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#Bull Case
Added 3 months ago

LYL had their AGM yesterday and gave full year guidance. Revenue up 20% and NPAT 10%. This management normally under-promises so unless their margins shrink their NPAT will be higher.

I think it's a bargain because it is on a trailing P/E of 10 and yields 8% fully franked

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#ASX Announcements
Added 5 months ago

Lycopodium has been awarded the Engineeringand Procurement (EP) and associated Project Management (PM) services contract for the delivery of the Sabodala-Massawa Expansion Project in Senegalfor Endeavour Gold Corporation(“Endeavour”).

The contract is valued at over A$26million, with first gold pour from the BIOX® plant expected in early 2024.

ANG, MND and LYL are all expecting and reporting strong sales.

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Valuation of $7.40
Added 6 months ago

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.

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#Dividends
Added 6 months ago

24-Aug-2022: As I said in my "Strategy & Outlook" straw for Macmahon (MAH) early this morning (about 2am), the Lycopodium (LYL) result was going to be good. It was. You can view the "#Great FY22 Result" straw by @Rick here: https://strawman.com/reports/LYL/Rick?view-straw=19458 and a "#Management" straw by @Scott here: https://strawman.com/reports/LYL/Scott?view-straw=19464

@Scott has also updated his valuation for LYL: https://strawman.com/reports/LYL/Scott

I think their dividend increase was well hidden in their announcements and presentations, it was certainly not highlighted by them, but it's definitely one of the major positives, and there were a lot of positives.

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As I said last night (or early this morning), I hold LYL in a portfolio that is structured partly to provide a decent income stream, and LYL are certainly contributing to that. A dividend yield of 9%, and a grossed up yield (including the full value of the franking credits) of 12.6%. And there's capital growth as well, because the company is growing revenue, profits, EPS, etc. at a very decent clip. There's a LOT to like about Lycopodium. $100m cash in the bank. 29% ROE. 39% of the company is owned by their Board and Management. Lots of skin in the game and terrific results.

Investor Presentation - Full Year Results FY2022

FY2022 Annual Financial Report

FY2022 Shareholder Report

FY2022 Full Year Results Announcement

About Us | Lycopodium Limited

Investor Relations | Lycopodium

Lycopodium Limited | The Science of Engineering, Maximising Commercial Value

They are the quiet achievers. They just get on with the job and deliver. No promotion, no blowing their own trumpet, no fanfare, just brilliant management and a wonderful company that does everything right.

Disclosure: I hold LYL shares.

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Valuation of $7.10
Added 6 months ago

If you want a 10% return and assuming they only grow at 5% ad the P/E goes to 10 then you can pay $7.1

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#Management
Added 6 months ago

See Rick's post about today's full year results.

You know that management is conservative when they report a near doubling of NPAT as a simple green arrow with no magnitude. They started the fin year with no guidance, then in Feb said it would be $22M NPAT, then in April $25M NPAT and now deliver $27M NPAT.

Fully franked dividend for the year at yesterday's share price is almost 10%.

Looking forward.

The market is about $200M and then have $100M in the bank! Not sure how much it will rise in price today but this P/E at yesterdays close is 8.5.

If you want a 10% return and assuming they only grow at 5% ad the P/E goes to 10 then you can pay $7.1

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#Great FY22 Result
Added 6 months ago

Lycopodium just released a very pleasing FY22 results announcement. I couldn’t find the percentage improvements over last year, so I made a few quick calculations below the table:

d8f43aee6a4d9f0988b332f71f54533f2c103c.jpeg

Revenue +43%

EBITDA +71%

NPAT +92%

EPS + 92%

Cash +31%

…and a nice juicy ROE of 29% which puts LYC back on track with the good ol’ days of 2013!

c58e9c84936f9ce28206eba0994a2272ccd8f0.jpeg

e37743fe0c174825a5d9408cc108aa07ef4bc9.jpeg

Outlook:

Given the general outlook and level of committed work, we expect our financial performance in FY2023 to be broadly in line with that achieved in FY2022. We do however undertake to provide further revenue and profit guidance as part of our Annual General Meeting update in November.

