BKN - Bradken - a heavy industrial

[modandm]

Bradken Limited (BKN) is a supplier of differentiated consumable products to the resources and freight rail industries. BKN's product range includes consumable parts, capital equipment and associated maintenance and refurbishment services. BKN operates five divisions: Mining Products, Rail, Industrial, Engineered Products and Power & Cement, supported by a network of 27 manufacturing facilities across Australia, New Zealand and the United Kingdom.

Current MCAP around $1.2bn - SP $8.20

I was surprised not to find an old thread - may have disappeared

[modandm]

Many will know of this stock as a major shareholder in small cap darling ANG.

Anyhow Bradken has been tracking slowly but steadily upwards as it benefits from the ongoing mining boom, although concerns over cheaper chinese competition to Bradkens significant rail wagon business has tempered appetite for the stock. A disappointing results announcement earlier in 2011 also saw the stock sold off.

Recently in an investor presentation BKN announced it would be constructing a foundry in China to boost capacity and reduce costs of production for rail wagons. Also the company mentioned that pricing has stabilized at -25-30% down and that BKN has successfully reduced costs of production by a similar amount.
In other news the company's ESCO licence has expired/withdrawn, and BKN has embarked on producing its own range of mining consumable products. Analyst have conservatively forecast a significant loss in revenue for this however there is upside risks to valuations should BKN be able to successfully lever its relationships with customers and gain customer acceptance with their line of products.

As recently as a few weeks ago following the analyst presentation where the reiterated 15-20% EBITDA growth for FY11, a number of upgrades were issued on the stock which rallied from 7.75ish to 8.60ish.
Following this a capital raising was announced at $8.20 raising about $160m. The company plans to use these funds to develop the Chinese foundary (30% lower costs)- which the company says will have a very short (3-4year) payback period, as well as to pursue acquisitions.

The company trades on a PE ratio of around 13.2, EV/EBITDA of 8.6, pays a 5% dividend yield and has excellent growth prospects once capex of $160m for FY12 is completed. i.e FY13 numbers should be around 20% better than FY12.

The company is rated:
- Outperform - macquarie
- Target 9.35 - Credit suisse
- Buy - Goldman Sachs

The company is very well managed and if it can make some small acquisitions at low multiples, and gain acceptance with its new mining consumables products I can see the company doing very well and returning 15-20% p.a over the next 2-3 years. If ANG continues to perform and grow in south america as it has this will further boost BKN also. I noticed BKN is also looking at expansion into South America.

Disc: Long term ANG holder :D nearly double bagger, recent buyer into BKN @ $8.26

[macduffy]

I held BKN a few years ago when I bought in following a slump in the SP. I think from memory that the co had been caught out with heavy overseas borrowings and had a poor result followed by a cash issue. Did quite nicely as the SP recovered but as often is my experience, managed to sell out too soon!

For all the fine words in the BKN corporate blurb, BKN is basically a heavy engineer/manufacturer with its main operations in Australia. It's a well run company as far as I can tell but I'd be a bit concerned about its ability to cope with the super-strong AUD, despite its efforts to diversify operations to China and other lower cost countries.

[macduffy]

RBS Australia also has a Buy on BKN.

From FN Arena on 1 June:

"BKN - BRADKEN LIMITED
RBS Australia rates BKN as Buy (1) - Target $9.90 (was $10.25). Bradken has raised capital via a placement and the broker expects the funds will give management greater flexibility to pursue potential acquisitions.
Forecasts and price target have been adjusted to reflect the raising and the broker retains a Buy rating on the stock.

Target price is $9.90 Current Price is $8.65 Difference: $1.25 If BKN meets the RBS Australia target it will return approximately 14% (excluding dividends, fees and charges).

The company's fiscal year ends in June. RBS Australia forecasts a full year FY11 dividend of 38.00 cents and EPS of 61.60 cents . At the last closing share price the estimated dividend yield is 4.39%.

At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 14.04.

Market Sentiment: 0.8

How do these forecasts compare to market consensus projections?

Current consensus EPS estimate is 61.3, implying annual growth of 4.8%.Current consensus DPS estimate is 40.0, implying a prospective dividend yield of 4.6%.Current consensus price target is $ 9.47, suggesting upside of 9.5%(ex-dividends).Current consensus EPS estimate suggests the PER is 14.1.

