Date of Data Capture: 30/1/2018
Name: GR ENGINEERING SERVICES LTD (GNG)
Classification: Mining Support Services
Current Price: $1.47
Market Capitalisation: $182M
Forecast EBITDA Growth: 52.54%
Yield Estimate: 6.85%
Consensus Price Target: $1.84
# Covering Analysts: 1 (thin coverage)
Discount at Current Price: 25.17%
Price Target Trend: Flat
Signal Timeframe: Monthly-Weekly-Daily
Trend Bias: Up-Down / Long-Short
Indicators:
Short-term: Positive
Medium-term: Positive-Neutral
Long-term: Positive-Neutral
Recommendation: Buy
Focus: Dividend Income & Capital Growth
Set up Notes:
· GNG fell 75% from 2011 to 2013 before staging a 300% recovery through to 2016. They have since cycled through a minor 30% consolidation (ending late 2017) and now look to be staging a greater recovery here.
· Fundamental performance has been steadily improving across sales and margins, though profits were softer last year (reflecting their decline in price) but carry forecasting of improving earnings growth through to 2020.
· Technically positive they look exciting here with good momentum seen across multiple timeframes, and this combines well with linear resistance breaking earlier this month, lining up resistance targets at $1.60, $1.80 and $2.00, with support layered in at $1.40, $1.20 and $1.00.
Growth Focus: GR Engineering Services Ltd. (GNG)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
Over the last few years the commodities markets have gone through some volatile times (none more than the precious metals) and now with a potential new gold rush building up in Western Australia it could be a good time to look at GR Engineering Services Ltd (GNG) who are well placed to ride this emergent wave and could begin to shine once more.
Founded in 2006 and headquartered in Perth, GNG consults and contracts engineering, design and construction services to the resources and mineral processing industry. With operations stretching from Australia to Africa and Europe, GR Engineering has delivered integrated project services in over 20 countries for a vast range of precious, bulk and industrial commodities, though we see the buoyant West Australian mining sector as being responsible for most of the strong forecasting ahead.
Performance over the last few years has been relatively steady despite some challenging conditions, and even though 2017 saw declines in sales and earnings, forecasts for 2018 are strongly positive and show favourable sales and earnings growth through to 2020. It has to be noted that there is only one analyst covering the stock, but with a growing presence in a recovering industry we are happy to look for unrecognised value and good indirect exposure to a sector with excellent growth potential.
GNG Floated on to the ASX in 2011 around $2 before falling around 80% to build a base of support around 40c by 2013 and then rallying back up to test $2 by 2016. That resistance ceiling held strong and forced pricing back to find support near $1.20 before bouncing back and breaking through linear resistance by the end of 2017. Right now we see positive signalling coming through on multiple timeframes and with price action showing good signal correlation, this sets up an attractive entry with historical resistance targets found significantly higher than current pricing levels.
Due to the often extreme volatility seen within the commodities industries there can be benefits to gaining indirect exposure through mining services companies, and with capex increasing for mining exploration and development we think the tide should continue to carry GNG higher. With steady performance and encouraging fundamental forecasts combining well with a solid technical recovery and attractive longer-term set up we think that with GNG we may just be unearthing a bargain.
