A relatively new listing on the ASX from Dec 2020. They undertake remedial construction work on infrastructural & mining assets & buildings etc and provide related advisory services.
Company website is here: https://www.duratec.com.au/investors...presentations/
Analyst report here (https://mcusercontent.com/3fff1ea9d792aab7f6dffe0ab/files/4f1d89e8-0c07-61db-9be8-69ace6f39218/Sohra_Peak_Duratec_Limited_Memo_December_2022.pdf).
In short (all figures are AUD):
- Profitable and growing, historic EPS for FY22 is 3.1c was flat vs last year due to a lower GP given higher construction material costs & wages
- Pays franked dividends and so is FIF exempt for NZ shareholders, FY22 was 0.5c interim + 1.5c final dividend
- Balance Sheet has interest bearing debts of $12m versus cash of $58m
- Mostly remedial construction work with around 44% of business from Australian defence contracts
- Acquisition of a consulting arm has driven a lot of referred growth, and the latest acquisition of WPF for $9m cash appears meaty.
- High forecast growth for FY23 given the order book and pipeline
A clean set of accounts except for 3 things:
1) DUR enters into long term contracts that require the use of construction accounting methods. A component of which is the "percentage of completion" calculation which drives overall profitability, and notably margin, for the business. The auditor tagged this (not in a bad way) as involving estimates and judgement. This is normal in construction.
2) DUR has $39m of surety bonds that are not on the books but have been disclosed in the notes. Not necessarily a bad thing, and I expect there will be backed by insurance policies.....TBC.
3) do NOT think of the 'contract liabilities' as liabilities that require a 100% cash repayment outflow when performing NTA calculations.
Amended investor announcement website here (link in previous post does not work):
https://www.duratec.com.au/investors/announcements/
Two big recent announcements:
1) Duratec won a tender (https://wcsecure.weblink.com.au/pdf/DUR/02614524.pdf) in December for A$48m to fix a wharf for BHP, and
2) Duratec bought (https://wcsecure.weblink.com.au/pdf/DUR/02579974.pdf)Wilson's Pipe Fabrication (WPF) in October for A$9m cash plus a potential earn out of another A$9m.
Guidance (https://wcsecure.weblink.com.au/pdf/DUR/02599773.pdf) for FY23 is "we are well positioned to deliver a strong result in FY23 and beyond". Not very helpful so I will see if I can come up with a number.
All figures are in $AUD. This is a pretty rough back of the fag packet calculation rather than any sort of detailed modelling on my part.
Revenues least year were $310m, EBITDA was 6.2% or A$19.3m and NPAT was $7.8m (2.5%). EPS of 3.2c and a current SP of 63c gives a backwards P/E of about 20.
Annual revenue growth was 31.5%, but FY21 was impacted by COVID. FY22 revenues were +25% on FY20 revenues. Forward order book at June 2022 was $458m (up from $236m in FY21). Tenders at $701m were up from $657m in FY21.
Given the sales growth trajectory, higher order book and higher tender values, it should be safe to assume base revenues will grow by 10% in FY23. $310m x 1.1 = $341m base revenues.
The wharf remediation contract will be delivered from March 2023 to February 2025. Assuming the revenues are earned evenly over the contract period starting 1 April, this will add revenues of $6m to FY23, $25m to FY24 and $17m to FY25.
WPF delivered $21.7m revenues in FY22 and 15% EBITDA for $3.4m. The $9m earn out incentive is payable if WPF deliver more than $5m EBITDA in FY23. Assuming WPF delivers $5m EBITDA, that implies revenues of about $32m in FY23.
Total forecast revenues = $341m (base) + $6m (wharf) + $32m (WPF) for $379m, which is +22% on FY22.
EBITDA for WPF is say $5m per earn out incentive. EBITDA for base + wharf revenues of $347m at 6% is $20.8m. Base added to WPF gives EBITDA of $25.8m (or 6.8%). Deduct ITDA based on last years value of $11.5m (being $19.3 - $7.8m) plus say 20% growth in these costs and tax gives ITDA of about $14m. $25.8m EBITDA less ITDA of $14m gives normalised NPAT of $11.8m.
