A little bit of press. Pity i held MAH too until yesterday :| No doubt you all would have seen the recent china coal mine explosion in the news too. That explosion seems to be getting more press than usual, i guess because of the chile miners. embarrassing for china.
* CRITERION: Tim Boreham * From: The Australian * October 20, 2010 12:00AM
HERE'S a yarn about two mining service providers.
One is an investor's pet and the other has been sent to the dog house after a contract snafu in the Pilbara.
Macmahon Holdings (MAH) 54.5c
Industrea (IDL) 44.5c
Macmahon yesterday revealed its full-year earnings would come in at around $20 million, less than half the market's expected $42m. The key culprit was cost overruns on a $500m project to double-track BHP Billiton's train line to its Mount Newman mine. Industrea yesterday wasn't elaborating, but we suspect it proves that the miners always wield the contractual whip hand over suppliers when things go awry.
Macmahon shares slid a benign 14.5c (20 per cent).
Meanwhile, the coal (and China) oriented Industrea completed a $50m insto raising, a day after revealing a record $35m order for its collision-avoidance equipment. Industrea is keeping its options on applying the funds, but everyone expects it to bid for Valley Longwall, the biggest provider of coal-seam drilling services on the east coast. Valley Longwall is being auctioned by private equiteer Catalyst for a vaunted $80-100m, a steal compared with Catalyst's $250m purchase price.
Still, some investors would be chirpier if Industrea paid down its sizeable debt load of $177m, rather than gear up further.
We rate Industrea a speculative buy. According to Foster Stockbroking's Dominic Rose, the stock is trading on a current-year earnings multiple of six times, compared with the sector average of 13-14 times. And dare we say it: QR National isn't the only exposure to Queensland coal.
Macmahon is a sell: the valuation looked stretched even before yesterday's bombshell.
IDL Price at posting:
$1.34 Sentiment: Buy Disclosure: Held
