General MCE discussion, page-3

[10/09/23 The Mercury ]


MoneyTalks: Speculative Buy on MCE as oil drills pick up; GNG could profit from energy transition

Euroz Hartleys reckons it may be worth taking the plunge into this Matrix, while Taylor Collison is eyeing an engineering outfit. Welcome to MoneyTalks.
Eddy Sunarto

3 min read
October 10, 2023 - 8:11AM
Stock head
Stock head



MoneyTalks is Stock head’s regular drill down into what stocks investors are pondering right now. We’ll tap our extensive list of experts to hear what’s hot, their top picks, and what they’re looking out for.
Today we hear from Euroz Hartleys and Taylor Collison

Euroz Hartleys has initiated coverage on advanced materials manufacturer, Matrix Composites and Engineering (ASX:MCE), with a Speculative Buy recommendation and a price target of 45c (versus its price of 26c on Tuesday morning).

MCE is a West Australian-based manufacturer of specialised buoyancy modules, predominantly used for deep sea drilling rigs and exploration – with EH expecting business to keep picking up.
Matrix has three key divisions, which the company defines as:

• Subsea Buoyancy (77 per cent FY23 revenue) – SURF, Deep water drilling and well construction and offshore wind,
• Corrosion Technology (20 per cent FY23 revenue) – Anti-corrosion coatings and application (orders largely recurring),
• Advanced Materials (3 per cent FY23 revenue) – Material solutions for renewables, defence and resources industries.

The company also boasts a 22,000 sqm facility in Henderson, WA, which has the capacity to produce buoyancy modules worth in the region of $240-$250 million per annum (operating 11 months per year).
Euroz believes that after a period of global under-investment in the oil and gas sector, the outlook looks set for a period of strong demand for MCE products.

Various forecasts suggest that activity in the oil and gas sector will increase consistently through to mid 2030s.

In addition, Matrix could capitalise on the huge growing demand for offshore wind over time. In Australia, this segment is expected to pick up rapidly following the announcement of offshore wind projects aimed at adding 48GW of power supply.

The company could also diversify its revenue base through the emerging advanced material segment, where it has partnered with the likes of FFI, RIO Tinto and Woodside Energy for manufacturing trials.

On the financials side, Euroz forecast that Matrix could break even by FY24 based on the company’s $70 million of buoyancy orders. (These modules provide the necessary buoyancy to drilling risers, ensuring they remain upright and do not collapse under their own weight or that of the drilling mud)….
Etc