Date of Data Capture: 8/2/2019
Name: AUSDRILL LIMITED (ASL)
Classification: Mining Support Services
Current Price: $1.42
Market Capitalisation: $972 M
Forecast EBITDA Growth: 82.49%
Yield Estimate: 5.3%
Consensus Price Target: $2.10
# Covering Analysts: 7
Discount at Current Price: 47.89%
Price Target Trend: Flat-Decreasing
Signal Timeframe: Monthly-Weekly-Daily
TrendBias: Up-Down / Long-Medium
Focus:(Dividend Income &) Capital Growth
Set up Notes:
· Strong performance has driven the price recovery of ASL, and despite recent falls, we expect this to continue with excellent forecasting and a strong technical setup signaling further upside gains.
· Earnings were up almost 30% last year on strong sales growth and improving margins, this is set to continue with further aggressive growth being forecast out to 2021.
· Price targets have been chasing the stock lower through the recent decline, even though the consensus sentiment is strongly positive and the discount to current pricing is very large.
· We have multi-timeframe buy signals combining well with major resistance breaking last month.
Support: $1.40, $1.20, $1.10 & $1.00.
Resistance: $1.50, $1.60, $1.80 & $2.00.
Growth Focus: AUSDRILL LIMITED (ASL)
Our primary focus here is capital gain, we will select our stocks from the ASX Top 500 All Ordinaries Index.
When you find yourself in a hole... keep drilling. While not normally the best advice, we are happy to see it work here as Ausdrill continue the strong recovery of the last few years, backed by strong performance and excellent forecasting.
Established in 1987, Ausdrill is now a diversified international drilling and mining services company operating in Australia, India, Africa and Europe for clients like Regis Resources, Hidustan Zinc, Western Areas and Consolidated Minerals. Specialising in open-cut and underground contract mining, ASL offers equipment & supplies, diamond drilling, grading, drill & blast, analysis and logistics.
The company has been on a steady recovery path, bolstered by improving market conditions, strong organic performance and an active acquisition strategy. A focus on high quality investments is well reflected in the aquisition of Barminco late last year, with the company being the recipient of the $113M Rosemont Gold Project contract just last month.
Improving fundamental performance and earnings growth (up 30% last year) has been the key driver behind the ongoing price recovery and this is set to improve further with strong forecasts for sales and margin growth out to 2021. We see demand staying steady to strong, with expected valuations in line with projected contract wins, extensions, and a decent pipeline of new business.
Analyst sentiment is similarly rosy with majority positive consensus price targets offering a steep (40%+) discount to current pricing. It is worth noting that the favourable overall outlook has not changed much, with targets being reduced by only 20% during the 60% price decline that began nearly a year ago.
Unsurprisingly, ASL has a volatile price history that needs to be timed to best advantage. We are following our well-correlated longer-term momentum signal and are looking to enter the stock after price broke through linear resistance last month, after bouncing off a good support to build a recovery base just above $1.00. While there is some structural resistance just above current pricing at $1.50 - with some longer-term dynamic resistance around $1.60 - the more interesting resistance targets stretch higher towards the highs of $2.50 reached only a year ago.
We like the sector, the story and the chart here as we follow positive multi-timeframe buy signals and look to catch a break above $1.50, and although we expect price action to remain volatile, this could become a great core investment.