Decmil Group Limited

DCG Details

Decmil Awarded $41 million of New Contracts: Decmil Group Limited (ASX: DCG) provides engineering construction services for the Infrastructure, Resources and Renewable Energy sectors. As on 30 January 2020, the market capitalisation of the company stood at ~$102.88 million. The company has recently announced that it has been awarded with two packages of work- design and construction contract for approximately $40 million and an Early Contractor Services contract for $1.4 million. The company also updated its shareholders regarding the valuation of Homeground Gladstone accommodation village and stated that it will be revalued from $92.4 million to $85.4 million. This will result in a non-cash pre-tax charge of $7.0 million in the interim results. 

Record Construction & Engineering Revenue:In the recently held AGM, the top management stated that the company witnessed substantial top-line revenue growth of 96% in Construction & Engineering and stood at $659.1 million in FY19. In the same time span, Group EBITDA of the company was $24.1 million.

 
Revenue Growth (Source: Company Reports)

What to Expect: The company is exposed to strong tender pipeline and is focused on the Resources, Infrastructure and Renewable Energy sectors across Australia and New Zealand. It also expects revenue of approximately $700 million in FY20. FY20 margins are anticipated to be similar to H2FY19, but an improvement is expected in FY21 owing to the current higher bidding margins.

Stock Recommendation: As per ASX, the stock of DCG is trading very close to its 52-week low of $0.407, proffering a decent opportunity for accumulation. Over the span of 3 years, the company witnessed a CAGR of 30.26% in revenue and a CAGR of 13.07% in gross profit. During FY19, EBITDA margin of the company witnessed an improvement over the past year and stood at 3.7%, up from 1.6% in FY18. During FY19, net margin and ROE of the company were 2.1% and 6.4%, respectively. On the TTM basis, the stock is trading at an EV/EBITDA multiple of 0.9x, lower than the industry median (Industrials) of 6.4x. The stock is trading at a P/E multiple of 6.860x, lower than the industry median (Industrials) of 10.9x. Considering the current trading levels, CAGR in revenue, improvement in gross margin and decent outlook, we recommend a “Speculative Buy” rating on the stock at the current market price of $0.410, down by 4.651% on 30 January 2020.

 
DCG Daily Technical Chart (Source: Thomson Reuters)
 
 

Mosaic Brands Limited

MOZ Details

Substantial Rise in Revenue: Mosaic Brands Limited (ASX: MOZ) is engaged in retailing of women’s apparel and accessories. As on 30 January 2020, the market capitalisation of the company stood at ~$158.77 million. In the recently held AGM, the management stated that the revenue of the company witnessed an increase of 136.8% and stood at $881.9 million. This was mainly due to the acquisition of the five brands from Specialty Fashion Group. This resulted in a growth of 22% in underlying EBITDA to $45.5 million. The company’s balance sheet is in a good shape and reported net cash of $7.1 million with a positive operating cash flow of $23.5 million. As a result of the strong financial position, the company paid fully franked dividends of 14.5 cents per share. The company has recently announced that perpetual Limited and its related bodies have increased its voting power to 9.08% from 8%.

 

FY19 Financial Performance (Source: Company Reports)

What to Expect: MOZ expects its Underlying Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA) for H1 FY20 to increase by ~13% to $33 million and EBITDA after non-recurring project costs is expected to be approximately $32 million. The Board also anticipates a dividend consistent with the dividend policy of 60-70% of profit after tax.

Stock Recommendation: As per ASX, the stock of MOZ is trading close to its 52-week low of $1.560, offering a decent opportunity for investors for accumulation. Over the span of 4 years, the company witnessed a CAGR of 68.12% in total revenue and a CAGR of 63.76% in gross profit. During FY19, gross margin of the company stood at 56.6%, higher than the industry median of 24.2%. This indicates that the company is managing its costs well and is able to convert its revenue into profits. On the TTM Basis, the stock of MOZ is trading at an EV/Sales multiple of 0.2x, lower than the industry median (Consumer Cyclicals) of 1.3x. The stock is also trading at EV/EBITDA multiple of 2.6x, lower than the industry median (Consumer Cyclicals) of 8.1x. Considering the current trading levels, CAGR in revenue and gross profit, high gross margin and positive outlook, we recommend a “Buy” rating on the stock at the current market price of $1.750, up by 6.707% on 30 January 2020.  

 
MOZ Daily Technical Chart (Source: Thomson Reuters)

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