A quick valuation on my StockVal spreadsheet puts the valuation up to approx $12 after lifting ROE from 20% to 29%. This was quick and dirty as I still need to rework 2022 equity values, payout ratios etc. I’m just after a ball park for when the market opens.

Disc: Small holding IRL (0.4%)

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#ASX Announcements
stale
Added 10 months ago

NPAT for the full year has been revised upwards since it was forecast at the half year. It has gone from $22M to $25M. My price estimate has also been revised upwards

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#On the move!
stale
Last edited one year ago

19-Nov-2021: Lycopodium, once the engineering arm of Monadelphous many moons ago, and involved in a JV with Mono's again now (called Mondium) have seen a decent share price move since they held their AGM yesterday. They closed up +7.4% today at $5.21, after having risen +1.8% yesterday. They closed at $4.44/share on Wednesday, but have finished the week at $5.21, some +17.3% higher. I do hold LYL shares (and MND shares). I also hold GNG shares. GR Engineering (GNG) and Lycopodium (LYL) both specialise in designing and building gold processing plants. That's their specialty, although both also work with other commodities and in other industries. GNG do most of their work in Australia, and LYL do most of theirs in Africa. The following shows LYL's breakdown of revenue by sector and geography:

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ec6d29792d0d972432bf62db833197920831da.png


With 90% of their work coming from the Resources sector in FY2020 and 87% in FY21, it is certainly the main game for Lycopodium:


0cad177a82595d7d7829246fcce64f4964c1d4.png


However, I believe their infrastructure division is underappreciated and has plenty of potential:


52d705caf07d5d94792c42ae51f1b016caac70.png


And they also do other stuff, like working for CSL, on facilities for base vaccine component production, and on plasma and blood product production facilities...


5bc29b2fcc6f58177b375ca2e6a4739b0f7691.png



LYL ticks a LOT of boxes for me. Firstly, they are a company that is solving a problem, i.e. providing services that are clearly needed and are in demand, and what they do is something that I understand - i.e. engineering, design, procurement, construction, and management (including construction management) - so EPC/EP(C)/EPCM work.

5c82db0afaead4eaf8ad690a78851bea79782b.png

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They work in sectors that I understand, and sectors with good tailwinds for the most part too. And they are GOOD at what they do, hence they win a lot of repeat work from clients.

They have a top notch Board and Management team, with plenty of skin in the game, so their interests are aligned well with ordinary retail shareholders.

c55f8a226846e67cfb1e732bd77bc09f2d03bb.png


41% of the company's shares are held by their Board and Management. 30% is held by Insto's, leaving only 29% for the rest of us (retail investors). They can go nowhere for months and then have quite big moves (like today), on relatively low volume often, because of that lack of liquidity. They are a microcap (currently just under $200m market cap) company with a small free float, so they can be very thinly traded. On the 2nd and 4th of this month (November 2021), less than 1,000 LYL shares traded over the entire day. The volume for those two days was 299 and 573 shares respectively. While they did move up +7.4% today, that was on volume of only 32,886 shares. That's 32 thousand shares, not 32 million shares. They are very illiquid. And I do like that as well. It means you can quite often pick up shares at low prices when there is no good news and people aren't interested in buying them.

I also like their solid balance sheet, with minimal debt, and the reasonable ROE.