I say 'normalised' because the $9m earn out will likely hurt NPAT by ($6.8m) if WPF EBITDA is $5m. CFO's love to adjust out such anomalies.
$11.8m normalised NPAT divided into 241m shares gives EPS of 4.9c per share. Annual EPS growth of 53%. Forward EPS into SP of 63c gives a forward PE of about 13.
On the numbers above, raw NPAT including the after-tax impact of the earn out will see EPS fall to 2.1c which is less than FY22. It won't be a good headline but one needs to look through that.
10% base revenue growth could be conservative, as is the assumption there is no significant increase in equity earnings of $1.8m from their 49% subsidiary DDR which has a higher growth trajectory.
I've followed loosely since IPO, absolutely no moat in the business model so really seems dependent on unpredictable contracts and a slightly above average management.
Quite a bit of new retail interest in the name and a few substack articles going around twitter recently.
As like similar tender companies most people get excited to see the company announcing huge contract wins etc, without considering the fact that winning contracts really just means that you were willing to make the least amount of money off the contract versus your competitors.
Like I said, really just comes down to management and if I haven't met them or have had any reason to form a reasoned opinion on them I really don't see the point of owning this at 150m mcap backed by 30m of equity and an earnings stream that is neither defensible or predictable.
Yeah the margins after overheads etc per my BOTFP analysis are pretty thin at 2.5%. A 48m contract win sounds meaty given it is 15% of prior year turnover at 310m. But once you break the contract down by fiscal year it is meh....
The only thing strategic about such an announcement is if it is their first BHP contract or their first wharf remediation project. Other than that it would be BAU. Maybe it is their single largest contract to date....?
One thing with construction is you need to keep winning contracts to keep your plant employed. There is no resting on your laurels and there are times where you accept low margin contracts until the next meaty one turns up.
In defence of DUR they have their defence contracts which represents a moat of sorts. It can be hard to displace a defence contractor. Plus owning the consultancy seems to confer a client relationship advantage.
But after all is said and done it doesn't really excite me unless we see growth far in excess of the projection I put forward of $379m revenues for FY23. That would take some exceptional management to achieve - especially if they do that without having working capital growing pains.
DUR recently came out with guidance (https://hotcopper.com.au/threads/news-dur-duratec-ltd-says-continues-to-expect-fy23-revenue-to-be-in-range-of-a-420m-to-a-460m.7196431/) which makes a mockery of my estimates.
Guidance revenue of $420-$460m versus my estimate of $379m. I am light by about $60m or 15%. I wonder if they have included the figures from their 49% owned subsidiary DDR? They also announced another $100m contract win but that will have minimal impact on FY23.
Guidance EBITA of $32-$35m versus my estimate of $26m. I am light by about $8m or 24%.
Guidance EBITDA / Revenue = 7.6%, versus my estimate of 6.9%.
Hopefully it is a case of under-promise and over-deliver and not the other way round.
On these numbers I am guessing normalised NPAT (excluding any earn out adjustment) of around $20m which is 8.3c EPS. Divided into current SP of 69c gives a forward P/E just over 8.
Engineering contractor Duratec has upgraded its revenue guidance and earnings before interest and tax in its half-year results.
The revised revenue range is between $465 million and $495 million, up approximately $35 million from its prior range. EBITDA is reported to be $36 million to $39 million, up approximately $4 million.
The company credited its stronger than expected half year performance to faster estimated timeframes with projects and profit contribution from its 2022 acquirement of Wilson's Pipe Fabrication.
What a winner for you Ferg! 35 pages of posts over at OCA and here you are all on your lonesome riding a winner in a bear market ;)
Lovely example of finding a share that is breaking out into a new uptrend, even in the depths of a crappy bear market. DUR IPO'd at 50c a share in late 2020 mid Covid pandemic, and like most of those companies that did so it promptly went on to lose 42% drifting to a low of 29c.
