Solid Earnings Outlook Keeps MACA Limited At Buy

This story features REGIS RESOURCES LIMITED. For more info SHARE ANALYSIS: RRL

– MACA guidance meets expectations despite disruptions
– DJ Carmichael sees MACA as well placed to further increase order book
– Buy rating retained by DJ Carmichael as MACA offers value at current levels
 

By Chris Shaw

MACA Limited ((MLD)) provides contract mining, civil earthworks, crushing, screening and material haulage solutions in the Western Australian market. While MACA has experienced some disruptions to operations in the June half, primarily due to wet weather, management last week guided to net profit for the year of $27-$30 million.

This is in-line with DJ Carmichael's forecast of $28.7 million, the broker noting MACA has managed to offset the difficult conditions to some extent by a continued focus on both efficient maintenance of its mining fleet and on corporate overheads.

Additional contract wins also helped, DJ Carmichael noting MACA has completed a Definitive Feasibility Study for Garden Well project of Regis Resources ((RRL)) and is well placed to services other projects being developed by Regis and WPG Resources ((WPG)).

On DJ Carmichael's numbers, work-in-hand for MACA now stands at $1.3 billion, which gives increased confidence in the broker's existing revenue forecast for FY12 of $330 million as this is better than 90% covered by current work-in-hand and extensions.

To reflect good visibility in MACA's order book, DJC has lifted revenue assumptions beyond FY12, with scope for further increases if additional contracts can be won. Current earnings per share (EPS) forecasts stand at 20.1c for FY11 and 22.9c for FY12. 

The stockbroker has a price target on MACA of $3.03, down slightly from $3.10 previously given recent market weakness and adjustments to earnings forecasts. Based on the revised target MACA is trading on an earnings multiple of 10.4 times in FY12, with recent share price resilience helping close a valuation gap to peers.

Given the attractive multiple on offer DJ Carmichael rates MACA as a Buy. Key catalysts for any re-rating of the share price should be contract extensions and new contract wins.

There is little to compare DJ Carmichael's view on MACA with the broader market, given a market capitalisation of just over $350 million at current levels.

Over the past year the shares have traded in a range of $1.40 to $2.96.

 

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