16e0de8a45b5fc07c4f0c3e3d7deaa4bf43bfc.png


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They have their "Mondium" JV (joint venture) with MND (Monadelphous Group) which tackles some fairly large projects, like this one for RIO:


9361ea2b7dde6daeddc1cc29fef86a06449e84.png


But what they do best, in my opinion, is design and build gold processing plants, on time, and on budget, even during a global pandemic, like this one:

aca66aa8e6b7c699eed4256adec67107f903b3.png

That's the Yaouré Gold Project in Côte d'Ivoire that Lycopodium have just delivered for Perseus Mining (PRU). They won that project award after successfully delivering the Sissingue gold project for PRU, and then completing the definitive feasibility study (DFS) and the front-end engineering and design (FEED) for Yaouré. I don't like investing in gold miners who work only in or predominantly in Africa or some of the other less stable and less predictable parts of the globe, however I do admire Lycopodium's track record of successful project delivery of gold processing plants in Africa. I guess their involvement is usually at the front end of a project's life cycle, and the "sovereign risk" issues tend to pop up further down the track, after the gold plant has been in production for a year or three and the local government wants a larger slice of the pie. When the excrement does hit the air blower, LYL are usually elsewhere working for someone else. Such is the nature of shorter-term contracting work. And that is clearly a risk worth mentioning. It can be a long time between drinks - in terms of very large projects, however I have found that both LYL and GNG have managed to diversify their revenue away from purely gold miners in recent years and have navigated through a variety of different operating conditions with aplomb, i.e. apparent ease. It hasn't stopped them being sold down on occasion, but GNG is now flying, and LYL are just taking off it seems.

85060ab1b52a3616261ed85128dca6760af636.png


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But then, with their liquidity issues, it can be hard to tell. Probably need to wait until LYL get over $6 with conviction to call an uptrend. Those charts are over 5 years, and over 10 years the picture looks different, as LYL were trading at over $6 (and up to $7.31) in 2012. Still, as a gold bug myself, and a holder of both GNG and LYL shares in one of my real life portfolios (my income portfolio) - and also here in my SM portfolio - It's good to see the positive SP movement. And the great dividends continue as well. Based on their closing share prices today, the trailing yields for GNG and LYL are 6% (5.97%) and 4.8% respectively, PLUS franking, and both are paying fully franked dividends, so the grossed up yields are even higher. If you can handle the lack of liquidity, and the lumpy nature of a large part of their annual revenue, there is a lot to like about these two little engineering companies. I'm not sure I'd be buying much more GNG up here, but LYL could well have further to run.

Disclosure: I hold LYL, GNG and MND shares.

Further Reading (source of graphics/images used in this straw, other than the Commsec charts): Lycopodium 2021 AGM (18-Nov-2021) Presentation

Further Presso's: Presentations | Lycopodium

Case Studies: Case Studies (lycopodium.com)

Website: Lycopodium Limited | The Science of Engineering, Maximising Commercial Value

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#EH on LYL FY21 Final Results
stale
Added one year ago

27-Aug-2021:  Euroz Hartley's Analyst Harry Stevenson has maintained his "Buy" call on LYL, but lowered his PT (price target) from $6.62 to $6.50.  LYL closed at $4.75 on Friday (03-Sep-2021).  I have attached the update.

Brief Extract:

"We have updated our forecasts to reflect FY’21 results; consequently the price target decreases to $6.50/sh. With strong tail winds in the resources sector and healthy studies pipeline we think LYL can trade strongly through FY’22 albeit from a low base."

 

Disclosure: I hold LYL shares and I purchased more during the past week in one of my RL portfolios.  I have written about them here and also in the "Gold as an Investment" forum.  [You'll have to scroll through that thread to find relevant posts on LYL - warning: it's a long thread!]  I have also discussed Lycopodium in relation to GNG (GR Engineering) who do similar work.  They both specialise in the design and construction of gold processing plants.

View Attachment

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#New Work/Contracts
stale
Added 2 years ago

19-Apr-2021:  LPD: Lycopodium to complete EPCM for Lepidico 

15-Apr-2021:  Award Of Ahafo North EPM Contract for Newmont

26-Mar-2021:  Award Of Seguela Contract for Roxgold

06-Jan-2021:  Award of Bombore EPCM Contract for Orezone Gold Corporation

01-Dec-2021:  Award of EP Contract for Sandfire's Motheo Contract (T3 Copper-Silver Project), located in Botswana’s Kalahari Copper Belt

LYL is getting busy again.  GNG and LYL mostly design and build gold and copper processing plants, although they do other stuff also.  GNG mostly work in Australia.  LYL are also based here, but LYL mostly work in Africa and other places overseas, like the Middle East and South America, all of the higher risk places where they can charge more because of those risks and logistical difficulties.  However, with decades of experience and an excellent track record, they rarely stuff up, and they always seem to make money on their projects/contracts.  I hold both GNG & LYL, and both have had a pretty good 12 months.

