I was pondering on the back of the result regarding what the...

I was pondering on the back of the result regarding what the next few years will look like for MND and their peers given the crossroads the industry appears to be approaching.


MND have flagged that FY23 is a poor year in terms of revenues due to delays in new construction contracts, as noted above.

But what exactly is causing a delay in the contracts?

My immediate guess was that the way contracts are written is changing, given the nature of the scarcity in labour availability. (I.e components of pricing, inflation and cost pass-throughs need to be considered more carefully).

A new thought occurred - What if MND will lose out on contracts on the basis of price, given that they have the a better and more accurate process of predicting costs (and pricing accordingly) than their peers?Fleshing this out -

We know that labour in the industry is scarce. Pricing of contracted work will rise as a result of supply-side economics.

MND are the dominant player domestically. They have better processes and oversight on their future costs and therefore haver more discipline in pricing contracts than peers.

There's a chance that MND's peers have poor visibility on future costs and undercut MND's contract pricing forcing them to lose out on contracts to smaller players domestically. This would create a short/medium term headache to MND earnings. Perhaps this is the causing the delay in new projects and contracts being awarded as miners assess the options they have.

Given the stock is on ~25x P/E on FY23(e), the market appears to assume that MND will win those contracts for FY24 and beyond. The risk to reward appears asymmetric to the downside in my eyes.