MLD - MACA Ltd

[mark100]

MLD, now known as MACA but previously known as Mining and Civil Australia is a recent listing. As per the former name, its a mining and civil contractor.

The $1 shares openned at $1.40 and are now at $1.50. Tipster Roger Montgommery has been giving the company favourable mentions around the place which has probably boosted its appeal although the stock was cheap at the IPO price.

MLD is now trading at around 9.8x forecast FY11 earnings and FF yield of 4%. They claim 98% of forcast FY11 revenue is based on existing contracts and they imply that capital raised from the IPO will assist in the winning of further contracts.

EBITDA margins are healthy at 20% plus, ROE forecast to be around 36% and Net Debt/Equity is low at around 8%.

I bought some on openning day at $1.42. It's hard to buy at a 42% premium but I see earnings upside for FY11 considering they haven't assumed the winning of any new contracts when making the forecasts and the stock is still reasonably price.

[ob1kinobi]

Big step up in volume today. Buying interest seems to be picking up.

[mark100]

And here comes that earnings upside I was hoping for. Looks like they might beat prospectus forecasts by 30% plus

[soulman]

And here comes that earnings upside I was hoping for. Looks like they might beat prospectus forecasts by 30% plus

Thanks for the heads up on this one Mark. Although buying on the first month after the IPO seems the best, I managed to luckily pick some up at $2.07 on Monday this week. I sold for $2.36 Wednesday and today it closed at $2.50. Strong movement by MLD this week.

[mark100]

Hi soulman, I sold this week at 2.37 and 2.42. It had run a little too hard I thought but it unfortunately it was still strong on Friday. I'm hoping for a pullback to around 2.20 when things calm down a bit

[COLIN]

Soulman/Mark: I guess a "bird in the hand is worth two in the bush" but, as hard as I look, I can see little justification for selling at this stage. None of the technical indicators which I normally examine seem to be flashing any "sell" signals yet - until they do, I will be continuing to hold.

BUY INTO STRENGTH, SELL INTO WEAKNESS.

Of course, if you used the sale proceeds to purchase even better-gaining stocks, then well done.

[mark100]

True Colin but that's just my way of doing things and it has served me well for quite a few years now, even though there are cases where I leave profit behind. I bought the stock even after it had opened at a 42% premium because I thought there was fat in their forecasts. That has now come to light, and when I get 20% in a week and 70% in under 3 months from an industrial stock more often than not you get another bite at the cherry lower down. It's easy to say sell into weakness but small-mid caps like MLD can become rather illiquid on weakness. I like to sell when the buyers are still chasing my offer after a hard run. But hey, differences of opinion on this is what makes a market!

[mamos]

I agree with your comments 100% Mark. You have to be more active with cyclical stocks. Not simply buy and hold.

$285m contract just announced.


True Colin but that's just my way of doing things and it has served me well for quite a few years now, even though there are cases where I leave profit behind. I bought the stock even after it had opened at a 42% premium because I thought there was fat in their forecasts. That has now come to light, and when I get 20% in a week and 70% in under 3 months from an industrial stock more often than not you get another bite at the cherry lower down. It's easy to say sell into weakness but small-mid caps like MLD can become rather illiquid on weakness. I like to sell when the buyers are still chasing my offer after a hard run. But hey, differences of opinion on this is what makes a market!

[mark100]

ok I look pretty stupid now. Managed a trade from 2.55 to 2.79 in a matter of minutes but only a small quantity.

mamos, I think you might be mistaken, I can only see where its a $285m contract over 6 years.

[Footsie]

Since listing these guys have upgraded earnings, now announce a massive contract win.
Look at Matrix (MCE) or Forge.
Why would they pull back unless market has a major correction something goes wrong?

No these guys will keep going up with the good news.
I understand they are very close to two other large contracts of similar size.

[COLIN]

This is reminiscent of VOC - it had a hard run post IPO but then ran out of steam but not before seeing signficant gains. However, the share price didnt fall back, its just stagnated. It will probably move again on earnings news. So if I was playing this one the same as VOC you would keep buying all the way up, then slowly offload when the momentum runs out, whilst still keeping a parcel to await earnings reports and contract news. Depth is the key - while the sell side is substantially short, it pays to buy. Once the sell depth begins to even out the buys, then you start to sell down.

Agree, KW.

And, for info, I have sold my VOC.

[COLIN]

Since listing these guys have upgraded earnings, now announce a massive contract win.
Look at Matrix (MCE) or Forge.
Why would they pull back unless market has a major correction something goes wrong?

No these guys will keep going up with the good news.
I understand they are very close to two other large contracts of similar size.

Yes, Forge (FGE) is a wonderful story, FTSE. Its hard to believe that 2 years ago it was only about 30c - now about to crack 600. And the PE (historical) is still not unreasonable.

[mark100]

Yeah you guys are probably right in this instance. Got this mornings parcel plus more back at pull back to $2.62. I imagine there will be some broker upgrades following todays news

[mark100]

Nice contract win announced today and picked up a few. Market not that impressed so far, probably because the orginal contract with WPG has been delayed by around 3 months it seems

[modandm]

interesting company in a favored sector right now. Just had a read of the HY preso makes for interesting reading.