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#Broker/Analyst Views
stale
Last edited 2 years ago

March 2021:  Euroz Hartleys: Lycopodium Ltd (LYL): Half Year Results

Analyst: Harry Stevenson - Industrials Analyst, +61 8 9488 1429

Price Target: $6.62/sh, Recommendation: Buy

Half Year Results

Investment case

Lycopodium has recently released half year results which were inline with expectations. With completion of Yaoure in December margins remained strong with NPAT at 8.8%. With full year guidance of “approximately $160m in revenue and NPAT in the order of $12m” our focus is increasingly shifting towards FY’22. We are looking towards an emerging EPCM/EPC boom with the with roll out of covid-19 vaccines globally, we expect projects which were previously delayed to be greenlit. This outlook is supported by strong gold prices and record iron ore demand which we expect to continue through FY’22. In the background Lycopodium’s JV with Monodelphous – Mondium looks set for a further growth through FY’22 with completion of the Western Turner Syncline; which should drive stronger margins. Our price target reflects our growing confidence in the EPCM outlook.

Key points

Lycopodium recently reported half year results, key highlights were as follows

  • Revenue of $71m, EBITDA of $10.6m and NPAT of $6.3m (EHSL $5.7m).
  • Margins were heathy 8.9% at the NPAT level and towards the top end of historical rates between 5%-10%.
  • Balance sheet remains strong; cash of $84.4m and net assets of $82.1m.
  • Negative operating cash flows of $15.7m – expected given build-up of working capital at 30 June, we look for cash balance to normalise to ~$67m at full year.
  • A fully franked Dividend of 10c per share declared (ESHL 9.3c); we now look for 20c full year distribution.
  • Contribution from Mondium (LYL’s 40% JV with Monadelphous) up 15% HonH (half on half) and 155% on PCP, we expect this contribution to become more meaningful through FY’22 ($4.2m).
  • Management have provided full year earnings guidance of “approximately $160m in revenue and NPAT in the order of $12m” – in line with our previous FY’21 forecasts of $160m Revenue and NPAT of $11.7m.

Outlook

  • Demand for EPC/EPCM contractors through FY’21 and into FY’22 is expected to strengthen with the resources sector set to continue to benefit from both the Gold and Iron Ore prices.
  • 12 month Price Target of $6.62 is a 9x multiple on FY’22 EBIT forecasts.

Lycopodium Ltd, Year End: 30 June

  • Share Price: 5.20 A$/sh (5.21 on 1-Apr-2021)
  • Price Target: 6.62 A$/sh
  • Valuation (DCF): 6.62 A$/sh
  • WACC: 9.0%
  • Terminal Growth: 3.0%
  • Shares on issue: 40 m, diluted
  • Market Capitalisation: 206.6 A$m
  • Enterprise Value: 137.6 A$m
  • Cash: 84.5 A$m
  • Debt: 15.5 A$m

Click on the link at the top for the full report, or open the attached file below.

Disclosure: I hold LYL shares.

View Attachment

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#H1 FY2021 Results
stale
Added 2 years ago

24-Feb-2021:  1HFY2021 Half Year Results Announcement   plus   Interim Financial Report 31 December 2020

and:  1HFY2021 Investor Presentation

Lycopodium Records Solid Start for FY2021

Lycopodium Limited (ASX: LYL) has delivered a solid result for the first half of 2021, with net profit margin remaining strong, at 8.8%.

For the six-months ended 31 December 2020 (“1H FY2021”), the Company generated revenue of $71.0 million and net profit after tax (NPAT) of $6.3 million.

