In today’s daily we have covered stock research on Decmil  (BUY).









2 Stocks To BUY In November + Upcoming dividends





 
The S&P 500 was up by 10.75points or 0.52%on Friday to 2063.50 points. U.S. stocks closed higher on Friday, with major indexes notching a fifth straight weekly advance after China's central bank cut its benchmark interest rate and its euro zone peer announced asset purchases in efforts to boost each region's economy. The gains were broad on Friday when both the Dow and S&P 500 ended at closing records. All ten primary S&P 500 industry sectors ended the day higher, while 63 percent of stocks traded on the New York Stock Exchange closed in positive territory. About 50 percent of Nasdaq-listed names were higher on the day.

The People's Bank of China said it was cutting one-year benchmark lending rates for the first time in more than two years. The move came after European Central Bank head Mario Draghi said "excessively low" inflation had to be raised quickly by whatever means necessary, rekindling expectations the ECB will move to stimulate the euro zone economy. Best Buy jumped 7.2 percent and Lowe’s Cos. rallied 8 percent to pace gains among retailers in the S&P 500, which advanced 1.7 percent as a group.



S&P 500 Daily Chart (Source – Thomson Reuters)
S&P ASX 200 was down by 11.9points or 0.22%on Friday and closed at 5304.3 points. The broader All Ordinaries index fell 10.4 points, also 0.2 per cent, on Friday to 5292.1, taking the weekly loss to 2.6 per cent. Supermarket owners Woolworths and Wesfarmers also weighed heavily on the market, dropping 6.3 per cent and 5.7 per cent for the week, respectively, to $31.60 and $41.56. There’s been concern in the ­supermarket space about increased competition from Aldi and Costco.
BHP Billitondropped 4.7 per cent to $31.70 over the five trading days, while Rio Tinto shed 6.1 per cent to $56.41, with both hitting their lows for the year. Fortescue plunged 11.8 per cent to $2.69 – its lowest in over five years – and a raft of smaller iron ore players were ­heavily sold down as the commodity price threatened to make higher cost mines uneconomic. Sonic Healthcare shares dropped 8 per cent over the week to $17.26 after the pathology ­services company cut its earnings expectations at Thursday’s annual ­general meeting.

ASX 200 Daily Chart (Source – Thomson Reuters)
 
Top Performers on the ASX 200 were :-


 
Stock of the Day - Decmil (BUY)
Decmil has a strong reputation within the resources services industry and has a tier 1 client list in government, mining and LNG. Its exposure to LNG is one of the highest of its peers. On financial benchmarking against other contractors, Decmil ranks very highly. Its long term cash flow conversion is excellent. Decmil appears to have several potential opportunities on the horizon with a tender pipeline of $3.2 billion up from $1.8 billion at the 1H2014 result.
 

Group Capability (Source - Company Reports)

Decmil’s net cash position at the result was $57 million (representing $0.34cps). The total FY2014 dividend of 13 cents per share represent a payout ratio of 44%. The company has cope for capital management or a higher payout ratio. The FY2014 dividend yield is 6.2% (fully franked). Over the past four years Decmil has the best operating cashflow conversion of any company in the sector and the cashflow conversion was once again top shelf.


Revenue + EBITDA (Source - Company Reports)

Both the debtors and creditors accounts increased by approximately $50 million over FY 2013. We believe this is a function of the ramp up of activity on the Manus Island contracts and makes sense given that the 2H2014 revenue was 35% higher than the 1H2014. Work in progress also moved in line with the revenue growth. We are satisfied that the working capital movements are as expected.


Decmil Daily Chart (Source - Thomson Reuters)

Integration of Eastcoast Development Engineering (EDE) was guided as now complete. The integration included some management changes. We note that whatever integration and redundancy charges incurred, those were taken above the line and are unlikely to occur in FY2015. We assume Decmil wins material contracts in FY2016 and FY2017, the EBITDA margin for the contracting business to trend towards a long term margin of 8.5% as well as a long term village utilization rate of 55%. We reiterate our BUY on the stock at the current price of $1.595.


 
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