The company strikes me as a junior version of NRW Holding (NWH) - 750m mcap PE 17.11. forecast growth 13% - 26% -??

Some back of envelope analysis - (be great to get feedback on)

For MACA:
HY to Dec 10 eps is 10cps
FY11 to June is 15cps. Does this mean the co is not forecast to do as well in the 2nd quarter? Or is the 15cps conservative and results may come in at 20cps? Would have thought contracts were long term and earnings were not seasonal?

What are people forecasting for FY12 FY13?

Based on 15cps I calculate a mixed forward/back PE of 16.6.
Just need a growth rate number for my PEG. Thats always the hard part eh. Suggestions for 2 year g rates?

Another way to look at it is EV/EBITDA = 380/52.2 = 7.2x
This is pretty reasonable for a listed company and on par with recent mining services transactions.

With debt at 44.6 and 9% D/D+E the company could defiantly gear up from here.

Only concern I can see is exposure to Iron ore producers....

[mark100]

The Trevor Hoey column in the AFR indicates the FY11 PE at $2.55 is 12.1x. So I assume consensus FY11 EPS is around 21c. The 15c forecast is from the prospectus which is out of date. But you better be careful modandm, the 'consensus' number might be from the broker who underwrote the IPO. To use your words, I would look for some independent research...

[modandm]

The Trevor Hoey column in the AFR indicates the FY11 PE at $2.55 is 12.1x. So I assume consensus FY11 EPS is around 21c. The 15c forecast is from the prospectus which is out of date. But you better be careful modandm, the 'consensus' number might be from the broker who underwrote the IPO. To use your words, I would look for some independent research...

lol - you have a good memory mark100.

I guess my youthful naivety shone through in that comment and I have been reprimanded appropriately.

It's still a relevant point but when investing in companies with low coverage as these you have little choice... - lesson learnt.

[mark100]

modandm, my comment was not necessary and I should just stick to the thread's topic.

If MLD can close above $2.60 it might just go for a little run I think. Also of significance that I didn't mention yesterday is Work in Hand is now 'in excess of $800m'. As at 31 Dec 2010 it stood at $427m. Provided they can keep margins steady that has to be good for FY12 earnings growth.

[mark100]

Another large contract. WIH now well over $1b.

This should see some very decent growth in NPAT for FY12. I wouldn't be surprised if they need a capital raising at some stage to fund all these new contracts

[mark100]

I would hate to know what would happen to MLD's share price if they lost a contract. Today they announce the impending award of a contract that will increase WIH by around 50% and after a small inital rise, we are now in the red for the day. Maybe everyone wants to be in GNG, the new kid on the block

[mark100]

The approval of WPG's Peculiar Knob project should provide more certainty for MLD given it has a major contract with WPG

[babymonster]

nobody watching this stock?

[cloggs]

I am now. Seems undervalued except for the fact that it is a mining services company.

89 cts for a stock that makes NPAT of 30 cts looks pretty good though.

[babymonster]

I am now. Seems undervalued except for the fact that it is a mining services company.

89 cts for a stock that makes NPAT of 30 cts looks pretty good though.
Agree with you and just add some holding last Friday. Only one thing worries me it's the down trend.

[DarkHorse]

I know Ausbil Dexia’s MicroCap Fund (with returns of almost 30% pa since started 2/2010) which is otherwise very bearish on mining services holds it.
Comment from Manager Chris Puntry in Under the Radar:
"The company upgraded revenue and earnings at their recent AGM and the stock trades on less than two times even the most bearish analysts pre-tax
earnings. With a net cash balance sheet and contracted revenues we think that the company can simply runoff the book of existing contracts, never win any
more work, (which they will) and you still get a valuation above the share price. Otherwise I’d avoid the sector like the plague. Most mining service companies have no intellectual property, are commodity service providers and are going lower..."

[DarkHorse]

Fair question KW. I haven't looked into them at all - just thought Chris Punty's comment may be of interest. Anyone looking to invest should definitely do more research into specific contracts.
I still see mining services as very high risk, and if mining bounces back so the will the ozzie dollar and my ASX holdings as a whole will benefit in any case... (already up 7% this month anyway^^)

[cloggs]

Watching them, but I think they have a way to fall. Rosslyn Hill Mining and Arrium both closing mines. I read somewhere yesterday that the price of iron ore has dropped some more. May have another read to see what proportion of their contracts is in iron as opposed to gold, which seems to be rising.

[babymonster]

Watching them, but I think they have a way to fall. Rosslyn Hill Mining and Arrium both closing mines. I read somewhere yesterday that the price of iron ore has dropped some more. May have another read to see what proportion of their contracts is in iron as opposed to gold, which seems to be rising.

the gold outlook doesn't seem very good either, a few big investment firms prediction is below 1200/ounce

[Chaowee88]

I am now. Seems undervalued except for the fact that it is a mining services company.

89 cts for a stock that makes NPAT of 30 cts looks pretty good though.

Dirtbag skank of a company who raises new equity to pay a special dividend and says they're doing it to prop the balance sheet up. Deception and lies.. I wouldn't touch this lot until the management is changed even with their low P/E.

[cloggs]

Down to 81 cts now.

[babymonster]

very disappointed..