The company Directors have approved a fully franked interim dividend of 10 cents per share, payable on 8 April 2021.

Lycopodium’s Managing Director, Peter De Leo, said: “The first half of this financial year has been very positive, with the successful completion of Perseus’ Yaouré Gold Project in Côte d’Ivoire in December, ahead of schedule and under budget despite the challenges presented by COVID-19, and the recent award of two substantial African resource projects.”

In December, the Company was awarded the contract to provide Engineering and Procurement (EP) services for Sandfire Resources’ Motheo Project (T3 Copper-Silver Project), located in Botswana’s Kalahari Copper Belt, one of the world’s most exciting and emerging copper producing regions. This followed the earlier completion of the Definitive Feasibility Study (DFS) and Front End Engineering and Design (FEED) for the project.

In early January, Orezone Gold Corporation awarded the Company the contract to provide Engineering, Procurement and Construction Management (EPCM) services for the delivery of its Stage 1 Oxide Process Plant for the Bomboré Gold Project in Burkina Faso. Again, this award comes on the back of earlier works completed on the project, including the initial study work and FEED, undertaken out of Lycopodium’s Toronto office.

“Our ability to convert initial study and engineering works into project delivery is testament to the strong client relationships we have established and our clients’ confidence in us,” said Mr De Leo.

Having successfully completed its largest EP(C) contract to-date in 2020, being the Yaouré project, the Company has maintained its strong safety performance, with a Lost Time Injury Frequency Rate (LTIFR) of zero for the rolling 12 month period to January 2021, against 2.5 million manhours controlled.

“Delivering projects safely for our clients remains a fundamental metric of success and our excellent safety performance is a credit to our delivery teams on the ground,” said Mr De Leo.

While COVID-19 continues to influence economic confidence globally, impacting project commencements, the forward outlook is considered positive, with a strong pipeline of opportunities identified. Based on the anticipated timing of new projects commencing, the Company provides guidance for the full year of approximately $160 million in revenue and NPAT in the order of $12 million.

“Our focus will continue to be on working in partnership with our clients to enable them to progress their projects to completion, on time and budget,” Mr De Leo said.

--- end ---

[I hold LYL shares.  71% of their H1 revenue came from Africa, and particularly West Africa, and 24% from Australia.  In the pcp (prior corresponding period, being the 6 months to 31-Dec-2019) it was 79% from Africa and 16% from Australia.  They do the same stuff that GR Engineering Service (GNG) do, except usually on a larger scale and for larger companies, and mostly overseas.  Both GNG and LYL are WA companies based out of Perth and both specialise in designing and building gold processing plants, after doing the studies (PFSs, DFSs and BFSs, being Pre-Feasibility, Definitive Feasibility and Bankable Feasibility Studies).  Both also work for other industries, meaning other miners and in other industries outside of the resources industry, but with both LYL and GNG it is working for gold miners that provide their main source of revenue.  I like them both for a pick-and-shovel-play on gold.  When they are flying, as GNG are starting to again now, their dividends can also be quite good, market-beating in fact, i.e. above average, although revenue and therefore dividends can be quite lumpy at various times.]

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#Broker/Analyst Views
stale
Added 2 years ago

30-Nov-2020:  Euroz Hartleys Securities: Lycopodium (LYL): Initiation of Coverage - Commercialising Science

Analyst: Harry Stevenson, Recommendation: Buy.

  • Share Price: 4.87 A$/sh
  • Price Target: 5.61 A$/sh
  • Valuation (DCF): 6.00 A$/sh
  • WACC: 9.2%
  • Terminal Growth: 2.5%
  • Shares on issue: 40 m, diluted
  • Market Capitalisation: 193.5 A$m
  • Enterprise Value: 94.3 A$m
  • Cash: 102.9 A$m
  • Debt: 0.5 A$m

Commercialising Science

Investment case

Lycopodium Limited (LYL) provides integrated engineering, construction and asset management solutions to global resource markets. Established in 1992 and listed on the ASX in 2004 the company has a 28-year track record of delivering EPCM/EPC contracting and engineering services to a diverse range of industries.

