for money (no SPPs or rights issues), have paid a dividend in every 6 month period except 1 (and their dividend yield has always been impressive), and they have reported a net cash position (no net debt) in every single report during that time.

They also have a strong record of sensible capital allocation, including M&A activity.  They have only aquired one company in the years I have been a shareholder, to diversify into the energy sector.  They acquired "Upstream Production Solutions" (Upstream PS), which has provided them with some much-needed recurring revenue.  The nature of their main contracting business is that it is based on a number of one-off studies and one-off engineering and construction projects.  Upstream PS is based around multi-year operations and maintenance (O&M) contracts for assets owned by large energy players such as Origin Energy and APLNG as well as some of the smaller players, and provides recurring revenue.

In summary, despite the risks, which I do acknowledge, they are very well run, their board and management have significant skin in the game (so their interests are aligned with mine), they provide me with a good income stream, they always maintain a net cash buffer (no net debt at all), their risk management has been superb to date, and they are very good at what they do, and the industry knows it, and they now have some diversified revenue, including some recurring revenue streams.

Last edited 4 days ago

26-Aug-2019:  GR Engineering's FY19 Results:

FY19 Financial Results - Media Release

Full Year Statutory Accounts FY19

Preliminary Final Report



  • Revenue:  $182.3 million
  • Underlying EBITDA:  $11.2 million
  • PBT:  $8.8 million
  • EPS:  4.25 cps
  • Cash:  $31.4 million
  • Final dividend:  2.0 cps (unfranked) 

GR Engineering Services Limited (ASX:GNG) today announced its financial results for the financial year ended 30 June 2019 (FY19). 
GR Engineering reported FY19 sales revenue of $182.3 million, underlying EBITDA of $11.2 million and profit before tax of $8.8 million. As at 30 June 2019, the Company held cash of $31.4 million. 
Commenting on the Company’s FY19 financial performance, GR Engineering’s Managing Director, Mr Geoff Jones, said: 
“In FY19, GR Engineering transitioned from a period of strong design and construction activity and into a phase of consolidating new project opportunities. This has been achieved primarily through the award and delivery of mineral processing design, study management and early works engagements both in Australia and overseas associated with precious metals and emerging potash and minerals sands development projects. 
Project execution activity was lower in FY19 largely due to the circumstances resulting in the deferred project opportunities reported in HY19 prevailing in the second half, and directly impacting financial performance in GR Engineering’s core mineral processing design and construction business. Pleasingly, a significant contribution was made by Upstream Production Solutions (Upstream PS) which generated approximately half of the group’s total FY19 revenue.  

Despite the decline in revenue in FY19, GR Engineering was able to significantly increase its cash balance to $31.4 million at 30 June 2019 (30 June 2018: $21.8 million). Minimal debt, relatively small ongoing capex requirements, consistent project profitability and delivery all contributed to the maintenance of a stable balance sheet and in particular, a robust working capital position. This has enabled the Company to pay out $13.8 million in dividends to its shareholders during FY19. 
The Board remains confident that GR Engineering has established quality exposure to a number of new projects that will attract funding and deliver near term design and construction opportunities to the Company. 
The Company’s Total Reportable Injury Frequency Rate for FY19 was 4.99 comparing favourably to the FY18 result of 8.62. GR Engineering pursues continuous improvement in its commitment to safety, with its primary objective being the achievement of a zero harm workplace environment on all jobs and at all locations.” 

A final dividend of 2.0 cps (unfranked) has been declared, resulting in total FY19 dividends of 6.0 cps.


FY20 Update and Outlook 
Work has commenced on the $46 million contract announced by GR Engineering on 21 January 2019 for the engineering, procurement and construction of the Sandy Ridge infrastructure project owned by Tellus Holdings Limited. 
GR Engineering intends to provide FY20 guidance ahead of its 2019 Annual General Meeting, to be held on 28 November 2019 when it is likely to have more certainty in relation to the timing of key projects. In the interim, it notes that FY20 financial performance is likely to be weighted to the second half.


--- click on links above for more ---


Disclosure:  I hold GNG shares.

Last edited 2 months ago
#Broker/Analyst Reports

25 June 2019:  Moelis Update:  GNG:  Project timing uncertainty remains

That broker update on GNG covers off the current state of the Thunderbird, Karlawinda and Sandy Ridge projects.

