The revised DCF valuation is now $0.61 per share (WACC 13.0%).
in time it will be on industrea website.
Contract win, site tour & CB buyback...
In the past 10 days Industrea (IDL) has announced a $21.7m extension at Mt Thorley Warkworth, conducted a HunterValleysite visit for 25 institutional investors and brokers and bought back $17.8m of its convertible bonds.
The Mt Thorley Warkworth contract extension was for the hire of 7 of Huddy's Caterpillar 789C dump trucks. Initially hired in Feb 2009 for 12 months the extension is for a further 24 months out to Feb 2012. It should be noted that this is not the only gear Huddy*s has on the RIOsite with the most recent addition being a brand new 550T excavator that was added in October 2009.
The site visit went well with the key takeaway being that AMT, IME, PJB and WADAM are all having a strong 2HFY10 on the back of the $10m/month sales rate that has been maintained with Chinese customers over the past year.
IDL has bought back $17.8m of the $70 convertible bonds. This leaves $52.2m of the bonds remaining at a conversion price of $0.39 (133.8m shares on conversion). The bonds are convertible/redeemable on 28 March 2011.
With the bond buyback OMhas made some adjustments for interest expense and dilution (OMassumes conversion of the remainder in Mar 11). As a result fully diluted eps increases in FY11 and FY12 by 4.2% and 4.3% respectively.
The revised DCF valuation is now $0.61 per share (WACC 13.0%).
IDL continues to trade at mid-single digit multiples (FY11 PERof 6.9x). OMexpects that this 50% discount to market will be eroded as the market gains confidence in the earnings profile and develops a greater understanding of the business post the introduction of meaningful segment information. OMcontinues to recommend IDL as a BUY.
IDL Price at posting:
$1.14 Sentiment: Buy Disclosure: Held
