Latest Research

Pacific Energy - Standout consistency

Pacific Energy LogoHeading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Pacific Energy. We recall the AGM in November was upbeat, with the Company indicating it was on track to beat the $54-55m underlying EBITDA guidance provided in August. PEA’s ability to provide and meet guidance shows the attraction of the business model, with average contract length of ~4 years on take or pay terms offering good visibility. We see no reason to adjust our forecasts for the next two years, and believe the stock is undervalued on a slightly more conservative valuation of $0.73 (prior $0.75). PEA provides lower risk exposure to mining services. BUY maintained.

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GR Engineering - Timing risks

GR Engineering LogoHeading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for GR Engineering. Both have been pulled back, the latter to $1.30 (prior $1.55). We continue to like the business; it is a well-managed, quality EPC contractor, with a strong track record. However, in an environment less conducive to mining project progress, and with the timing of Thunderbird in particular providing a high degree of near term earnings uncertainty, we believe a HOLD (prior BUY) is more appropriate pending greater clarity.

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Decmil - Market needing reassurance

Decmil LogoHeading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Decmil. Given exposure to government-funded infrastructure and capex spend by the majors in resources, we remain positive on top-line growth potential. Uncertainty relates more to margin, particularly with rapid revenue growth, and we build more caution into our forecasts and valuation calculations. Our blended valuation of $1.10 (prior $1.20) is well ahead of the current price, although investors will likely need reassurance on solar contract risk, and evidence of a stronger 2H19, before reacting to our maintained BUY call.

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Ausdrill - Price falls overdone

Ausdrill LogoHeading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Ausdrill. Tighter liquidity and heightened uncertainty are key risks to project progress and therefore pose a risk to organic growth. As a result, our forecasts now largely reflect the existing level of work, with contract wins to provide potential upside. We also up risking to calculate a revised valuation of $2.00 (prior $2.25). This is significantly ahead of the current price, in our view providing a good opportunity to BUY a quality business.

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Austin Engineering - Waiting on crane business sale

Austin Engineering LogoHeading into 2019 and the interim reporting season, we have reviewed our forecasts and valuation for Austin Engineering. Our FY19F EBITDA is now at the lower end of guidance range, and we have upped risking in our valuation calculations. We still find more than 20% share price upside to our valuation, and maintain a BUY call with a $0.24 blended valuation (prior $0.27). We remain positive on ANG’s strategy, global diversity, and the repair & maintenance spend evident in 2018. Risks relate to the deferral of mining capex and non-urgent opex in 2019, and the timing and success of the targeted sale of the crane hire business in Chile.

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