Perth-based engineering services firm Monadelphous Group has rediscovered its growth mojo, judging by the latest financial report, with help from the rebound in commodity prices and activity, especially in oil, gas, gold and iron ore.
Monodelphous Group Limited (ASX: MND) is the bellwether company for the Australian resource service sector. After seeing the MND share price decline 80 per cent from $28.50 to $5.50 in the three years to early-2016, it has more than doubled this year, indicating investors appetite to switch into cyclical stocks as the expectation for resource projects proceeding has increased with the recovery in commodity prices.
Deutsche Bank was disappointed with the FY18 results, noting a severe earnings hole is emerging in FY19. While the company exceeded FY18 revenue guidance, the broker believes the expectation for construction revenue to decline in FY19 implies double-digit declines in earnings.
Macquarie now forecasts a -16% decline in the company’s FY19 construction revenue, given the low level of wins this year and the time lag for new work flowing through to revenue. The Ichthys work should largely be completed by June 30 and the focus is now on the replacement of around $300m in revenue run-off in FY19.
The company has been awarded a $600m contract from Woodside ((WPL)) to provide asset maintenance services at the gas production facilities in Western Australia. The contract is for five years and has a further two 1-year extension options.