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Mining Services Stocks

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FGE under 4 dollars today.

Mining services are getting slaughtered.

Sooner or later FGE is going to be a very good buy.

The downward trend has so much momentum that it could go down to ridiculous levels.

I am waiting on this one who knows how far it will drop with sentiment going so far against mining services companies. Maybe 2 dollars or less?
 
odds-on said:
Ha ha ha.......my investment criteria is based on looking for companies that are not going bust (and are cheap), simply because it is easier to predict bankruptcy than earnings. If a company does not go bankrupt, what is going to happen? It is going to stay in business!
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That is silly because with those spectacles you have forgotten about opportunity cost - the best foregone alternative...

Far better to sit in cash and ready to seize on the better opportunity.

When I say opportunity cost here I don't just mean economic cost but also mental cost (in terms of stress or barely conscious shifts to decision making) of having money tied up doing nothing.
 
Intrinsic Value said:
FGE under 4 dollars today.

Mining services are getting slaughtered.

Sooner or later FGE is going to be a very good buy.

The downward trend has so much momentum that it could go down to ridiculous levels.

I am waiting on this one who knows how far it will drop with sentiment going so far against mining services companies. Maybe 2 dollars or less?
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Yes there should be some opportunities in this sector sooner or later, I would prefer to pay a price as close as possible to NTA however.

I must admit to not being able to get my head around UGL, the debt bothers me and I can't understand any advantage they have over other businesses in property management. I have been meaning to have a look at CDD for a while now, I don't think they have too much exposure to mining services but have been sold off anyway.
 
robusta said:
Yes there should be some opportunities in this sector sooner or later, I would prefer to pay a price as close as possible to NTA however.

I must admit to not being able to get my head around UGL, the debt bothers me and I can't understand any advantage they have over other businesses in property management. I have been meaning to have a look at CDD for a while now, I don't think they have too much exposure to mining services but have been sold off anyway.
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I am not a fan of UGL and they wont get any of my money. They are run by cowboys imho. Construction mentality.

On the other hand FGE is looking good. I had a look at their investor presentation today and 65 percent of their revenue is from power contracts and 25 percent related to iron ore so it is not as exposed as other companies to commodity prices and China. Further their outlook for 2014 is currently around 500 odd million which is less than they have at the moment but there is also plenty of time for them to win more contracts. And as long as they can effectively reduce costs with a reduced revenue which l believe they can then they are looking good. They also have 187 million in the kitty and that positions them well for acquisitions at bargain rates should something interesting come along. If the management continues to be good then FGE will keep getting better slowly over time.

While the whole sector is being market down it is just a waiting game now to pick the better stocks when this downward momentum settles down.
 
Have to agree that FGE is looking good - maybe a little better than good :2twocents.

At a SP of $3.90, the market is valuing the company at $336M. As of Dec 31 2012, they had $187M in cash.

Their order book had them fully sold to make $1B in revenue and about $70M in profit for 2013, giving an EPS of around 80c per share. Given that their 2014 year has about $850M already sold following their recent $290M contract win, worst case is they have no growth 2014 and make about 80c per share.

DYOR but you now are able to pick up a profitable $1B annual revenue company at a PE of 2.

Unless you believe that they will go out of business in 2015, or make a stupid capital decision with the cash, risk/reward equation seems attractive.

Disclosure: already a holder and happily adding
 
Intrinsic Value said:
I am not a fan of UGL and they wont get any of my money. They are run by cowboys imho. Construction mentality.
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Perhaps. But they've got a pretty good board member in Robert Denham. He is the guy Buffett picked out to run Salamon for him and who advised him on his investment in Goldman. Before that he ran Munger, Tolsen & Olsen (Charlie Munger's old law firm) where he is still a partner. He also sits on the board of Oaktree Capital, run by Howard Marks. He's no dummy and I doubt he would associate with corporate knaves.:2twocents
 
McLovin said:
Perhaps. But they've got a pretty good board member in Robert Denham. He is the guy Buffett picked out to run Salamon for him and who advised him on his investment in Goldman. Before that he ran Munger, Tolsen & Olsen (Charlie Munger's old law firm) where he is still a partner. He also sits on the board of Oaktree Capital, run by Howard Marks. He's no dummy and I doubt he would associate with corporate knaves.:2twocents
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I dont know about Robert Denham but I do know the culture that was there when I was involved with them back in 2008-09 and they blew lots of money on their customer projects with Woodside, BHP etc.
 
