Civil Mining Contractor MACA Share Price Drops 18% On Market Update

This morning, Maca Ltd [ASX:MLD] fell more than 18%, to $1.80 per share.

Why did MACA Share Price Tank?

Investors didn’t think much of MACA’s market update, released this morning. The company said:

To date, revenue has been in line with expectations and MAXA [sic] reaffirms its previous revenue guidance of $560 million for the 2018 financial year.

However, earnings have been adversely affect by under-performing contracts in the MACA Interquip (60% owned by MACA) and Victorian Civil & Infrastructure division with all costs and these projects now recognised.

In consequence, and based on information currently available, the Board anticipates MACA’s EBITDA for the half year to 31 December 2017 will be in the range of $39-41 million and net profit after tax of $10-12 million.

Compared to their 2016 half yearly result, it’s not a huge drop. In 2016, MACA reported a first half profit of $15.6 million.

However, because of the company’s instability of earnings over the past few years, investors seem to be nervous and willing to jump ship at any sign of contraction.

Looking to the future for MACA

If we assume the first half will be similar to the second, MACA still trades at around 20 to 24-times 2018 earnings.

It’s a very high multiple for such a cylindrical stock. But of course, if you believe the mining sector will continue to boom in the next few years, MACA might not be that expensive at all. This first half might be just a momentary slip in what could be far more profits to come.

As the company stated in their market announcement this morning:

MACA remains very positive on its future pipeline of work and the company’s strong financial position makes it ideally positioned to win new work from this pipeline.

The group continues to win moderately sized, shorter term civil jobs in both Western Australia and Victoria, and is currently still in contention for a number of significant mining and crushing projects.

If successful, the impact of being awarded these projects is expected to materially contribute to earnings in FY19 and beyond.


Härje Ronngard,

Junior Analyst, Money Morning

PS: Our resource analyst, Jason Stevenson has compiled the top 10 Mining stocks trading on the ASX right now. What do find out which ones will benefit from the resurgence in commodity prices? Click here.

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