Macmohan Holdings Limited

This report is the updated version of the report uploaded on 20 June 2022 at 3:55 PM GMT.

MAH Details

Company Overview: Macmohan Holdings Limited (ASX: MAH) offers mining and consulting services to the resources sector in Southeast Asia and Australia.

Latest Updates: MAH recently advised that one of its clients, Dacian Gold Limited (ASX: DCN), will discontinue the current mining operations at the Mt Morgans gold project after the close of FY22. Henceforth, MAH expects no impact on its FY22 earnings and revenue.

Ramp-Up of New Contracts Drives 1HFY22 Results (Ended 31 December 2021):

Growing Trend of Half-Yearly Revenue; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of commodity price changes, customer base expansion, COVID-19 challenges, and regulatory hurdles.

Outlook: MAH expects to generate ~$1.6 billion - ~$1.7 billion in revenue in FY22. It expects a more robust performance in 2HFY22 Vs. 1HFY22 and margin improvement as the newly commenced projects move out of the start-up phase.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company’s NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation: The stock of MAH gave a negative return of ~25.71% in the past three months. The stock is currently trading close to its 52-weeks’ low level of $0.130. The stock has been valued using the Enterprise Value to Sales based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at a slight discount than its peers, considering the higher debt-to-equity ratio and COVID-19 disruptions, etc. For this purpose of valuation, a few peers like Perenti Global Ltd (ASX: PRN), NRW Holdings Ltd (ASX: NWH), and Mitchell Services Ltd (ASX: MSV) have been considered. Considering the current trading levels, growth in top line, new contract awards, ~$5.2 billion order book in hand, an indicative upside in valuation, and associated business risks, we give a ‘Speculative Buy’ rating on the stock at the current market price of $0.135, as of 20 June 2022, 10:50 AM (GMT+10), Sydney, Eastern Australia.

Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

MAH Daily Technical Chart, Data Source: REFINITIV 

 Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

Technical Indicators Defined: -

Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the stock prices tend to find resistance when they are rising, and uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.

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