Small Caps | Jan 25 2012
By Greg Peel
LaserBond. These two words conjure up fond childhood memories when a Mr Bond spent his time saving the world from lasers, back in the days when Bond movies were high camp and fun rather than serious and tedious as they are now. As to whether LaserBond's Number One is bald and likes stroking his cat is unknown, but from a technological standpoint it seems LaserBond does have some world domination in mind.
Micro-cap research specialist Microequities has initiated coverage on LaserBond ((LBL)) with a Buy rating. The company operates a portfolio of surface engineering technologies for the fortification of industrial machinery operating in hostile environments.
Put simply, LBL's technology offers water-resistance that can extend machinery life an average four to five times beyond its original service life. In a world where the cost of new machinery or machinery hire has become critical to the ongoing resources boom, and in which new mining, civil works and power generation developments are finding themselves in more and more hostile weather environments (Queensland comes to mind – beautiful one day, bucketing down every other day), the ability to much reduce such costs through machinery life extension is compelling.
LBL's proprietary thermal spray technology can be applied at a fraction of the cost of new machinery, Microequities points out.
LBL has not stopped developing new technologies, and otherwise has expanded through acquisition. Recent acquisitions have added technology that repairs damaged machinery and that can manufacture custom parts, all before the coating process. Fix-improve-protect. LBL has become a one-stop shop.
As FNArena has pointed out often enough before now, mining and construction service companies are the big winners in an era of rapidly expanding global exploration and development and even faster rising costs. The problem for investors in 2012 is nevertheless that a lot of the recognised names – think your Imdexes, Campbells and Monadelphi – now have the bulk of potential earnings growth priced in. Microequites calculates, on the other hand, LBL is trading at a significant discount to peers and a 27% discount to DCF (discounted cashflow) valuation. LBL's revenues are weighted 45% to the mining sector.
LBL has posted a 2011 result showing 154% earnings growth to deliver a 68% compound annual growth rate since listing in 2008. Since being established in 1993, LBL has boasted seventeen years of continuous profitability. Despite the risks associated with the resources sector, such as a European implosion forcing development delays, LBL actually offers a “defensive” characteristic given repair and coating is a much cheaper option than replacement.
Microequities is tipping a record FY12 profit for LBL and has set a share price target of 28c. The shares closed yesterday at 21c.
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