On closer inspection of the fundamentals and outlook, we consider that there are a number of factors that could potentially underpin a recovery in Monadelphous. The catalyst for this recovery would be what upcoming AGM on 19 November.
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.
Following the recent underperformance of the share price, UBS upgrades to Buy from Neutral. The broker expects Monadelphous to return to sales growth in FY20 as it transitions into iron ore replacement and sustaining capital projects from LNG construction.
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.