I agree, it's absolutely a turnaround story. Last FY they generated around $9.3m in revenue with a GP of 26%vs overheads of $4.7m to make a loss of $1.2m not a great result but given the downturn not too bad.
At the last report the company had $10.1m cash with $6.9m in assets, they have reduced their corporate overheads at sliced the top end salaries by around 35% which is likely to directly impact the future profitability. In addition to this they have reduced the expense base by winding up some of their ongoing property leases. Overheads are down.
The company are not the best at communicating key information to shareholders, possibly due to the T20 owning 88% but if you go digging there is a little more going on here currently than meets the eye. As we know the company were recently awarded a contract with a 7 month term for a minimum of $9m, this contract appears to be for stage one of a 3 stage project Wodgina lithium plant. Not sure Andrew Ellison being the MIN MD's brother helped here but certainly unlikely to have hurt. So with this contract alone the revenue can be anticipated as being similar to last year.
We know however that over the last few financial years that BHP have made up over 50% of the companies revenue therefore it seems unlikely that there will be zero from BHP this year? In the peak of the downturn they awarded around $4.5m of work to RDG so perhaps we could assume similar this year which would push expectations to around $13.5m revenue, applying the same GP of 26% this would be $3,5m which under the lowered corporate expenses outlines should get RDG to around cash flow neutral with any contracts awarded for the remainder of the year pushing us into cash flow positive territory?
What I and I assume few others however may have overlooked it the large residential contract that was awarded back in March
"On 9 March 2017, the Company announced that Centrals had been awarded a contract with property developer, Blue Ocean Enterprises for the redevelopment of a beachfront site known as “Oceanfront Development”, situated immediately south of South Beach, Fremantle, Western Australia. Centrals has been engaged to demolish the existing car-park structures and redevelop the site to accommodate 24 luxury townhouses with an anticipated total contract value of circa AUD$27m."
https://oceanfrontsouthbeach.com.au/
The local word on this development is that demolition and site preparations are near complete and that the build will soon commence.
So with a potential $40m pipeline in a sector that's heating up rapidly we could find that the turnaround is a lot more advanced than what management have communicated.
The other potential value adding vertical from the annual report is the one liner stating that they are actively seeking complimentary acquisitions. I guess it makes good sense to put that bid stack of cash to work...
This IMO has genuine rerate potential with much of the hard yards already apparently done, with the T20 holding 88% it may move quite quickly as others catch up on the potential.
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