Latest Research

Global Construction (GCS) - Building A National Footprint

Global Construction Services LogoGCS successfully diversified its business onto the East Coast and continued to strengthen its balance sheet in FY17 (currently $3.8m net cash). Whilst FY17 results were softer than we forecast, we expect significant growth opportunities in the future for the commercial sector in particular. We believe execution of the East Coast expansion strategy and balance sheet strength warrant multiple expansion; we now value GCS on 8.0x P/E (previously 7.5x). GCS trades on undemanding multiples and offers value as well as growth. BUY call maintained on a blended $0.80 valuation.

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OZ Minerals (OZL) - H1 2017 Financials & Carrapateena Feasiblity

OZ Minerals LogoOZ Minerals (OZL) release H1 financial results with revenue of $446m, underlying EBITDA of $39m and NPAT of $80m. Underlying NPAT of $81m was up $26m on the corresponding period in H1 2016. The Company retains a strong balance sheet with $625m cash and no debt. OZL has made a decision to progress the Carrapateena project through to development with commissioning forecast for Q4 CY19. The updated Feasibility Study (FS) highlights production of 65kt Cu and 67Koz gold at all-in sustaining costs (AISC) of US$0.99/lb, with $916m pre-production capex. While we regard the project as marginal on an IRR and NPV10 basis (15% and $595m respectively, Argonaut est.), OZL has significantly de-risked the technical aspects of the project and can fully fund development from existing cash and future cashflows from Prominent Hill. Argonaut downgrades OZL to a HOLD recommendation with a revised target price of $8.95 (from BUY at $8.20).

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Matrix Composites & Engineering (MCE) - Subdued FY17 Results

Matrix Composites & Engineering LogoFor MCE FY17 results were difficult, but largely expected. An underlying EBITDA loss of $4.4m reflects the subdued offshore oil and gas sector. Negligible sales in MCE’s core riser buoyancy market and a bleak outlook for new offshore rig builds has forced the Company to diversify its product offering to better utilise its state-of-the-art manufacturing facility in Henderson. Whilst some early success has been had, in particular with Matrix LGS (the Company’s low drag buoyancy products), we believe it will take time to penetrate new markets. Given a high level of uncertainty and a likely very soft FY18 we maintain our HOLD call on a revised DCF valuation of $0.38/share (previously $0.43/share).

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Ausdrill (ASL) - Winning In Africa

Ausdrill Limited LogoAfrica drove strong FY17 performance, and there’s more to come. The $1.6b in awards during FY17 largely came out of Africa, and will drive strong growth in FY18 (ASL guidance is for 30-40% earnings growth), while an exceptional tender pipeline here augurs well for FY19 and beyond. There are risks to managing and funding such strong growth, but ASL is well positioned in our view. We remain attracted to the business quality and outlook, but maintain a hold call on a revised valuation of $2.20 (prior $1.95).

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ST Barbara Ltd (SBM) - The Comeback Kid

St Barbara Ltd LogoSt Barbara Ltd (SBM) reported double digit growth for their FY17 results with underlying NPAT of $160m (+26% y-o-y), operating cashflow of $303m (+25% y-o-y) and EBITDA of $321m (+13% Y-o-Y). Consolidated gold production for FY17 came in at 381koz at an AISC of $907/oz, at a realised gold price of A$1,685/oz generating EBITDA margins of 50%. FY18 guidance of 350-375koz @ AISC $970-1,035/oz was announced, with production back-weighted to 2HFY18 to incorporate mine sequencing from Gwalia as the extension project is implemented. SBM announced its maiden dividend of 6cps (2% dividend yield), but remains cautious on a consistent policy pending balance sheet strength. FY17 was a standout year with over $228m of debt repaid. SBM has made a stellar comeback, and is appealing longer term. However, with capex expected to double and lower forecast FY18 production and higher costs at Gwalia we see limited upside versus our valuation at this juncture. HOLD maintained.

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