Expected Return Capital growth 22.4% Dividend yield 1.5% Total expected return 23.9% Company Data & Ratios Enterprise value $1,285m Market cap $1,242m Issued capital 200m Free float 23.4% Avg. daily val. (52wk) $1.2m 12 month price range $4.10-7.99
Price Performance
BELL POTTER SECURITIES LIMITED ABN 25 006 390 772 AFSL 243480 DISCLAIMER: THIS REPORT MUST BE READ WITH THE DISCLAIMER ON PAGE 9 THAT FORMS PART OF IT.
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(1m) (3m) (12m) Price (A$) 6.23 6.58 4.25 Absolute (%)-0.3-5.6 46.1 Rel market (%) 0.1-10.1 37.9 Growth momentum to continue… Here’s why In this report, we have reviewed industry and company data that reinforces our earnings growth expectations for MAD. Key points: Australian iron ore production growth: The Australian Government is forecasting growth in Australian iron ore production over FY23-28 at a CAGR of 2.2% pa, ahead of the historical 5-year CAGR (FY18-23) of 1.2% pa. This acceleration in growth would likely generate further expansion in Heavy Mobile Equipment fleets, enhancing R&M demand and component consumption. Metal ore capital expenditures at record levels: Equipment, plant and machinery capital expenditure across metal ore mining is currently at a record (FY24 annualised capital expenditure is $8.7b), significantly exceeding levels reported during the 2012 mining boom. Steadily rising capital expenditures from FY17-23 (from $3.2b to $7.6b) has led to an increase in machine stock, and with higher R&M intensity across ageing fleet, we expect R&M demand will remain robust in the short to medium term. Ability to grow revenue in a declining & low iron ore price environment: As we emphasise in this report, MAD’s Australian segment and Seven Group’s (SVW, Buy, TP$44.30/sh) WesTrac have historically demonstrated meaningful YoY revenue growth during declining and low iron ore price environments. This dynamic is supported by the fact that these businesses are leveraged to mining activity (or production volume growth) in a market that hosts the lowest-cost iron ore producers. We have only considered the iron ore market in our analysis, MAD’s largest commodity exposure in Australia. It is worth noting that current record Australian gold prices and resilient thermal coal prices are expected to support mining activity in those markets. We make no changes to our forecasts and valuation in this report. Investment thesis: Buy; TP$7.60/sh (unchanged) MAD’s near-to-medium term outlook is supported by growing Australian iron ore production and record high A$ gold prices. In North America, we expect a return in strong growth rates as further technicians are mobilised in Canada over FY24-25. Absolute Price Earnings Forecast