But then it found a bottom, and continued to trade within a fairly tight range, giving the stock time for the 50 and 200 day moving averages to realign and setting up the foundation for a move higher. You can then see a very clear break out from this range in both price and volume (best to have both in sync) portending a strong new uptrend.
dur.png
Quote from: KW on Apr 24, 2023, 07:07 PMLovely example of finding a share that is breaking out into a new uptrend, even in the depths of a crappy bear market. DUR IPO'd at 50c a share in late 2020 mid Covid pandemic, and like most of those companies that did so it promptly went on to lose 42% drifting to a low of 29c.
But then it found a bottom, and continued to trade within a fairly tight range, giving the stock time for the 50 and 200 day moving averages to realign and setting up the foundation for a move higher. You can then see a very clear break out from this range in both price and volume (best to have both in sync) portending a strong new uptrend.
dur.png
Anybody looked at the fundamentals? I didn't. but they look pretty much contract driven to me (i.e. not really a continuous stream of work).
From a TA perspective - no doubt, with the benefit of hindsight a good buy at 29 cents, and still at 45 cents. However - what exactly do they have other building contractors don't?
Anybody just surfing the SP-wave better make sure they have a real good exit strategy at the crown. Might get a bit crowded if everybody tries to exit at the same time ...
Not saying they reached the peak, but just wondering how momentum investors recognise that a share approaches the peak and manage to stay on top while their ground crumbles away?
The recent volumes don't look that outrageous to my untrained eye :) ;
Quote from: BlackPeter on Apr 25, 2023, 10:03 AMNot saying they reached the peak, but just wondering how momentum investors recognise that a share approaches the peak and manage to stay on top while their ground crumbles away?
The recent volumes don't look that outrageous to my untrained eye :) ;
There are many exit strategies you can have. You may choose to simply take profits on the way up, ie. by selling a % at set price points or percentage gains. This is something Mark Minvervini recommends. You can choose to use a technical indicator, such as a drop below the 50 day moving average, or when the 13 day moving average drops below the 50 day moving average. You might look at the direction of the chart and decide to sell when the price jumps by a lot, or goes perpendicular, because there is a high likelihood of it pulling back in later. You might sell if you want the money for something new that is just breaking out. Deciding when to sell, or why, is so much more personal than the decision to buy.
Also the longer the trend runs, the easier it is to spot a breakdown - a drop below the 200 day moving average is my sure fire exit signal. But in a choppy market, where a bear market rally might be driving the stock and not its fundamentals, you might have to exercise more short term discretion in order to lock in profits. This is mostly what I've been doing in 2023, just taking profits where I can find them and being happy with them, rather than hanging around too long. Sometimes this pays off (like with WBT and DRO) and other times you miss a continued run (like with XRF). But money in the bank at 4.3% interest is still an acceptable return while you wait for something else to pop up. One I hedged my bets on is NEU which I sold half of when it dropped below the 50 day after a big run up from $4 but held the other half and am now up 225% on it with the share price now over $14. You have to figure out what works for you, taking into consideration the nature of the stock and the market conditions. Its harder in a bear market, as bull markets lift all boats on a rising tide, so its more obvious when a particular stock fails. In a bear market anything can fail at any time, so you need to sleep with one eye open LOL :o
Re Vol moves, the move doesnt have to be outrageous, it just needs to be higher than normal, signifying that interest in the stock has suddenly increased. Demand drives price. There was a good vol breakout on DUR in July 22 but it was not accompanied by a price breakout that put the stock back into an uptrend. You need both (not necesssarily together on the same day, but should be close to each other)
Duratec smashed it's Feb guidance on revenues at $492m (which was at the upper end of their April guidance). Nice growth in all financial metrics and the dividend, except for the order book - although tenders & pipeline have grown significantly so that could be a temporary blip.
