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Dividend Portfolio: Income Stock (ASX: MND)


Published 13-JUL-2016 00:00 A.M.


2 minute read

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Overview: Monadelphous Group Limited ("MND", "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.


Hurdles: MND’s revenue has declined for the past two consecutive years and its long-term performance is dependent on increasing levels of investment in the mining and energy sector. A further slowdown in global economic conditions with adverse impact on coal, iron ore, and LNG demand, would aggravate the risks of fewer new order flows or deferral of existing contracts.

Catalysts: MND is well placed to benefit from a recovery in the depressed mining services sector. Backed by its diversification into the marine infrastructure sector and cost restructuring measures, MND’s results are projected to be less impacted by the cyclical downturn. Most key commodity prices have recovered year-to-date which should enable management to reward shareholders via attractive dividends. The FY16 dividend distribution is estimated to yield ~$7%.

Investment View: MND is strategically placed to leverage from any recovery in mining investments. We are attracted to its long-term earnings growth record, free cash flow profile, and management’s interest in driving shareholders’ return. Whilst the near-term outlook for the metal and mining sector looks challenging, MND is well placed to benefit from any cyclical recovery. The stock is trading at an undemanding valuation and we estimate a dividend yield of ~7% and with a resilient business model of the diversified revenue base, we initiate coverage with a ‘buy’ rating.


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.

Any forward-looking statements contained in this article are not guarantees or predictions of future performance, and involve known and unknown risks, uncertainties and other factors, many of which are beyond our control, and which may cause actual results or performance of companies featured to differ materially from those expressed in the statements contained in this article. S3 cannot and does not give any assurance that the results or performance expressed or implied by any forward-looking statements contained in this article will actually occur and readers are cautioned not to put undue reliance on forward-looking statements.

This article may include references to our past investing performance. Past performance is not a reliable indicator of our future investing performance.