The company employs around 600 staff specialising in providing lifecycle services from concept and feasibility through to construction and plant optimisation. Recently the company has developed a reputation for providing services to the growing West African gold sector.

FY’20 Results

LYL provided a solid set of FY’20 results generating revenue of $211.1m and NPAT of $11.8m; in line with guidance of $200m and NPAT of $11.5m. Supported by staff the company was relatively unaffected by Covid-19 and all projects were completed on schedule. LYL benefited from favourable payment terms on the Yaouré Gold project for Perseus, generating operating cashflows of $62m for the year. LYL continued its strong track record of dividend payments, maintaining a fully franked 20CPS full year dividend or 68% of earnings.

Outlook

While FY’20 results were generally strong, the orderbook does not support the same level of activity, with two major projects now complete we look for a decrease in the level of EPC activity and consequently forecast revenue falls through FY’21; however, we forecast stronger margins as backend project profits are recognised. We expect activity in Mondium to continue to ramp through FY’21 picking up some of the slack in the LYL’s orderbook. With a number of major studies in the pipeline we expect EPC contract awards to occur in the back end of FY’21, positioning the company for a stronger FY’22.

Valuation

LYL continues to lag the wider resources led recovery and its industrial peers. Trading at $4.87 LYL continues to trade at a discount to preCovid high of $6.40. We expect LYL to retrace some of this lost ground as existing studies and EP contracts convert into new contracts through the second half of FY’21.

We initiate coverage with a 12-month price target of $5.61 based on a fairly basic, although somewhat undemanding, capitalisation of forecast 2021 and 2022 earnings. LYL has traded back given the general market conditions and a weaker orderbook outlook, we look to contract wins in the second half of FY’21 from a large pipeline of opportunities to re-rate the stock. In the meantime, LYL trades 6x EV/EBIT with $100m in the bank.

Other Matters

LYL’s capital light business model is cash generative; converting ~100% of EBITDA to free cashflows and over time enabling the business to pay ~60% of earnings as dividends, while continuing to fund internal growth. The stock remains firmly held by management and insiders, aligning management and shareholder interests; however, this does come at the expense of liquidity.

Summary

LYL has established a reputation for delivering projects on time and to client specification. While the current orderbook does not support the same level of activity through FY’21 the business is well positioned to capitalise on sustained gold values and ramp up on project activity as Covid-19 vaccines roll out through 2021. Guided by experienced management with track record of managing tendering risks, we expect LYL to continue to trade up from current levels as LYL converts a number of studies to EPC contracts. We initiate coverage with a Buy Recommendation and a 12 month $5.61/sh price target.

--- click on the link at the top for the full initiating coverage report on LYL by EH (Euroz Hartleys) ---

[I hold LYL shares, and I bought more LYL earlier this week.]

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#Results
stale
Last edited 2 years ago

26-August-2020:  FY2020 Full Year Results Announcement   and   FY2020 Investor Presentation   

plus  FY2020 Annual Financial Report   and   Preliminary Final Report / Appendix 4E

PERTH, 26 August 2020 – Lycopodium Limited (LYL) has generated revenue of $211.1 million and a net profit after tax (NPAT) of $11.8 million for the financial year ended 30 June 2020 (FY2020). NPAT was slightly higher than the updated guidance issued in May of $11.5 million, in response to the onset of the COVID-19 pandemic.

The company Directors have approved a fully franked final dividend of 5 cents per share, payable on 9 October 2020, bringing the full year dividend to 20 cents per share.

Despite the growing impact of COVID-19 as events unfolded during the first half of 2020, the progress of projects in delivery was generally unaffected, with measures implemented to manage the potential implications on operations. Consequently, the full year revenue achieved was only slightly lower than the mid-year guidance of $220 million.