Completion of the 6 disclosed contracts alone will deliver $211m in revenues in the coming year, which is 43% of total revenues in the last fiscal year (although some of these will carry over into the next fiscal year but who is counting?).
https://wcsecure.weblink.com.au/pdf/DUR/02702243.pdf
For those who didn't like this at 90c, they must really not like it now it is over $1.30:
https://nz.finance.yahoo.com/quote/DUR.AX?p=DUR.AX&.tsrc=fin-srch
Disclosure: hold
And the growth continues. DUR released guidance for FY24 on 24 November:
https://wcsecure.weblink.com.au/pdf/DUR/02744773.pdf
Revenue $570-$610m (last fiscal year $492m)
EBITDA $54-$52m (last FY $39m)
Order book at $411m is lower than the EOY presentation of $458m
Pipeline $3.3b (EOY presentation $2.4b)
Quote from: Ferg on Dec 06, 2023, 03:11 PMAnd the growth continues. DUR released guidance for FY24 on 24 November:
https://wcsecure.weblink.com.au/pdf/DUR/02744773.pdf
Revenue $570-$610m (last fiscal year $492m)
EBITDA $54-$52m (last FY $39m)
Order book at $411m is lower than the EOY presentation of $458m
Pipeline $3.3b (EOY presentation $2.4b)
Go you good thing
Quote from: Shareguy on Dec 07, 2023, 10:08 AMGo you good thing
For sure. The opening price jumped over $1.54 this morning and Yahoo is sayin the day's high was $1.61. No news on HC so possibly just overly enthusiastic ebbs and flows.
Update to my April 23 post on exit strategies. First exit signalled as the 13 day MA crosses the 50 day MA with the price remaining below both (shorter term strategy that protects recent gains). The second on the substantial break down on volume that occurred on the 23rd February - a big breakdown like that is usually for a good reason, and while retail investors see an opportunity to "double down" on their losses, long term the pros will be using the opportunity to unload. Then the downtrend resumes as there is no longer any insto interest in the stock to sustain demand giving the third exit signal as the price drops below the 200 day MA.
dur.png
I had forgotten about DUR so thanks for bringing this up. I sold out 14 Dec as part of a rebalance, more by fluke than good management with a well out of the market sell order.
I went looking for any news for the SP drop and the only thing I found were HC threads that reek of Phradeus' warnings.
I couldn't see any significant red flags in the last HY result. From a TA perspective I presume we should be looking for the next support line before buying? The graph looks pretty grim.
Not a holder however I too looked for Red Flags.Did not see any, and results and performance looked good to me.
Quote from: lorraina on Mar 19, 2024, 09:04 AMNot a holder however I too looked for Red Flags.Did not see any, and results and performance looked good to me.
Lesson learned from HCL however....not catching that falling knife if a big boy is selling.
Sometimes its not obvious, but somewhere along the line we will find out what the market is pricing in. PME is currently doing the same thing.
The point is to not be wedded to a stock, as its not unusual for big performers to run out of steam and just fizzle out. Since NZ has no capital gains tax, there is no impediment to being sensible and selling out so you can move your capital to a stock that is at the beginning of its move rather than its end.
Use FA to pick stocks, and TA to decide when to buy and sell them. Best of both worlds.
Nice graph KW, clearly showing those 3 exit signals. To add to that, at the 1st exit signal the sp fell below 12MA (used in MACD) but the sp can easily recover from that point (been caught before on that) except in the case of DUR, the RSI at that time also fell dramatically from 70 to around 40. For DUR I think the RSI is a lead indicator as the company operates in a conservative infrastructure environment and revenues are dependent on contracts which come in large bites won or lost, so the big boys know they have to move quickly.
The other signal was a large sell volume at the Earnings announcement which saw me sell shortly after.
PE had risen to around 20 so I think sp just got ahead of itself. PE is now back to a healthy 12.85 today. Earnings are still forecast for a modest increase in 2Y24. Current mkt cap is $292 mil on Revenue of $491 mil. This remains a good company and a good stable mate for Acrow. I shall watch for a re-entry point going into 2Y24.