Latest Research

GR Engineering (GNG) - Moving Forward

GR Engineering LogoGNG’s 1H18 underlying EBITDA of $12.5m on $177.2m revenue was slightly ahead of our forecasts, although the Company has peeled back 2H expectations reducing revenue guidance to $270-300m (previously $300-330m). We would expect stronger margins in the 2H as more profit may be recognised at the back end of the soon to be concluded Mt Morgan and Dalgaranga projects. We believe investors can begin to look beyond customer disputes with EGS and WLF and focus on long-term growth prospects in an improving resources sector. Therefore, we maintain our BUY call on a $1.60 valuation.

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Global Construction (GCS) - All Cashed Up

Global Construction LogoGCS continued to pile on the cash, finishing the 1H with $42m net cash on the balance sheet. Whilst the 1H18 result was below our expectation, due mainly to lower than expected returns form the commercial and resources segments, we were positively surprised by the $16.6m operating cash inflow. GCS has substantially changed its business structure over the last 18 months, diversifying onto the East Coast and changing its product offering to be less capital intensive. The result is a more appealing business for investors in our view. We believe GCS has a strong pipeline of opportunity in the near-term and expect a stronger 2H. BUY maintained on a $1.00 valuation (prior $1.05).

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Ausdrill (ASL) - Delivering

Ausdrill Limited LogoASL’s 1H18 results were solid, with earnings ahead of expectations and a robust balance sheet enabling targeting an exceptional pipeline in Africa. Normalised EBITDA was $82m (we were thinking $78.5m), gearing dropped below 20%, and the Company has cash and available facilities in excess of $400m. Based on 1H18 numbers and commentary, we up our FY18 normalised NPAT forecast to $51.5m (prior $43.9m) and increase our longer term numbers. Our blended valuation climbs to $2.75 (prior $2.28). The current share price reflects a strong business with excellent prospects and we maintain a hold call.

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Pacific Energy (PEA) - Looking For A Spark

Pacific Energy LogoPEA’s 1H18 EBITDA of $21m on $30m revenue was in-line with guidance and forecasts. The Company has reaffirmed full year guidance for $43-44m EBITDA with recently installed capacity coming on-line in the 2H. Recently, concern has centred on PEA’s long-term growth potential after losing out on a spate of newly awarded contracts and slow progress in Africa. However, we believe the current EV of circa $240m, trading on a 5.3x FY19 EBITDA multiple, to be undemanding for a business with the consistency that PEA offers. Therefore, we upgrade to a BUY, on a revised $0.70 valuation (prior $0.67).

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Paragon Care (PGC) - Ceasing Coverage

Paragon Care logoFollowing a research review, we are ceasing coverage of PGC to focus on WA-based industrials. PGC currently has a $70m capital raising underway to help fund a number of acquisitions and continue its consolidation strategy. The new businesses are expected to be accretive to earnings and we believe the risks associated with the integration of these large acquisitions are mitigated to a degree by successful strategy execution to date. We cease coverage with a buy call and a $1.20 valuation.

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