Lycopodium’s Managing Director, Peter De Leo, said: “Faced with the significant challenges presented by the onset of the global coronavirus pandemic during the latter half of the financial year, our ability to continue to provide our clients with the high quality of service they have come to expect from Lycopodium is a testament to the resilience and adaptability of our people.”

During FY2020 the Company successfully completed two significant EPCM projects in Burkina Faso, being the Sanbrado Gold Mine for West African Resources and Teranga Gold Corporation’s Wahgnion Gold Mine, both of which were completed safely, ahead of schedule and within budget. Delivery of the Yaouré Gold Mine for Perseus Mining remained on schedule in Côte d’Ivoire, with completion of the design and procurement scope and commencement of construction work on site achieved as planned.

During the second half of FY2020, Mondium, Lycopodium’s incorporated joint venture with Monadelphous, commenced its EPC scope on Rio Tinto’s Western Turner Syncline Phase 2 iron ore project in the Pilbara region of Western Australia. Engineering and procurement services are well advanced and the team has mobilised to site, with delivery ongoing into FY2021. Mondium also completed the engineering and procurement services scope and is well advanced with earthworks and concrete works of its EPC contract for Talison Lithium’s Tailings Retreatment Project in Western Australia.

Throughout the year, the Company completed numerous Feasibility Studies across a spectrum of commodities including gold, copper, lead, zinc, silver, lithium, graphite, mineral sands and sulphate of potash. Successful completion of these studies has led to the award of further scope on a number of the projects which will support the project pipeline moving into FY2021. This includes the award of the front end engineering and design (FEED) scope for Australian Potash’s Lake Wells Sulphate of Potash Project in Western Australia, the FEED to support long lead procurement and early works site packages for Sandfire Resources’ Motheo Copper Project Processing Plant in Botswana, and the engineering and procurement (EP) contract for IAMGOLD Corporation’s Boto Gold Project in Senegal.

During the year, the Company’s Infrastructure business provided rail infrastructure management services, including condition surveys and design services, for the Australian Rail Track Corporation (ARTC) and the Country Regional Network (CRN), and rail inspection services for various clients including Pacific National, BHPB and Southern Ports Authority. Utilising its infrastructure asset management expertise, it was also engaged by the Cape Preston Port Company, operators of the port stockyard and marine section of CITIC Pacific Mining’s magnetite mining operation, the largest magnetite operation in Australia, to optimise the maintenance for a number of critical assets at the port facilities located in the Pilbara region of Western Australia.

The Company’s Industrial Processes business continued to leverage its expertise in the provision of projects and engineering services in the areas of specialty chemicals, pharmaceutical and heat/mass transfer, providing services on Kawasaki Heavy Industries’ Hydrogen Energy Supply Chain (HESC) project, a worldfirst pilot project to safely and efficiently convert locally-produced, clean hydrogen for international transport. Focusing on emerging opportunities in renewable energy and sustainability related projects, it also provided independent expert advice on energy efficiency and clean energy generation opportunities for the Victorian Government’s Agriculture Energy Investment Plan (AEIP) and worked with ZECO Energy in the development of a new portable, photovoltaic (PV) solar-powered light tower design.

“There is no doubt the past few months have been extremely challenging, with the onset of the pandemic in early 2020 significantly impacting how we live and work. During this most difficult time, I sincerely thank our people for their continued focus, commitment and resilience in maintaining the level of professionalism and quality of service our clients know they can expect from us,” said Mr De Leo.

During FY2020 there were 2.5 million manhours worked across Lycopodium managed projects, with a zero Lost Time Injury Frequency Rate (LTIFR) achieved against a 7.5 Australian construction industry average (Safe Work Australia, Australian Workers’ Compensation Statistics, 2017-18; note, the industry statistic excludes LTIs less than one week, ADIs and MTIs).

“With projects delivered across the globe, in often challenging locations, the Company’s excellent safety performance is reflective of our focus on the health, safety and wellbeing of our personnel, and the commitment they each have in achieving such a high standard,” said Mr De Leo.

