Macmohan Holdings Limited

MAH Details

Material Updates & 1HFY22 (Ended 31 December 2021) Results: Macmohan Holdings Limited (ASX: MAH) is a mining services provider with projects such as Batu Hijau, Byerwen Coal Mine, Deflector, Mt Morgans, Tropicana Gold Mine, and others in hand.

• CAI (Calidus Resources Limited) recently declared the completion of the commissioning of the processing circuit and the first gold pour from its Carbon in Leach (CIL) Circuit at the Warrawoona Gold Project. MAH provides contract mining services to CAI.
• 1HFY22 witnessed contract extensions across surface mining and underground mining divisions. The surface mining division secured ~$220 million new contract award for the Warrawoona project from CAI.
• Revenue increased by ~24% Y-o-Y from ~$652.5 million in 1HFY21 to ~$809.7 million in 1HFY22, led by new projects such as Gwalia, Dawson South, Foxleigh, and Civil West.

The Growth Trend of Underlying EBITDA; (Analysis by Kalkine Group)

Key Risks: The company faces the risk of commodity price changes, award of new projects, adverse macro conditions, a tight labour market, and delays in regulatory sanctions.

Outlook: MAH provides revenue guidance of ~$1.6 - ~$1.7 billion, with ~$1.6 billion revenue reported to be secured for FY22. MAH is progressing to develop a diversified scalable business, evolving its pipeline, and investing in multiple technology streams in surface and underground mining operations.

Valuation Methodology: EV/EBITDA 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 ~13.51% in the past three months. The stock is currently trading lower than the 52-weeks’ average price level band of $0.152 - $0.243. The stock has been valued using the Enterprise Value to EBITDA based illustrative relative valuation method and arrived at a target price of low double-digit upside (in % terms). The company might trade at some discount than its peers, considering a high debt-to-equity ratio, and risk of a tight labour market, etc.  For this purpose of valuation, a few peers like MACA Ltd (ASX: MLD), Perenti Global Ltd (ASX: PRN), DDH1 Ltd (ASX: DDH), and others have been considered. Considering the current trading levels, growth in top-line, secured revenue of ~$1.6 billion, an ~$5.2 billion order book, robust tender pipeline across divisions, an indicative upside in valuation, and associated key business risks, give a ‘Speculative Buy’ rating on the stock at the closing market price of $0.160, as of 3 June 2022.

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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