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Dividend Portfolio: 2017 Income Stock (ASX: MND)


Published 24-MAY-2017 00:00 A.M.


2 minute read

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Overview: Monadelphous Group Limited ("Monadelphous", "the Company") is an Australian engineering services company. It is engaged in providing construction, maintenance, and industrial services to the mining, energy, and infrastructure sectors throughout Australia. MND has two divisions: Engineering Construction and Maintenance and Industrial Services. Our last advice was a ‘buy’ recommendation on 13 July 2016 at $8.47.

Catalysts: Monadelphous Group has a strong order book and has been awarded an additional $700 million of new contracts during the first half of FY17. The Company has a strong footprint in its core markets and management seeks to expand its services into new and existing markets, which could drive growth if successfully executed. The company has a strong balance sheet with net cash of $226.2 million and debt of less than 1x EBITDA.

Hurdles: During the past three years, challenging conditions have resulted in declining revenue and earnings and Monadelphous was forced to reduce dividend distributions. There is no guarantee that this trend won't continue despite the improved order book. The company is subject to economic activity in the mining and construction sector and adverse conditions may aggravate risks of fewer new order flows or deferral of existing contracts.

Investment View: Monadelphous Group offers profitable exposure to demanding engineering services in the resources, energy, and infrastructure sectors. We are attracted to the company’s order book, balance sheet, and diversified income profile. The primary risks are associated with general economic conditions in the construction and resources sector, which may adversely impact Monadelphous operations. With many of its contracts spanning over several years and interest building up, Monadelphous may be at an inflection point to return to dividend growth following several years of contraction. The Company is forecasted to pay a full-year distribution yielding ~4.5%. We reiterate our ‘buy’ recommendation.


General Information Only

S3 Consortium Pty Ltd (S3, ‘we’, ‘us’, ‘our’) (CAR No. 433913) is a corporate authorised representative of LeMessurier Securities Pty Ltd (AFSL No. 296877). The information contained in this article is general information and is for informational purposes only. Any advice is general advice only. Any advice contained in this article does not constitute personal advice and S3 has not taken into consideration your personal objectives, financial situation or needs. Please seek your own independent professional advice before making any financial investment decision. Those persons acting upon information contained in this article do so entirely at their own risk.

Conflicts of Interest Notice

S3 and its associated entities may hold investments in companies featured in its articles, including through being paid in the securities of the companies we provide commentary on. We disclose the securities held in relation to a particular company that we provide commentary on. Refer to our Disclosure Policy for information on our self-imposed trading blackouts, hold conditions and de-risking (sell conditions) which seek to mitigate against any potential conflicts of interest.

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The information contained in this article is current as at the publication date. At the time of publishing, the information contained in this article is based on sources which are available in the public domain that we consider to be reliable, and our own analysis of those sources. The views of the author may not reflect the views of the AFSL holder. Any decision by you to purchase securities in the companies featured in this article should be done so after you have sought your own independent professional advice regarding this information and made your own inquiries as to the validity of any information in this article.

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