re- when will sp reflect earnings growth?, page-4

from latest ord minnett note on idl


More Positive News From China...

Industrea Limited (IDL) has announced new Chinese orders totalling $22.2m.

The new orders included:

o $19.5m for eight AMT Drill Guidance Systems (DGS); and

o $2.7m for two IME 40 tonne roof support carriers.

These orders again highlight IDLs ability to consistently win new business in China and the quantum maintains IDLs sales run rate of ~$10m per month.

This will take the installed base of AMT gas drainage systems to ~87 globally (~67 in China) post delivery which builds on the critical mass that IDL has accumulated to support what is becoming a large scale spare parts business.

Encouraging aspects of the release were the increase in repeat orders from Jincheng (now has 18 DGS systems) and the addition of Fu Yan as a new customer which has come about by leveraging existing relationships.

The announcement also included a small bolt on acquisition of a Chinese based manufacturing business. While not a significant (or material) expense it allows IDL to better execute on its strategy of delivering PJB vehicles in China at a lower price point that is more acceptable to IDLs Chinese customer base.

Ord Minnett (OM) remains of the view that IDL will comfortably achieve its FY10 guidance of an adjusted NPAT of between $48m-$54m (OM $52.1m).

The DCF valuation remains unchanged at $0.61 per share (WACC 13.9%).

IDL continues to trade at mid-single digit multiples (FY11 PER of 5.2x). OM expects that this discount to market will be eroded over time particularly post final resolution of the convertible bond and post the refinancing of the existing debt. OM continues to recommend IDL as a BUY.