Last edited 3 months ago
#Substantial Shareholders

24-May-2019:  I have mentioned in other straws that one of the reasons why I like GR Engineering Services (GRES, ASX:GNG) so much (and have held them since soon after they first listed on the ASX) is the level of Management ownership, which is often referred to as "skin in the game".  All of the board and senior management hold shares in the company, and a number of them are substantial shareholders.  There are also founders and spouses/families of deceased founders who are also still substantial shareholders in GNG.  The only drawback of that is that it reduces the "free float", which is the name we give to the remainder of the shares on issue which are not tied up with those long-term holders, i.e. the shares available to trade on the market for Joe/Jo Average.  This reduced free float, in combination with the small size of the company (sub-ASX300 with a market cap of less than $150m) results in some big moves sometimes because of reduced liquidity - meaning less shares available to buy and sell and often substantial gaps between the lowest offers and the highest bids.  A buy or sell "at market" can sometimes move the SP 5% or more with one trade.  They are also engineering and construction contractors, with all of the risk that brings with it.  We all remember RCR...

GNG are mostly involved in fixed price or guaranteed-maximum-price (GMP) contracts, which swings the risk pendulum firmly back to GNG (rather than their clients).  Their clients need that cost certainty.  Without it, most wouldn't be able to secure financing for their projects.  GNG are VERY good at what they do and they don't get themselves into trouble with cost blowouts too often.  However they still have to deal with a lot of small miners or wanna-be-miners, who are just starting the journey, attempting to move from being explorers to developers to producers.  GNG usually become involved during the development stage and take these companies through to production, but not all of these companies find themselves in a position to pay their bills as they fall due.  They can have commodity prices move against them, or have finance issues (such as finance deals falling through or getting renegotiated), or they can encounter other issues that are completely unrelated to anything that GNG are involved in.  One quick example of where this occurred is Eastern Goldfields (EGS).  They are now in voluntary administration, and GNG are going to have to write off a few million that they are unlikely to ever receive from EGS.

However, having followed them for a number of years now, I rate GNG's risk management as first rate.  They never carry net debt.  Every 6 months, they always report a net cash position, and they are not afraid to reduce or suspend their dividend if that's what it takes to shore up their balance sheet.  That might sound like an easy or very sensible and obvious thing to do, but remember that some of the largest shareholders are managers or board members at GNG, and so reducing their dividend does affect them more than most.

Just while I'm on that, this current FY (FY19) is going to be a very quiet one by GNG's standards, so expect a smaller final dividend to be declared in August this year than the 5c they declared last August.  Based on their last two dividends (5c + 4c = 9c), their dividend yield is currently over 10% - plus franking, but that is historical, and FY18 was a much stronger year than FY19 is going to be, so keep that in mind when projecting that yield forward.

I still rate GNG as a definite "buy" below $1, and I was recently buying more at 90c (and they're 88c now), but that's not based just on the past dividend hostory, it's based also on the quality of the company's management, their excellent industry position and their track record of on-time and on-budget project delivery.

Despite that reduced free float that I've just mentioned, Spheria Asset Management have managed to build a 10.43% stake in GNG over the past couple of months, so they're now the third largest shareholders in GNG (after Citicorp and CBA).

On their website, Spheria describe themselves like this:

"Spheria Asset Management is a fundamental-based investment manager with a bottom-up focus specialising in small and microcap companies. Our mission is to achieve strong investment returns for our clients with an emphasis on risk management. Keeping an open mind to potential investments is critical to our process and expanding our horizons to consider global influences gives us a powerful edge."


Disclosure:  Obviously, I hold GNG shares.  They're a very solid company that won't go broke (because they never carry net debt) and pay an excellent dividend.  They're good to buy near the lows (like now) and to trim when the valuation looks a bit stretched (up towards $2).

Last edited 4 months ago
#Skin in the game

21-Apr-19:  This straw is about the founders of GRES (GR Engineering Services, ASX:GNG) and their current board and management, and their levels of share ownership in the company.

Firstly, a little light reading for those who are interested:

Joe Ricciardo also retired from the MinRes (ASX:MIN) board at the same time.

