Ouch... the wound can't stop gushing at SDM :(I took a small...

Ouch... the wound can't stop gushing at SDM :(

I took a small position this week.
Market appears to be freaking out of the 20% reduction in order book (Dec-11 to Jun-12) down to $474m. However, my instinct (hope?) is this was a little bit unkind to the company, as a few projects were delayed, and it is only a snapshot as at June 30.

Closure of Blair Atholl by Rio is a worrying sign, but at least it will not impact SDM in FY13 (as they get a termination fee).

Company is forecasting a flat FY13 result (EPS 20c), would be pretty awesome if they could pull this off, but I think would obviously still require a few project wins pretty soon.

So what is to like about SDM?
Significant margin improvement in FY12 under new CEO - company expects these can be maintained.
Still left with $50m net cash after paying 6.5c dividend in Sept.
50% marketshare in Australia (CHPP specialist, not trying to do too many different things)
Capital light. Companies investment in PPE is primarily in dozers/diggers etc (which can be transported to different projects) do not own any CHPP plants (difficult to relocate).

There is some concern over Leighton... looking to sell off some of its assets, but their official view (subject to change of course) is that Segman is a core business, more likely to ditch MAH, which has a weaker operating history.


Mike, I'd really like to know your viewpoint on the current coal spot price. At what point will most mines in Aus be typically unprofitable? Would you consider $100/t to be a major risk? Or $80/t!?