Date of Data Capture: 10/10/2016
Name: DECMIL GROUP LIMITED (DCG)
Classification: Construction & Engineering
Current Price: $1.09
Market Capitalisation: $179M
Forecast EBITDA Growth: 43.43%
Gross Yield: 3.32%
Consensus Price Target: $0.86
# Covering Analysts: 2
Premium at Current Price: 21.1%
Price Target Trend: Increasing
Signal Time Frame: Monthly-Weekly
Trend Bias: Up-Down Long-Short
Short-term: Positive Neutral
Focus: Dividend Income & Capital Growth
Set up Notes:
• DCG looks to be in the early stage of a major trend reversal with improving fundamentals and while volatility will be significant so too will the returns if the call is right.
• Good long-term signalling has had our eye on them for a little while now and with the break of $1.00 structural resistance as well as linear resistance 2 weeks ago we think it is time to step forward on this trade.
• Some dynamic resistance around $1.12 is yet to be conquered and should provide some short-term volatility as it looks to test its major dynamic resistance target around $1.40. If it breaks that it could well be a longer-term hold.
• Decent support down to $1.00, any bounce off that should be a good buying opportunity, with further support layered down to 80c.
Growth Focus: Decmil Group Ltd
Our primary focus here is capital gain, we will select our stocks from the ASX top 500 All Ordinaries Index.
When you aren’t investing directly in strength you at least should be buying the end of weakness. Here we are looking to climb the latter to success with construction engineer Decmil Group Ltd (DCG) as they continue digging themselves out of a financial black hole with strongly improving fundamentals and an exciting technical blueprint.
First breaking ground in Perth 1979, Decmil has grown to be a significant player in the fields of engineering, construction, design, fabrication and maintenance. Accordingly their share price experienced as many up and downs as the business they practice, but with the price and performance of the company continuing to improve we believe they are currently building towards a greater recovery.
While they do pay a significant dividend right now we prefer to treat this stock as a recovery growth play and look to recent contract wins and strategic acquisitions to back excellent forecasts as Decmil engineers a return to robust earnings and excellent forward growth potential. We have to note that while current pricing has them rising above their present consensus price target by around 21%, those aggregate price targets rose by a similar 21% in the last two months alone.
Improving fundamentals do indeed put solid foundations under this stock, but really we are looking for clear technical signalling with high correlation to give us confidence that they are really bridging the gap to further price growth. And we have that here in spades.
The long-term trend began signalling a positive reversal back in June 2016 and was soon followed by a shorter-termed rally into August before successfully retesting that breakout in September. Waiting for the medium-term downtrend to complete lasted until a week ago when that signal turned positive while the price broke through important structural resistance at $1.00 and dynamic resistance sitting closely overhead at $1.02. While there will be volatility during the emergence of this uptrend, the potential here is easy to project going ahead.
Looking back at their price history you can survey a company that falls deeply before making arching rallies in recovery. We believe this could be happening again with previous similar long-term (monthly) buy signals preceding rallies of around 500% in 2009, 100% in 2010, 40% in 2012 and 50% in 2013 – with each one of these rallies following steep falls. And right now they seem to be emerging from their largest collapse in price to date.
There does remain some dynamic resistance currently layered around $1.40 which will be hardened by structural resistance set in place back in 2013 and 2010 - but these levels should also act as natural targets. With this background, combined with sturdy fundamentals supporting exciting technical signalling the time is now to back Decmil as they look to rebuild shareholder value.