PBT guidance at the light end FGE recently provided FY12e PBT guidance of ~$70m on sales of ~$770m, an uplift of 23% and 80%, respectively. While the sales guidance was ahead of our forecast of $700m, PBT fell short of our previous $74m estimate. We understand that there are some one off charges associated with the result, with more detail around these to be disclosed in the full accounts (Due 15th August). While short of expectations the preliminary results indicates 50% growth in 2H12 profitability to record levels and we expect this momentum will be carried into FY13e, with an exceptionally high level of work under contract and potentially large packages yet to be awarded at Roy Hill. Changes to forecasts We have downgraded our FY12e PBT to $70m (prev. $74m) to be in line with revised guidance, however, there has been no material change to our PBT forecasts in FY13-14e. We have also adjusted our tax assumptions to more accurately reflect the treatment of identifiable intangibles. This combined with movements in PBT outlined above has resulted in cuts to our NPAT forecasts of 7.6% in FY12e, 3.6% in FY13e and 3.1% in FY14e. Our target price has also come back to $6.30ps (prev. $6.90ps) as a result of the changes. Investment view: Buy retained As a relatively early cycle exposure in the mining service sector FGE has retraced 35% from its March highs. At current share price levels the stock is trading on a cash PE of 6.3x FY13e and EV/EBITDA of 3.2x, undemanding in our view. A solid presence in the power segment (~25% of net FY13e revenues) and exposure to a developing West African gold sector suggests a degree of insulation to a slowdown in domestic mining investment. FGE remains in a strong net cash position while generating a high ROE (20%+) and we retain our Buy rating with a $6.30ps target price.
FGE Price at posting:
$4.65 Sentiment: LT Buy Disclosure: Held