Outlook

With the uncertainty presented by COVID-19 and what is likely to be a highly constrained environment in FY2021, the Company’s forward strategy is to stay focused on its established relationships to secure ongoing works with key clients. This includes supporting clients to progress through the various stages of project development, from initial scoping studies through to project delivery.

In the Resources sector, the current global economic outlook is driving up the price of gold, with gold generally seen as a safe investment in times of economic uncertainty. There is also the opportunity in the domestic Australian market to support clients embarking on sustaining capital works projects, given the prospect of new developments potentially being delayed for some time.

The Company will continue to pursue its target markets in the Infrastructure sector, focusing on the provision of rail infrastructure management, non-process infrastructure and infrastructure related asset management. Again, much of this work is acquired on the basis of having established long-term partnerships with a core client base.

In the Industrial Processes sector, the Company will continue to provide its specialist expertise in emerging markets, such as cannabinoids, light metals and water purification, and support renewable energy and sustainability related projects as businesses seek to operate smarter and leaner in response to current economic pressures.

--- click on the links at the top for more ---

[I hold LYL shares.  Lycopodium is a larger and international version of GR Engineering Services - GNG.  Both specialise in designing and constructing (and optimising) gold processing plants, but both do other work as well.  GNG do their work mostly in Australia, whereas the majority of LYL's projects in recent years have been in Africa and other overseas countries.]

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#COVID-19 Impact
stale
Added 3 years ago

25-Mar-2020:  5:45:  FY2020 Guidance - COVID-19 Impact

Withdraws previous guidance, will pay the interim dividend as planned, has very strong balance sheet with no net debt.  Their SP is up, not down, after this announcement, suggesting the downside was already priced in.

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#Analyst / Broker Reports
stale
Last edited 3 years ago

26-Feb-2020:  Hartleys:  Lycopodium (LYL):  Solid as usual, though delays continue to impact

Lycopodium Limited (LYL) has delivered 1H20 NPAT of $9.0m, representing growth of 5% on 1H19 ($8.6m). An interim dividend of 15cps has been declared, in line with 1H19.

This was another solid result from LYL with management reporting that project execution continued to be strong.

Delays again impact guidance…

Unfortunately, a common theme for LYL, and indeed the broader sector, over the last 12-18 months has been continued delays to project commencements.

LYL has provided updated guidance for revenue of $220m and NPAT of $14.1m. Previous guidance was for revenue of $220m and NPAT “generally in line with FY19” ($16.5m).

LYL notes that guidance has been impacted by delays to new project commencement impacting on revenue. With project performance solid as expected, this implies that initial internal revenue expectations were likely higher than stated guidance. Our FY20 NPAT estimate reduces to be in line with updated guidance.

…though outlook remains strong

LYL advises that recent awards of several projects and studies will support revenue growth into FY21 as new projects ramp up later this year.

Additionally, LYL notes that tendering activity remains strong, as does the pipeline of identified prospects.

The outlook for gold remains strong, with current prices of US$1,640oz providing support for developments, though securing project financing continues to be a challenge for some.

Mondium (LYL 40%) has commenced work on its $400m contract with RIO at Western Turner Syncline, which is expected to complete in 1H22. Meanwhile LYL continues work on its key EPC project at Yaouré for Perseus (PRU).  PRU recently announced that the project remains on track to achieve its stretch target of first gold in December 2020.

Cash position very strong

LYL continues to maintain its focus on having a very strong balance sheet.  At 1H20 net cash stood at $111m, buoyed by receipt of material payments in advance during the period. We estimate that on a pro-forma basis LYL has net cash of ~$77m (see page 4).

Buy; Price Target $6.57

LYL is a very well-managed business. While project delays continue to impact, the outlook remains positive with LYL well-positioned to benefit.

We maintain our Buy recommendation. Our price target reduces to $6.57 / share from $6.76 / share previously.

--- click on link above for more ---

I do hold LYL shares.  They closed at $5.50 today (28-Feb-2020).

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