Latest Research

Orbital (OEC) - 1H18 Results; Ceasing Coverage

Orbital LogoThe 1H18 performance (revenue $5.9m, net loss from continuing op $2.3m) was weak as expected, although the focus from now on UAVs gives us cause to be optimistic about a 2H recovery. Forecasting risk sees us pare back margins in future periods, dropping our valuation to $0.60 (prior $0.75), but still backs up a speculative buy call. We will be ceasing coverage of OEC following release of this note after a review of companies covered.

We will be ceasing coverage of OEC immediately following release of this note.

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Matrix Composites & Engineering (MCE) - Leveraging Existing Expertise

Matrix Composites & Engineering LogoA pull back in MCE’s share price nearer to our $0.47 DCF valuation gives us cause to upgrade to a HOLD (prior SELL). We note that significant forecasting risk remains as the Company is in the infancy of its diversification away from the weak riser buoyancy market. However, we are encouraged by early success in penetrating new markets with LGS, growing SURF’s revenue contributions and securing work in civil & infrastructure, where the opportunity in bulk freight is particularly appealing.

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CTI Logistics Limited (CTI) - Going National

CTI Limited LogoCLX has transformed itself from a largely WA-based business to a national logistics and transport provider. After the acquisition of Jayde in the last half, CLX expects to generate ~40% of its revenue from the eastern states. From this platform we expect last half’s adjusted EBITDA of $9.5m (slightly below our $9.9m forecast) to improve over time as the WA economy picks up steam and national organic and acquisitive opportunities emerge. Our valuation drops slightly to $1.50 (prior $1.60) on amendments to forecasts, but is still well ahead of the current share price. We see value and maintain our buy call.

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Decmil (DCG) - On Your Marks

Decmil LogoWhile DCG’s 1H18 revenue of $141m and EBITDA of $1.3m did little to excite, the outlook commentary made for good reading. Work in hand and a large pipeline supports a much stronger performance in 2H18 and FY19. A combination of growing revenue and cost control should prove positive for margin in coming periods. We maintain a buy call on the compelling macro environment and an unchanged valuation of $1.40.

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Austal (ASB) - US Delivers

Austal LogoEBIT of $29m in 1H18 was as expected, and similar to the prior two halves. We expect a similar result in the current half. However, our focus is on FY19 and beyond. Revenue consistency and steady 6-8% shipbuilding margins in the US, combined with an expected uplift as commercial work drives greater workloads through the Australian and Philippines shipyards, should see strong growth next financial year. With medium term performance largely underpinned by a $3.4b order book and large longer-term opportunities, we remain positively disposed. Buy maintained on a $2.10 blended valuation.

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