I often refer to the 'macro' when commenting re MND because its...

I often refer to the 'macro' when commenting re MND because its effect is amplified when considering contractors. We've had two exceptional booms here in Oz during past 20 yrs. First the iron ore boom from 2003-2008. FMG were starting construction and with IO price 4x that of ten yrs earlier... RIO and BHP were pedal to the metal. The potential profits were so huge wages for tradies more than doubled and truck drivers... some without a licence were getting 160k plus all expenses.

MND joined in and setup a JV factory in China making modules. Mines were desperate to expand production AFAP and construction contracts were 'cost plus'. MNS SP soared and hit $16.40 early Sept 2008. GFC struck and everything collapsed.

But with China willing to spend its way out of any slowdown IO prices began climbing very rapidly from USD60 in 2009 to an all time high of USD191.90 in February of 2011. MND churned out modules and SP flew from $6 to a peak of $26 in Feb '13. But it wasn't just MND. Contractors across the board saw massive rise in margins and the IO boom was back. Gina kicked off Roy Hill and China ploughed some 14B into a magnetite mine which is unlikely to ever make a profit.

But what made the 2nd boom a once in a lifetime occurrence was the simultaneous expansion in oil/LNG production. These projects dwarfed those of the IO boom and totalled over $300 Billion with Gorgon alone blowing out to 70B. Unprecedented. Once again contractors held most of the cards.

But now the IO mines and LNG projects are just about completed with Itchys due to finish up mid year. Many contractors have seen revenue more than halve and some have disappeared. MND diversified into maintenance and civil work. But the overall pie has shrunk substantially and now miners and oil companies hold most of the cards. Contracts are keenly contested and margins won't recover.

Takeaways:
a) The collapse in mining/energy CAPEX is massive by any measure.
b) Contractors have a level of control over their costs but have no control re the macro environment and are strongly affected by it... more so than companies in other sectors.

It's often said the sharemkt thinks 12 months ahead, but has Mr Mkt done the sums on what FY19  revenue is likely to be? Various Oz govts are still pouring money into renewables and MND is placed to win some of it. Otherwise, despite gains in efficiency, FY19 will be leaner than current FY.  Given the circumstances an SP of $15.55 is high. Yet everything outlined above was well known back in late Nov '17 and the SP hit $19.80! Was it 'irrational exuberance'?