Investment Matters

Company News: Insiore, Emeco and quarterlies

NSL Consolidated Limited officially changed its name to Indiore (IOR.ASX) to better align its underlying business and company name.  Further, the company announced plans to accelerate the Phase 3 expansion post the capital raising in May 2018 for this purpose.  Phase 3 remains the company’s primary focus as it is the key to unlocking the latent value in the business.  This acceleration brings the timetable forward three months, and also allows for an element of derisking, in that access to the construction area is simpler and better phased. When complete, Phase 3 will allow Indiore to produce strong profits and we expect the company will need to pause any further growth plans until such time as the market better appreciates the businesses value.

 ***

Emeco announced its Q4 trading update.  Emeco continues to trade strongly with FY-18 EBITDA of A$153m, up +83% on FY-17. 4th quarter EBITDA was up +10% on Q3 to A$45m. This Q4 EBITDA run rate equates to A$180m, which would be up +17% on FY-18, and is before the recent Matilda acquisition.  Combining Q4 FY-18 run rate and the Matilda earnings will take the FY-19 EBITDA through $200m. Further, Emeco continues to deleverage with net debt to run rate EBITDA now at 2x.  We expect at some stage Emeco will either pay off all its debt or refinance to a much cheaper facility (it is still paying 9.25%p.a. interest on its debt).  We continue to believe that the recovery phase for the mining equipment market is at best only at the halfway mark, and with most of Emeco's contracts rolling in FY-19, the bulk of the uptick is still to be seen for this business.

 ***

Both BHP and South32 delivered their quarterly production updates. Both were very well received by the market, with BHP, in particular, the standout in every major class of resource (except oil) with higher tonnes produced for the year.  BHP remains on track with its cost guidance which means that higher production, given higher commodity prices (than a year ago), will boost profit strongly in FY-18.