Monadelphous - Our and Market Forecasts May not Be that Different, Just Differently Priced
It may be that we are not factoring in quite so large a difference in earnings expectations from the market. Our unchanged AUD 9.00 fair value estimate for no-moat Monadelphous currently sits at a 30% discount to the AUD 12.80 share price. We could explain the discrepancy simply as the market factoring in unrealistic five-year average revenue growth and EBITDA margin of 3.5% and 12.5% respectively, well above our base case forecasts for 2.5% and 8.5%, and of actual EBITDA margins for fiscal 2016...Monadelphous Group provides construction, maintenance and industrial services to the resources, energy and infrastructure sectors. Co. has two operating divisions working predominately in Australia, with overseas operations in New Zealand, China, Papua New Guinea, Mongolia and the U.S. The Engineering Construction division provides large-scale multidisciplinary project management and construction services. The Maintenance and Industrial Services division focuses on the planning, management and execution of mechanical and electrical maintenance services, front-end scoping, shutdowns, fixed plant maintenance services, access solutions, mine dewatering services and sustaining capital works.
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