2011 IPO Prospectus for GNG (GRES)

Note:  Joe Totaro, one of the co-founders, has now retired from full-time employment (from the beginning of April 2019), including resigning from the CFO and Company Secretary positions at GRES, but he has now joined the GRES (GNG) board as a non-executive director.  He still owns 5.21% of the company.

Other founder and management holdings:

  • David Sala Tenna, co-founder, and current Manager - Projects, owns 12,325,500 shares (8.03% of GNG).
  • George Botica was one of the original owners of all or part of one or more of the businesses that became GR Engineering prior to their 2011 float.  Joley P/L ("Botica Family Trust") owns 10,524,000 shares (6.86%)
  • Joe Ricciardo (father of Formula One racing car driver Daniel Ricciardo) was a co-founder of GRES, and his private company, Parsian P/L, owns 9,798,578 shares (6.38%).
  • Ron Harken was one of the original owners of all or part of one or more of the businesses that became GR Engineering prior to their 2011 float.  He is survived by his wife, Toni Harken, whose private company, Quintal P/L, owns 9,500,000 shares (6.19%).
  • Tony Patrizi was a co-founder of GRES, and his private company, Kingarth P/L, owns 9,025,000 shares (5.88%).  Tony is also a director of GRES (GNG).
  • Rodney Schier is an Engineering Manager at GRES according to his LinkedIn.Com profile.  He was also one of the original owners of all or part of one or more of the businesses that became GR Engineering prior to their 2011 float and his wife Beverley Schier owns 8,100,000 shares or 5.28% of GNG.
  • Barry Patterson was also one of the co-founders, and is a current director, and his company Polly P/L holds 7,500,000 shares, or 4.89%.
  • Steve Kendrick is one of the Managers (Projects) at GRES and Steve owns 4,875,000 shares (between his Family account holding and his Kendrick Investments P/L holding) which is 3.17%.
  • Michael Woodhouse was one of the original owners of all or part of one or more of the businesses that became GR Engineering prior to their 2011 float and his wife Barbara Ann Woodhouse owns 3,500,000 shares (2.28%) in the Woodhouse Family account and the two of them (Mike and Barb) own another 813,950 shares (0.53%) in their Woodhouse Family Retirement Fund account.
  • Geoff Jones, GNG's Managing Director, owns 772,134 shares, plus at least another 1.1 million appreciation rights.
  • Peter Hood, a non-executive Director, owns 500,000 shares.
  • The only board member that doesn't own shares is their independent non-executive Chairman, Phil Lockyer.

They certainly do tick the "skin-in-the-game" box.




Last edited 6 months ago
#Broker/Analyst Reports

02-Mar-2019:  Moelis Australia have released an updated Broker/Analyst Report on GR Engineering Services (post GNG's 1HFY19 results) which is available free via the "ASX Equity Research Scheme", and that report can be viewed here.

For more details on the scheme or to sign up for a free email every Friday afternoon with links in it to that week's free reports - see here.

Moelis rate GNG as a "Hold" with a target price of $1.22, which is 8% above yesterday's $1.13 cent closing price.

Disclosure:  I hold GNG shares.

Last edited 4 days ago

25-Feb-2019:  GNG released their 1HFY19 report this morning and they've reported significantly lower revenue and profit compared to the pcp - as expected - as they are cycling off FY18 during which they completed 2 large gold projects (DCN/Dacian Gold's Mt Morgans and GCY/Gascoyne Resources' Dalgaranga) and they've had no large projects commenced yet in FY19.

They have also now guided that the 2nd half is likely to be roughly the same as the first half - due to project development delays and uncertain commencement timing on some projects.  When you look at the numbers (you can view their 3-page 1HFY19 Results Media Release here), FY19 is going to be a much weaker year than FY18.  I have been warning that this would likely be the case, and that they needed to get cracking on both Thunderbird (for SFX/Sheffield Resources) and Karlawinda (for CMM/Capricorn Metals) in the first half to have any chance of having a reasonable 2nd half.  They haven't commenced work at either project as yet, with Thunderbird being very close, but Karlawinda being delayed by a few different factors including some M&A activity around the project owners - Capricorn Metals (CMM).

On the bright side, they (GNG) look set to have a much better FY20.