All consensus data are updated until yesterday. FNArena's consensus calculations require a minimum of three sources "

[macduffy]

But Deutsche Bank and Credit Suisse have both downgraded BKN to Hold.

From FN Arena :

http://www.fnarena.com/index2.cfm?type=dsp_newsitem&n=48AE948B-D237-5D4C-60543F3D529A4AA9

[modandm]

wth is this FN arena mcduf? geez. Are you a recent subscriber or something?

I am fortunate to have Reuters access so can actually read the research, not just make a database of statistics bys/sells, and sell that on to willing punters. The service sounds pretty useless if you ask me.

I have always found analyst/broker research to be a good read to learn about the company. Sometimes I agree with their conclusions other times I don't - but you need to read the research and understand their assumptions before acting on their valuations or buy/sell recommendations.

[macduffy]

Just a free digest of, amongst other things, brokers' current recommendations. Take it or leave it but I thought that as you were mentioning Macquarie, Credit Suisse and Goldman Sachs' views a bit earlier you might be interested in other current recs.

Personally, I'm always interested in others' views but I rarely take action on them and never without first doing my own rough version of "research".

[modandm]

Just a free digest of, amongst other things, brokers' current recommendations. Take it or leave it but I thought that as you were mentioning Macquarie, Credit Suisse and Goldman Sachs' views a bit earlier you might be interested in other current recs.

Personally, I'm always interested in others' views but I rarely take action on them and never without first doing my own rough version of "research".

yeah, but since I now own the stock i will only mention the brokers who are bullish and have buy recco's on the stock. Isn't that how this site works??? lol

Only joking. :D

In interest of full disclosure yes some of the brokers have downgraded since the capital raising but they pretty much all have target prices of $8.75+ with several above $9.00. If $1.00 capital appreciation + a 5%dividned yield is the result over the next year I will be stoked.

As with most of my portfolio this is a long term hold - 3-5year horizon. if they take out ANG I will be a big holder of the combined entity and happy to be so. Both A grade management and businesses.

[soulman]

A nice result out as the market likes it.

Up 10.66% as I type. As BKN has been downgraded and their shares smashed prior to the result, this result will re-rate BKN.

[Lizard]

Yes, good result and agree BKN look reasonable value here. Nice dividend yield too at $5.74.

[Fred114]

Not the turn of BKN in the market today, with a 7% fall. Down from $6 since September.....won't pick up any more yet, but I feel the turn is coming soon.....

[Fred114]

Shareprice up 9% today on good result. Solid announcement of interim result for 2012/13. NPAT up 9% and EBITDA is up 5%. Div up 3%.......

[Fred114]

SP up 30% to 4.50 ish....on the back of announcement of takeover at $5.10

http://www.reuters.com/article/2014/12/04/bradken-ma-idUSL3N0TO5KU20141204

[macduffy]

Not quite a takeover yet. A non-binding, indicative "offer" subject to completing due diligence and a recommendation from the board. Memory tells me that they received one of those at $6 not long ago.

Not holding, although I have in the past.

[babymonster]

Maybe it's a good buy now. The takeover bid broke down

[macduffy]

Maybe it's a good buy now. The takeover bid broke down

Maybe, maybe not.

It's a "difficult" industry - may be quite a while before conditions improve there.

[macduffy]

Maybe it's a good buy now. The takeover bid broke down

Maybe, maybe not.

It's a "difficult" industry - may be quite a while before conditions improve there.

[babymonster]

Yes, glad I didn't buy it when I posted last time. However, I do have MLD, another mining service company, doing not so well atm, hopefully the HY report won't be that bad.
And today showed just how difficult. Down 22% again. Anyone holding any of the mining services companies through this reporting season had better cross their fingers, toes, and legs LOL

[PSE]

100m dollar loss for the half year ameliorated by 50 million in benefit related to falling aussie dollar.
This company has only been listed during the mining boom, so uncertain how well it will do in future. This loss is also a hit to the company's capital position, shareholders equity now 44% of total assets.
I like that it does mining consumables which will be required for ongoing operations. Not just a mining services company.
Methinks the private equity buyout may not have liked the debt levels.
I am not holding as I haven't got the spare capacity and it seems to speculative for me but this could prove a good investment at $2.50 for those with the time and inclination to understand the company.

[macduffy]

I had a good run with BKN during 2007-8 but wouldn't be buying again at this stage. Patience needed until/if fortunes improve.

:cool: