Bell Potter downgrades Monadelphous amid slowing growth
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The news: Bell Potter analysts have downgraded engineering firm Monadelphous Group citing margin pressure amid a slowing project pipeline.
The numbers: The brokerage cut its 12-month price target on Monadelphous to $14 a share, from $15.40 earlier, and downgraded the stock to ‘Hold’ from the previous ‘Buy’ rating.
Shares in the company were down nearly 1% to $12.95 in early trading on the ASX. Over the past 12 months its share price has gained 12%.
The context: Bell Potter analysts said they had adopted a conservative short-to-medium term outlook for the company’s main engineering construction division activity. This was due to a quietening in its major project development pipeline and limited visibility on near-term contract awards.
The Perth-based engineering group had lifted its half-year profit and dividend in February on the back of strong order flows from resources and energy companies.
What they said: “Consequently, reduced engineering construction revenue contribution will likely lead to group EBITDA margin pressures. We remain positive on the short-to-medium term outlook for maintenance and industrial, with opportunities reinforced by the latest wave of resources and energy developments and expanded sustaining capital expenditure programs by iron ore miners,” they said in a note.
The source: Bell Potter research
