MND

Given that the very high quality companies are, in many instances, outrageously valued, there are some “tier 2” companies that are of broadly decent quality, but are attractively priced.

MND has hairs, in that the borders are shut, impacting FIFO workers.

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It is a capital light developer and contractor (engineering and maintenance) that on occasion gets a little ahead of itself (see periods of substantial premium to book below).

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Currently, those shares are deeply depressed, as projects, revenues, and margins bounce around due to COVID (WA hard border w/ everyone else).

The washout from large LNG projects finishing up in 2012-15 ended, and the recovery (on the newly rebased earnings) was underway, until the pandemic.

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Cashflows are generally good.

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And consider how well this contrasts to say a business like Leighton’s.

Mono’s are net cash.

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Again, not totally for the faint-of-heart. Deferred projects can easily slide from one quarter to the next, and we really don’t know how margins will fare given the productivity of worker mismatch due to the border logistics.

Earnings uncertainty is accordingly quite high.

But overall, the business is good at what they do, are cheap, and that balance sheet strength gives one the confidence that they can ride out the shorter term vol / uncertainty, and has a vague tailwind from LNG FID’s + high commodity prices driving capex.

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.

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