- Exit SYD
- Add MND
We’ve had a good run of corporate activity driven stockpicking of late.
A consortium led by IFM has tabled a 42% premium to VWAP for Sydney Airports, and as such, our thesis is largely played out. So we are taking profits on the stock and reinvesting in Monadelphous Group (MND).
Pleasingly, SYD joins Altium, Crown, and IRESS as four stocks that we’ve bid farewell from our portfolios as a result of corporate activity.
Our full investment thesis and stock story pack will be sent separately to our clients, alongside all downstream documentation (SoA/RoA text, commentary, portfolio positions etc). However we table a few high level graphs here.
- Good quality mining services company, capital light, with strong cashflows
- Provides a material exposure to infrastructure related revenues, and to relatively stable maintenance volumes
- Very attractive valuation, with low expectations, on bottom of the cycle margins
- Strong balance sheet (net cash)
- Provides good exposure to Quality and Value factor premia
MND is a very capital light business, and doesn’t require much in the way of incremental capex to grow the business. That tends to mean that Monadelphous generates good free cashflows, which is an attractive quality.
MND’s recent project wins, and the modest unwind of COVID-related project deferrals, saw revenues start to trend higher, enough that our econometric software can detect a positive direction, which suggests that the operational outlook appears reasonable.
MND trades like Quality, and Value, which is attractive to our investment approach. Note, however, that the stock appears to have little statistical factor loading to Min Vol, which is a little misleading. We’d suggest MND is a beta + story, that does well when the economy, markets and the AUD (as a function of global risk appetites) does well.
Important Information: This document has been prepared by Aequitas Investment Partners ABN 92 644 165 266 (“Aequitas”, “our”, “we”), a Corporate Authorised Representative (no. 1284389) of C2 Financial Services, (Australian Financial Services Licensee no. 502171), and is for distribution within Australia to wholesale clients and financial advisers only.
This document is based on information available at the time of publishing, information which we believe is correct and any opinions, conclusions or forecasts are reasonably held or made as at the time of its compilation, but no warranty is made as to its accuracy, reliability or completeness. To the extent permitted by law, neither Aequitas nor any of its affiliates accept liability to any person for loss or damage arising from the use of the information herein.
Please note that past performance is not a reliable indicator of future performance.
General Advice Warning: This document has been prepared without taking into account your objectives, financial situation or needs, and therefore you should consider its appropriateness, having regard to your objectives, financial situation and needs. Before making any decision about whether to acquire a financial product, you should obtain and read the relevant Product Disclosure Statement (PDS) or Investor Directed Portfolio Service Guide (IDPS Guide) and consider talking to a financial adviser.
Taxation warning: Any taxation considerations are general and based on present taxation laws and may be subject to change. Aequitas is not a registered tax (financial) adviser under the Tax Agent Services Act 2009 and investors should seek tax advice from a registered tax agent or a registered tax (financial) adviser if they intend to rely on this information to satisfy the liabilities or obligations or claim entitlements that arise, or could arise, under a taxation law.