ANG have just reported very strongly boosted a little by some revenue that didn't quite make last half. Full year outlook is very strong though.

Here are the highlights of the half.

• Revenue up 26% to $143.6 million
• EBITDA up 70% to $20.8 million
• NPAT up 2.8 times to $15 million
• Operating cashflow $6.9 million
• Net debt of $11.4 million, on track to be debt free in FY24
• Order book up 16% to a multi-year high of $184 million
• Return on Equity increased to 27%
• Interim dividend reinstated of 0.4 cents per share, fully franked

Full year outlook is just as strong.

• • FY24 revenue of $310 million - $330 million, up ~24% from FY23
• • FY24 NPAT of $31 million - $33 million, up ~75% from FY23
• • Company on track to be debt free in FY24

At 42c, at time of writing, the forward P/E is 7.7.

Order book is very strong at 27% higher than end of H2 23.

I didn't like the release stating 'recurring revenue' without stating what this meant. My interpretation is that this is bollocks. I think they have recurring customers, but that's it.

As with each of the mining service companies you need to judge how long the cycle will last. All of them still have very positive outlooks.

HELD.

ANG has upgraded guidance for the half year.

1H FY24Revenue of$138-$144million(versus original guidance of $120-140 million)

1H FY24 Underlying NPAT of$12-$14 million (versus original guidance of$10-$12 million)

Austin enters the second half of the financial year with improving group margins and with a new record level of order book following strong order in take in Australia and the commitment to a major 3 year contract extension in the USA.

They reported 'normalised NPAT' for the full year last year of $18.1M. Taking the mid-point of the 1H result and doubling it for full year gives them a forward P/E of about 7.

Rev + 27% but includes impact from Maintec acquisition - 11% organic growth

Underlying EBITDA (includes $11m in adjustments) was up 10%. Maintec contributed $3.2m so organic growth was negative. On a statutory basis EBITDA was down 23%

Operating cashflow in line with statutory EBITDA

Outlook: 1H guidance of $120-$140m Revs which includes $8m contribution from the acquisition. Presso says this is up 60% -- its actually an increase of 14% at the midpoint?! Unless I have missed something.

Historically the 1H was marginally stronger but was weaker in this result so tough to conclude on annualised numbers. Consensus has $285m for the full year +11%.

View: Smoke and mirrors- unsurprisingly David Singletons LTI is all related to the share price. Stock has done very well but come off the highs. Needs a catalyst to re-rate again and perhaps a quality result with no adjustments. 

After taking a nibble at Austin Engineering (ANG) today, I thought I should search for other views on the business. Last week Tony Yoo from The Motley Fool shared a note by Shaw and Partners portfolio manager James Gerrish. James thinks “Austin Engineering has been oversold given the share price decline was harsh relative to the downgrade”. More below:

Punished too harshly, and ready to bounce back

The Austin Engineering Ltd (ASX: ANG) share price has crashed 27% since 2 May after a profit guidance downgrade.

According to Gerrish, there was a single source for the change in numbers. 

“The downgrade stemmed from their Perth business unit which was expecting to deliver on a contract before year-end before the order was delayed,” he said. 

“As a result, much of the fixed costs associated with the contract will be booked this year, while the revenue won’t land until 1Q24.”

Even with that nose dive, the stock is 18.75% higher than it was a year ago, which is an enviable performance considering the rest of the market.

The reality is that the rest of Austin Engineering is sound.

“The other business units are progressing well with revenue growth coming through and margins improving as a result.”

Thus Gerrish’s team is “bullish” on Austin Engineering shares.

“We see Austin Engineering as oversold, given the share price decline was harsh relative to the downgrade.”

Disc: Held IRL 0.5%

Austin Engineering, the dump truck tray manufacturer has been DUMPED following the earnings downgrade on the 4th May 2023 (ASX Announcement). Normalised Net profit after tax for FY23 is now expected to be in the range $17-$19 million for the Austin group, including Mainetec. This figure is down from the previously reported guidance of $24 million, primarily due to a delayed order from a major customer. This is also down on FY22 NPAT of $20.6 million. The share price reached a high of 40 cps in April and is now trading at 28 cps, down 30%. I think this is a buying opportunity, here’s why!

Since the guidance downgrade the order book has grown to record levels. Austin’s group order book to the end of May 2023 was up 21 percent year-on-year to $146 million and more than double from the same time two years ago (ASX Announcement). Put into context that’s around 57% of Forecast FY23 revenue.

A Quality Cyclical

Over the last seven years the ROE for the business has been consistently improving to 19.2% in FY22. FY23 ROE is expected to be weaker due to delayed orders (ROE 16% based on mid-point normalised NPAT of $18 million and shareholder equity of $111 million).

While there are eight analysts covering ANG on Simply Wall Street, only one analyst has provided forecast data. This analyst expects earnings to grow at 37% and ROE to be c. 21% over the next 3 years. Given the rapidly growing order book, I think this is feasible, especially on the back of delayed orders in FY23.

Conservative Debt

Net debt for the full year FY23 is expected to be circa $16 million (up from $12 million) primarily impacted by material procurement, partially offset by deposits following this delayed order, a situation which is expected to improve over the next few months as deliveries are made. Net debt on equity is still conservative at c. 14%.

Margins OK (FY22)

Gross Margins 45%

Net Profit Margin 6.2%

Valuation Ratios suggest it’s cheap

PE ratios:

Annual average PE ratios: 23.1 (FY19), 12.7 (FY20), 8.3 (FY21), 6.7 (FY22).

PE based on FY23 normalised earnings = 9.3 (28 cps / 3 cps)

PE based on forecast FY24 earnings = 5.6 (28 cps / 5 cps)

PEG = 0.3

PB = 1.5

Expected Annual Return 17%

Using McNiven’s StockVal Formula and assuming Normalised ROE of 20%, Equity of 19 cps, earnings reinvestment of 70%; You could pay up to 35 cps for a minimum annual return of 15%. At today’s share price (28 cps) you could expect an annual return of 17% (including growth, dividends and franking credits), or higher if PE adjusts upwards.

About Austin Engineering

Austin is a global engineering company. For over 50 years, Austin has partnered with mining companies, contractors and original equipment manufacturers to create innovative engineering solutions that deliver productivity improvements to their operations.

Austin is a market leader in the design and manufacture of loading and hauling solutions, including off- highway dump truck bodies, buckets, water tanks and related attachments, supporting both open-cut and underground operations. Complementing its proprietary product range are repair and maintenance services performed in our workshops and on clients’ mine sites, and spare parts.

Through Austin’s own design and engineering IP and range of tailored products, it delivers solutions for all commodity applications and drives increased efficiencies in productivity and safety in both open cut and underground mining operations.

Austin’s products can create more sustainable mining operations by delivering the lowest cost per tonne to end user, reducing fuel usage per material carried.

The Company is headquartered in Perth and has operations around the world in Australia, USA, Chile and Indonesia serving many of the major mining sites in the world both directly and through local partners.

Disc: Recently added IRL 0.5% (Cost price 28 cps)

Austin to acquire mining equipment company Mainetec

Mainetec is expected to have revenue of more than $40 million (on an annualised basis) for the 2023 financial year. In perspective - ANG revenue is currently $200M - so another 25%

Expected to be >20% EPS accretive to FY23 on a full year basis; expected significant operating and cost synergies.

Acquisition to be funded through cash plus new and existing debt facilities; prudent gearing maintained. Initial amount is only $19M. So it sounds like a great deal.

ang-to-acquire-mining-equipment-company-for-19-6-million-2751312 (1).pdf