Also, they've dropped their interim dividend from 6c to 4c FF.  Their full-year dividend, paid in October was 5c.  I think it's safe to assume they'll most likely drop their full year dividend this year, and most likely to 4c - the same as this interim dividend declared today.  Based on 8c (4+4), and their current $1.17 SP, that puts them on a 6.8% FF forward-looking dividend yield - or 9.6% grossed up (to include the full value of the franking credits).

On that basis - even without the franking credits - they look like a good "hold" to me currently, and possibly a "buy" if their SP drops much further.  There will be upside in terms of capital gains when their workload/WIH/order book improves again, and a decent income stream to keep us interested in the meantime.  It's the nature of the industry - lumpy revenue and profits, but GNG usually pay a good dividend yield regardless.  Happy to continue to hold GNG at these levels and with this div yield.

You can view their 24-page Half Yearly Report and Accounts here.

Last edited a month ago
#ASX Announcements

21-Jan-2019:  GNG have announced a new EPC contract - see here.

EPC Contract – Sandy Ridge Project 

GR Engineering Services Limited (ASX:GNG) has entered into an engineering, procurement and construction (EPC) contract with Tellus Holdings Ltd (Tellus), a public unlisted infrastructure development company in the business of  developing geological repositories that provide waste storage, recovery and permanent isolation solutions and complementary salt and clay products.  The Contract is for the engineering design, procurement and construction of infrastructure for a fully integrated facility for the long-term storage, recovery and permanent isolation of hazardous and intractable waste and an associated kaolin mining operation located approximately 75km NE of Koolyanobbing, in the goldfields region of WA.

The Contract price is approximately $50 million, with the works to be delivered under a guaranteed maximum price (GMP) model. GR Engineering’s scope of work under the Contract includes the engineering, procurement, construction and commissioning of the waste cell infrastructure, access roads, raw water supply and other key facility infrastructure for the Sandy Ridge Project’s underground waste facility.

It is proposed that the Contract will be undertaken in 2 stages, with stage 1 comprising engineering and design and long lead procurement activities for the works, anticipated to commence in coming weeks, subject to the satisfaction of conditions precedent, which primarily relate to conditions associated with Tellus’ proposed financing facilities.

Stage 2 execution of the works is intended to commence mid-calendar year 2019, subject to Tellus satisfying additional conditions relating to the balance of the Sandy Ridge project approvals.

GNG are still busy with a number of studies for different companies and many will lead to EPC contracts as this one has.  However, the two big hopes for this half (2H FY19) remain the Karlawinda gold project for CMM (Capricorn Metals) and the Thunderbird Mineral Sands project for SFX (Sheffield Resources).  Karlawinda and Thunderbird are important because of their scope and size and the associated revenue relating to them (with each one expecting to be worth over $100m).  GNG are going to have a quieter FY19 (compared to the pcp - FY18), and the share price is already reflecting that, but there could be further weakness if Karlawinda or Thunderbird are canned or significantly delayed.

Disclosure:  I hold GNG shares.

Additional:  Karlawinda and Thunderbird still haven't been commenced, and it's now 22 July 2019.  Karlawinda is getting back on track after CMM had some board turmoil (board got rolled) and survived a couple of takeover attempts, and then tried to sell the project, before changing tack and deciding to go ahead with it themselves as originally planned - so - as I said - I think Karlawinda is finally getting back on track again now...  Sheffield's Thunderbird Mineral Sands project has been put on hold while Sheffield (SFX) attempt to attract a partner to help co-fund the construction (the bit GNG are going to do), and they are reviewing their BFS (bankable feasibility study) as part of that process.  SFX are using Macquarie to help them find a funding partner.  Meanwhile SFX have recently (during this month - July 2019) announced seperate offtake agreements for the Ilmenite and Zircon that Thunderbird will produce, which is an important step forward for the project.  There was a heap of tax-loss selling with GNG in June (they closed at 75c on June 26th), but they've risen almost 30% from there in the past 3 weeks to close today at 97c.  GNG are still debt-free and profitable, still paying dividends, and still with excellent management.  Karlawinda and Thunderbird were not commenced in FY19 as planned, but they will get built, and they should still get built by GNG, and I'd expect they'll both be commenced by GNG at some point in this current financial year.  Still holding GNG (of course).

