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Emeco Holdings Ltd FY19 Results Show Continued Recovery From Major Downturn

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Emeco Holdings Ltd (ASX: EHL) rent out mining equipment to mining exploration and production companies. Emeco has close to 1,000 machines in its fleet that is supported by a network of maintenance and component rebuilding workshops across the country. Emeco has a market capitalisation of around A$750 million.


What are the results from Emeco FY19?

Today (Wednesday 21 August 2019) Emeco released its FY19 annual results. The main points are as follows:

  • Operating revenue for FY19 is A$464.5 million, up 22 per cent from FY18.
  • Operating NPAT for FY19 is A$63.1 million, up 214 per cent from FY18.
  • No dividends paid during FY19.

What were the drivers of this result?

This result is driven by stronger demand for customers in metallurgical coal industry and continued improvement in rental rates contributed to the margin increase.

What is the outlook for Emeco?

Emeco’s management mentioned, “Emeco is well-placed to generate stronger earnings and cash flow in FY20 and is on track building a business of scale, quality and lowest cost to ensure we are stronger and more resilient”.
Also, Emeco’s management noted “Improving conditions in the Western Region have been observed in early FY20 with approximately 100 pieces of equipment already committed into new gold and iron ore projects. However, the full benefit of earnings is not expected to be realised until 2H20. Emeco anticipates allocating some growth assets and assets from thermal projects to the Western Region to meet fleet requirements”.

Emeco is recovering from a significant downturn between 2014 and 2017 where it nearly collapsed. Emerco continues to recover from this “near death” experience, but it still have a long way to go to reach pre-2008 levels.

What is the market reaction?

The initial market reaction to Emeco FY19 is negative. Emeco share price is down around 9 per cent and is currently trading at around A$2.11 (12.15pm, 21 August). Emeco has a P/E ratio in the mid-teens.



This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

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ASR has no position in any of the stocks mentioned.

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