Intrinsic Value said:
I dont know about Robert Denham but I do know the culture that was there when I was involved with them back in 2008-09 and they blew lots of money on their customer projects with Woodside, BHP etc.
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Fair enough. FWIW, the mining services side of the business is of little interest to me, I'm all about the property!:)
 
This from business spectator

The Bureau of Resources and Energy Economics has put some numbers around the likely fall off in resources investment and they aren’t pretty.

On the bureau’s analysis, the likely scenario for investment in resources and energy is that it has already peaked, at about $268 billion last year, and will start falling quite sharply from next year before tailing off to only about $25 billion in 2018, roughly around the levels experienced in 2007.

Read more: http://www.businessspectator.com.au...dgy-brakes-see-mining-miss-peak#ixzz2U7FLwenj
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AZG suspended itself today. It's been living on a credit card for some time...
 
I was watching Your Money Your Call tonight and there was an email from a viewer asking whether FGE would be a good medium term buy.

And one of the experts Michael McCarthy was saying that UGL , Transfield and Forge were all in trouble and that they may not be around in a few years time because there would be consolidation in the sector and they probably wouldn't survive.

Now I might agree with him on Transfield but these guys know nothing of the fundamentals of FGE. With 187 million in cash and forward contracts for the next year I don't think they are going anywhere.

I also think t hey are dead wrong on UGL as well because UGL is a lot more than a mining services company. They have power, maintenance, real estate etc
 
Five months later and we know that economic conditions in Aust have not improved. They may be deteriorating at a slower pace but there are no signs yet of a turnaround. The mining sector has been suffering for a while now and I was expecting to seeing some signs of increasing demand in this sector at this time of the year. I was wrong with ASL, FGE and now WOR announcing massive falls in profit and poor outlooks.

This once fav sector of mine has become a definite no-buy, no hold zone.
 
peter2 said:
Five months later and we know that economic conditions in Aust have not improved. They may be deteriorating at a slower pace but there are no signs yet of a turnaround. The mining sector has been suffering for a while now and I was expecting to seeing some signs of increasing demand in this sector at this time of the year. I was wrong with ASL, FGE and now WOR announcing massive falls in profit and poor outlooks.

This once fav sector of mine has become a definite no-buy, no hold zone.
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I currently hold NWH, MIN and MLD. NWH for income, MIN and MLD as a growth oriented income stocks. I'm don't know whether I will own MIN and MLD at the end of the week but I think those companies have decent balance sheets and outlooks. I think it is important to distinguish between those companies where service mine production versus mine construction. There is an awful lot of dirt being blast, dug and moved about these days.
 
So_Cynical said:
I continue to restrain myself...the spend wont actually peak for another 6 to 8 months.
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Hi So Cynical,

Are you continuing to restrain yourself? I am starting to form the view that this sector needs a few more companies to fail and then it will be like shooting fish in a barrel, what are your thoughts?

Cheers
 
odds-on said:
Hi So Cynical,

Are you continuing to restrain yourself? I am starting to form the view that this sector needs a few more companies to fail and then it will be like shooting fish in a barrel, what are your thoughts?

Cheers
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Yes still in restraint mode somewhat concerning Mining services stocks...there have been in and out opportunity's over the last 12 months and there will be over the coming 12 months im sure, personally i have done a successful super fund in and out with EHL as the stock interests me, everything else im very wary of.

I suppose its the big guns that should be getting most of our attention...i have them all in a 15 month old watchlist and have come to the conclusion that at least half of them appear to be ranging and tradable, i reckon some of them have seen bottom, just don't know which ones. :)

Thinking about it one should probably be building a position into 2 or 3 favourites.
 
Trade in and out is the way to go for these guys, next 24 months doen't look good with BHP fired the first shot in house their service and take control of the whole cycle rather than contracting to service providers, if RIO and other miners follow look out below. See why MLD management cashing out with the special dividend play :)

I have a few favourite with solid balance sheet I trade in and out...even with that short of balance sheet things can turn ugly quick.

the whole sector need to be in a single digit PE to compensate for the extreme risk
 
If you were going to trade stocks then there are better sectors to go long in then mining. You may even find mining a reasonable sector to short in a market down turn.
 
Am I the only one to see early signs of demand in this sector?

There are certainly more dogs than darlings. I'm interested to see the two big names, MND and WOR climbing off recent lows. Both stocks have gone XD and yet their prices are being bid up.
 

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