Thanks for your comments on the AGM which I was not able to attend. I d id look at the presentation and there is no doubting it is a good start to the year. i do note however that last year DSA (the pipeline business) had a horror first 4 months and indeed bad first half - owing to the eFMG contract cancellation. Thus it would be interesting to see the earnings splits between DSA and the dewatering business. The very high revenue growth is also a sign that DSA has got off to a cracking start, which is consistent with the $35m of new contracts kicking off in July. So one concern for me is that it maybe that the dewatering business has not actually grown much YOY. In any event it would show the wisdom in having bought DSA - and there were plenty people calling it a dud acquisition when FMG pulled the plug.
I am still a real fan of this business however and it is trading at around 3 times EV:EBITDA by my calcs. Let's see what Coates Hire sells for and compare the multiples.
I appreciate the concern for capex vs free cashflow. But again I reiterate that as the growth starts to slow ( but still positive) this will be delivering heaps of cash. I sit on a mountain of shares and I look forward to the divi pay day. That said I do not expect a first half divi as I doubt they will have the franking credits then, but hope for a small divi at year end 1.5 cents maybe.
Plenty of cheap mining services stocks out there, but I think this and PEA are the picks. Problem for this sector is that if you own a mining services stock you need to make a decision to hold, and if you don't own a stock no consideration is given to the sector. This will turn mid 2013 IMO.
best to all
RQL Price at posting:
32.0¢ Sentiment: ST Buy Disclosure: Held
