Monadelphous Group Ltd (MND) posted lackluster results which missed the majority of analysts’ estimates on all fronts, even though the company saw a +41.1% increase (over the previous corresponding period, pcp) in revenue to $1.78bn, predominantly driven by growth from infrastructure markets and strengthening demand for maintenance services across both the resources and energy sectors.

Over the year, MND made solid progress in their infrastructure business (increasing activity levels in the renewable energy and water and irrigation markets) and overseas markets (such as via acquisition of and securing contracts with Newcastle-based maintenance and irrigation service businesses, and award of packages of work on the Oyu Tolgoi Underground Project in Mongolia). MND secured new contracts and additional work valued at ~$600m since the beginning of the financial year.

Management expects maintenance activity to remain positive, bolstered by a
1. production ramp up on newly commissioned LNG projects;
2. increasing required levels of maintenance and support on aging resources;
3. increases in capital projects announced or under feasibility studies; and
4. stabilizing commodity prices. MND trades largely in-line with our valuation and multiples of 17.5x PE20, 3.9% yield – Neutral.