Last edited 4 months ago
#ASX Announcements

12-Nov-2018:  GNG (GR Engineering Services or GRES) have announced today that they have signed an EPC contract with Sheffield Resources (SFX) for the construction of the Thunderbird Mineral Sands Project which is located between Broome and Derby in Western Australia - see here. 

The corresponding announcement by Sheffield can be viewed here. 

The GNG announcement mentions that they still can't start work on the project properly until SFX have secured all of their funding and made a FID (final investment decision) on Thunderbird, however reading the SFX announcement I would expect that the FID announcement would be imminent seeing as SFX are announcing that the project is now fully funded (via the Taurus facility).

GNG need to be working on Thunderbird and also Karlawinda (the gold project owned by CMM: Capricorn Metals) pretty soon to secure a decent second half for FY2019.  Despite plenty of smaller contracts, GNG have had no really large contracts in the current half to replace the two big projects they completed in FY2018, being Dalgaranga for GCY (Gascoyne Resources) and Mt Morgans for DCN (Dacian Gold).

GNG are committed to providing the market with current year guidance ahead of their AGM - which is in 10 days time - on the 22nd November 2018.

If the market has already priced in a weaker half (this current half) compare to the PCP (being H1FY2018) then upbeat guidance (especially for a strong second half) might lift the share price.  However there is also a strong possibility that GNG get sold down on the guidance that should be provided by GNG at some point in the next 10 days (between now and Nov 22).   I would view a significant fall in GNG's share price from here as a buying opportunity.  This current half will certainly be weak, but the next couple of years will be strong!

There are two brokers covering GNG.  The latest report from Hartleys can be viewed here and it is titled, "FY19 Some Risk, FY20 Very Strong".   They have a "Buy" on GNG with a valuation of $1.60 and a 12-month price target of $1.70.  That report was prepared on August 23rd 2018.

Argonaut's latest report on GNG can be viewed here.  They have reduced their valuation from $1.60 to $1.55, and also have GNG rated as a "Buy".

It's worth noting that both of those brokers are generally bullish on the sector, and they do issue a lot of "Buy" and "Spec Buy" recommendations.

Previous and future broker / analyst reports on GNG can be accessed from here.

Disclosure:  I hold GNG shares.




Last edited 4 months ago
#Bull Case

Most of this was written in 2018, and parts have been updated since then:

GR Engineering Services (GRES, ASX: GNG) are the best in the industry at engineering, construction and commissioning of gold process plants, and they tackle many other minerals and metals as well.

They have highly incentivised and capable management who are shareholders - many are substantial shareholders.  GNG are very profitable, and avoid debt like the plague, always maintaining a healthy cash buffer.  They tend to target the smaller end of the market, so occasionally find themselves in disputes with companies who can't or won't pay their bills, like Eastern Goldfields (EGS) and Wolf Minerals (WLF).  When they have cashflow issues, such companies tend to dispute invoices & threaten or commence counter-claims to stall having to pay their bills.  Both disputes have now been fully settled. 

Those who follow Monadelphous (MND) might remember they had a similar issue with WICET - the Wiggins Island Coal Export Terminal - a few years ago, as did every other contractor who worked on that project.  There was a substantial negative movement in the coal price between when WICET was commenced and when the project was completed, and the construction contractors wore a lot of the pain as WICET stalled and argued and tried to get their costs reduced - after the contracts had all been signed and the work had already been done.  MND found themselves in a long-running dispute with a company that was backed by some of Australia's largest coal miners - despite MND not doing a thing wrong.  All settled now.  This also occurs with much smaller companies like GNG.

To my knowledge, GNG have no material ongoing or current disputes now.  The vast majority of their clients are very happy, and rave about GNG's work.  

GNG have a lot of ongoing study work (feasibility studies and other engineering studies and process work) for various clients, and some smaller contracts, plus they have their Upstream Production Solutions (UPS) division which services the energy sector with mostly recurring revenue from ongoing maintenance and operations contracts.  However, I'd like to see them announce a couple of new bigger contracts.

FY19 was a much quieter year than FY18, with lower revenue and NPAT (due to less work), and the share price of GNG reduced accordingly.  The pick-up in FY20 really hasn't happened yet (as I write this on Monday 21st October 2019).  However, with the SP down below $1/share, and the issues temporary rather than structural, I think GNG are looking quite interesting at these levels.


Disclosure:  I hold GNG shares.