Bobcat.
20-11-2013, 03:45 PM
Ausdrill published two weeks ago a FY13 earnings update of $35-40m (FY12: $90m, which is also lower than recent analyst expectations of $70-75m). This has surprised investors to the point of shaving 50% off its share price since then (drifting prices for mining products has of course also contributed)...but is the company's financial position really all that bad?
Given the number of Australian digger projects on hold, it's no surpise that its mining services division locally is under utilised. What is more surprising is the extent of under utilisation in its African divisions - CMSA and joint venture AUMS - with new tendering now required in Ghana, Mali and Tanzania to utilise idle machines and employees.
More positively, a 5% reduction in headcount has been achieved this year, with more OPEX cutting underway, and less CAPEX is expected (down from $180m over the past two years to less than 40% of that figure for 2014).
Debt gearing is a bit high at 37% (FY12: 26%) but manageable with an interest cover of about 5 times for FY14 (for the 3 times covenant).
Stock today is trading at about 6 times FY14 earnings estimates. I see this as a good purchase.
Chart TA has solid support around 80c (demonstrated early July).
Discl: Bought some today for the first time, anticipating a short-term rebound back up to at least $1 by the end of this month.
Given the number of Australian digger projects on hold, it's no surpise that its mining services division locally is under utilised. What is more surprising is the extent of under utilisation in its African divisions - CMSA and joint venture AUMS - with new tendering now required in Ghana, Mali and Tanzania to utilise idle machines and employees.
More positively, a 5% reduction in headcount has been achieved this year, with more OPEX cutting underway, and less CAPEX is expected (down from $180m over the past two years to less than 40% of that figure for 2014).
Debt gearing is a bit high at 37% (FY12: 26%) but manageable with an interest cover of about 5 times for FY14 (for the 3 times covenant).
Stock today is trading at about 6 times FY14 earnings estimates. I see this as a good purchase.
Chart TA has solid support around 80c (demonstrated early July).
Discl: Bought some today for the first time, anticipating a short-term rebound back up to at least $1 by the end of this month.