Has got no discussion here; most being intent on getting rich/poor quick on hyperinflated, underfinanced, never made a dollar, never will make a dollar penny stocks. Mining service companies made big gains over the last 6 months or so, and some of them have ample cash reserves and strong earnings and dividend histories. All the brokers, analysts, even newsletter writers continued to warn against this sector no matter what the price. Not a total list of movers, and all prices are approximate: Mineral Resources MIN From $3.50 to $10 in 6 months Monadelphous MND From $6 to $11.50 in 6 months Maca Ltd MLD From 70c to $1.75 in 6 months NRW Holdings NWH From 5c to 45c in 7 months Lycopodium LYL From $1.15 to $2.45 in 7 months Southern Cross Engineering SXE From 25c to 55c in 13 months ALS Ltd ALQ From $3 to $5 in 6 months Ausdrill ASL From sub 25c to $1.15 in 7 months Swick Mining Services SWK From 10c to 23c in 9 months And I'll sneak these in, but not to commend: Imdex IMD From less than 20c to 45c in 6 months Codan CDA From 55c to $1.25 in 7 months
I gues if you time it could be lucrative. My chief worry about these services company is when China goes into recession like all economies, the Chinese Governement will just stop buying Australian resources it doesn't need. Bearing in mind tha chinese are the biggest miner in the world for our three major exporter ores, we are just the largest exporters. I fear the bottom will fall out of these stocks, if China went into recession. Coal, China import is around 15% the rest they mine - they have more coal than Australia and they actual mine more tons than Australia. Iron ore, import Less than 10% and they have more iron ore than Australia and they actually mine more tons than Australia Aluminium, Import about 15%, they have the second largest reserves in the world, Australia has the largest reserves) and they mine more than Australia.
Yes ok, but I've been hearing persuasive arguments like that against the service industry for a couple of years. The correct move was, admittedly in hindsight, some contrarian buying when cash positive companies of quality were being thrown away. Some of these stocks have been paying dividends, big ones, even through the 'crisis'. They could have been bought above the absolute lows, and a portion traded down recently for a low net cost hold. I think that output of companies like Rio, BHP, FMG have kept up so far. Another thing, a few of these companies heavily service gold miners; a recession shouldn't bother that line of business. That's the tack I belatedly took, but couldnt get a decent amount of the stock i wanted before it took off. It will pay almost a 12% ff dividend fy16 on my entry price.
Few more, same time frame ... Boart Longyear BLY From 5c to 17c in 7 months Worley Parsons WOR $3 to $8 in 6 months Downer edi DOW From $3 to $5 RCR Tomlinson RCR From $1.25 to $2.35 Yet to bottom or confirm: Cardno CDD Saunders SND Might have bottomed: Decmil DCG 65c to $1 Austin Engineering ANG Small mthly candle bodies, high volumes) 8c to 12c Boom Logistics BOM recently broke downtrend 7c to 10c in 3 months Emeco EHL high weekly volume 3c to 6c LogiCamms LCM
Purely based on what came out of Diggers and Dealers at which there were no wholly exploration IPOs announced, service companies probably really don't have a whole lot to look forward to. Granted short term there will be some infill work on the drilling side and plant upgrades/maintenance, both touted to the max for incoming investors attracted by the gold price rally but will that be sufficient to sustain the service sector? Clearly I have my doubts - on the other hand there aren't as many elephants around any more, so companies need more of the smaller finds to maintain a decent production pipeline (mine life ain't what it used to be) - which suggests that service companies would be in greater demand, but at the moment they aren't... it's all a bit too risky for this little black duck, better off looking at oil and the likes of Schlumberger and Halliburton and the second tier mobs if primary resource service sector companies is your thing.
^^^ Depends how much weight you choose to give one part of the picture (like explorer IPOs) Some of these are doing good business, and maybe its been a case of only the bad news being expected and already fully accounted for in the depressed share prices. Back months ago that is, dont know about buying now. NRW Holdings NWH Up 50% intraday in response to fy16 results. Good profit, cashflow, and work in hand report. The debt and a legal issue scared me off serious consideration of this one, but i guess sometimes debt creates a bargain for someone able to weigh up the chances at an ultra low market cap - I believe that was also the case with St Barbara SBM in the gold miners? Few more servicers: GR Engineering GNG From 50c to $1.50 in 3 years MacMahon MAH From 5c to 12c in 10 months Coffey Int COF Taken out by nasdaq listed large cap Tetra Tech Inc in Jan 2016
Still stuff happening in this sector. Opportunistic predator Cimic has made 14.5c offer for McMahon shares and share price of MAH up 31% at the close. Long term holders of MAH must be fuming, I know I was when Cimic mugged me for my Sedgman shares.. At the same time Boom Logistics (BOL) and Emeco Holdings (EHL) are up 19% and 14% respectively. EHL has a Dec Qtrly update out, but BOL has no announcement to explain its rise, and maybe speculators are being reminded again of how far the small cap, lower quality mine servicers have fallen, leaving them as sitting ducks for predators. Still reckon these lower quality sub 20c type shares are for traders - the better quality companies only had modest moves today: MND, MIN, GNG, RCR, MLD, ALQ, LYL.
Has the run already happened though? Where's iron and coal got left to go and many other forms of mining have relatively small amounts of servicing required. I'd be interested in Australian oil servicing equities though. OOO IS great, but the secondary support and transport companies probably have plenty to run since they go up with oil but are a little protected on the downside because spice must flow regardless of price on new projects. A shock need event that doesn't change macro could mean a good entry for some of these guys, but at the current variations aren't these long long term bets?
Yes, much lower reward/higher risk now. Some shock event might give another entry opportunity in the quality ones. I would still like to add GNG at a lower price as it seems versatile - e.g. has just made an announcement showing it is managing feasibility for a mineral sands project in Tanzania. More importantly, has a proven ability to do gold plants. No debt, plenty of cash, dividend, founder led, management has a big stake. Monadelphous (MND) my other wish list item. I'm not interested in the low ROE ones with debt, so don't feel that I missed out with MAH or BOL.
If only applied a year ago to mining service companies, e.g. MND, LYL, GNG, RCR, MIN - it's a long list: Twitter Rudolf E. Havenstein @RudyHavenstein I generally start an investment search with "What is the most hated thing right now?"
