I thought it'd be interesting to start a thread so we can post "value" stocks here and bounce ideas off each other. No right or wrong answers since what is defined as "value" is rather vague, but it would be interesting to hear everyone's ideas.
I'll start with first one, which is one I actually bought today, Monadelphous (MND). The enterprise value is trading is about 15% discount to market cap, with EV/EBITDA about 6 and EV/FCF about 12, it is obvious cheap in the ASX200 category. And there's good reason for being cheap, being an engineering company serving the cyclical mining sector, its revenue has declined 3 years in a row. Their engineering & construction sector has basically come to a halt from $1.8b in 2013, the new contract obtained in FY2016 was only $100m, the management seem so embarrassed by this they didn't even mention this in the last annual report, this is compensated by the maintenance division.
Basically an out of favour stock, my favourite kind. Liquidation value excl. cash is about 30% of share price, and cash alone is 26% of share price. The company highly dependent on securing new contracts, judging by the historical relationships between new contract value and actual, the FY2017 contract value will be higher than current FY2016 of $1.4b, the lowest contract value should be circa $1.1b. I do like the management, promotion tends to be from within and they seem to have good employee relationships from what I found. The market is pricing this stock at about 3% perpetual growth at 10% cost of capital, I think they have more potential than this. They're involved in some very prominent renewable energy projects like solar and water, an area of great long-term potential, as well as winning overseas contracts and factory in China. There is a risk they MND can fail to win significant new contracts throughout FY2017 as the mining sector continues to drag, but with a fat dividend yield that's seems to be covered for next year there's some room to wait this out.The directors are buying in late August is also a promising sign. Any comments?
I'll try to find more stocks over the weekend.