Date of Data Capture: 2/5/2019
Name: MACA LTD (MLD)
Classification: Mining Support Services
Current Price: $1.05
Market Capitalisation: $276 M
Forecast EBITDA Growth: 38.16%
Yield Estimate: 4.27%
Consensus Price Target: $1.39
# Covering Analysts: 3
Discount at Current Price: 32.38%
Price Target Trend (3-Month): Up +12.5%
Signal Timeframe: Quarterly-Monthly-Weekly
TrendBias: Up-Down / Long-Medium
Focus: (Dividend Income) & Capital Growth
Set up Notes:
· MACA is prone to huge price swings played out over multi-year cycles and here it looks like it could be entering into a major uptrend with price breaking through major resistance structures and forecasting showing good growth potential.
· Performance has been mixed with steady sales growth since 2016 at odds with earnings declines in 2018 (and expected for 2019) before strong profit and margin growth returns next year, with this recovery continuing out to 2021.
· Pricing and timing needs to be followed closely with MLD due to its extreme volatility, but here we see excellent signal correlation in the long-term showing a high probability for further gains as the stock breaks through linear and dynamic resistance after breaking back above $1 in April.
Support ($): 1.00, 0.95, 0.90 & 0.80.
Resistance ($): 1.10, 1.20, 1.50 & 1.90.
Growth Focus: MACA LTD (MLD)
The primary focus is capital gain - stocks are selected from the ASX Top 500 All Ordinaries Index.
Steep falls don’t always mean deep value but after declining for most of 2018, we see value in mining support services company MACA Ltd as it firms up, with fresh strength being shown since the start of 2019. This price resurgence combines well with excellent forecasting and an exciting technical setup, and we think the recovery has further to run as they continue digging themselves out of a hole.
Listing on the ASX late in 2010, mining support services contractor MACA operates primarily in Australia with some secondary operations in Brazil, providing mining and civil infrastructure services. With operations ranging from mining, crushing and construction services and covering a range of commodities, MACA works with large and small clients, ranging in size from corporate giants like BHP to developing growth prospects like Pilbara Minerals. While MACA has been successful in extending long-term contracts, it is also winning new business and should benefit from the broader market recovery in the mining sector generally and we expect this growth/recovery trend to continue.
The key metric in recovery plays is improving earnings and we like forecasts showing a strong expected increase in revenue and profits in 2020 and out to 2021. Context is important and there remains good potential for a strong return to earnings growth after a softer 2018 saw earnings slide on weaker margins and profits. There are definite signs of strength with consistent sales growth since 2016 set to continue higher and should be a main driver of recovery as margins are expected to begin recovering this year and continue higher into 2021 - setting up a significant bounce in EPS from the lows expected from 2018 and 2019.
The market tends to be forward looking and we can see these more positive expectations beginning to be revealed in fresh share price strength with pricing breaking through important linear and dynamic resistance barriers over the last few months. This sets up higher historical price targets and we see excellent long-term correlation and while we expect some volatility we do see positive momentum signalling also coming through here in the short to medium timeframes and we believe MACA should continue to unearth good value from here.