General | Feb 05 2006
Buying a stock on the way down is sometimes described as trying to catch a falling knife, but it can also simply be an opportunity if a stock is out of fashion for whatever reason.
Intersuisse suggests the latter is the case with Monadelphous (MND), which has fallen from around $7.00 to current levels of closer to $6.50. This is despite the company winning its largest-ever single construction contract with BHP Billiton (BHP) last month, a deal the broker estimates is worth up to $180m in revenues.
Management at the time indicated the contract would all but ensure the construction division recorded higher revenues in FY07, a view shared by the broker. In its view the outlook remains strong, as on its estimates the company’s EPS will grow from 20.9c in FY05 to 32.9c this financial year and 38.9c next year.
This expectation of ongoing strength in the mining infrastructure sector supports the broker’s Buy rating.
In the FN Arena database only one broker and equity researcher covers Monadelphous, rating the stock as Accumulate.
The last closing price for MND was $6.59.
