Monadelphous Group (ASX: MND) announced poor results to the market, with revenue, EBITDA and NPAT all declining sharply from FY18. The company’s share price now sits around six-month lows, as the market questioned whether the stock should still be priced on 22x earnings. Revenue declined 9.8% to $1,608m, while reported NPAT declined 29.3% to $50.6m as challenging market conditions accelerated margin compression for the business.
The company operates two business segments, with the first being engineering construction and the second being maintenance and industrial services. Their engineering construction services segment delivers construction projects, in addition to electrical and support services to airlines and plane makers. The maintenance and industrial service segment deals with minor capital works, as well as solutions to reduce or eliminate shutdowns. A couple of notable clients of the business include the NZ Government and BHP Billiton (ASX: BHP).
They gave the market a positive outlook, projecting that a more favourable core market conditions will provide a solid pipeline of opportunities .They also mentioned pressures within the labour market, as the business looks for new strategies to help hold top talent, although these pressures are not expected to be a significant drag on the business.
MND’s two main business segments operate across resources, energy and infrastructure. Its resources business provides services to mining companies, a traditionally more volatile part of the sector. This generally results in companies trading on lower multiples across the economic cycle, since investors know that earnings will be low for a large part of the mining cycle.
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).
This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.
ASR has no position in any of the stocks mentioned.