MLG result
MLG's report yesterday was reasonable, but their outlook is very positive. However, the stock was trashed on the opening. Can someone comment on the sell-off as I don't see any issues to be concerned about.
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Answer
Hi Peter,
For subscribers not familiar with MLG it’s a ~$90mn integrated mining services and resource asset management company based in Kalgoorlie, Western Australia. They delivered a mixed First Half 2025 result this week which saw the stock fall ~10%.
- Revenue: $272.9m (up 21% from 1H 2024).
- Net Profit: $4.08m (down 43% from 1H 2024).
- Profit margin: 1.5% (down from 3.1% in 1H 2024). The decrease in margin was driven by higher expenses. Not great.
- EPS: 2.8c (down from A4.9c in 1H 2024).
This is not a company, due to its size, covered by many major brokers but having listened to the earnings call, we think one aspect stood out captured in this comment: Where we sit today is one whereby we still have some capacity to be able to service our underlying customer base as they continue to grow and we have capacity to flex for them, but we are starting to get to the upper end of available fleet as we sit.
Which essentially means, for more growth they need to invest more, and that is the issue with these sorts of businesses. Capital intensive and front loaded, whereby, they need to spend money on big things to then generate revenue/earnings from them. They do appear to be laying some solid foundations for the future, however, a business like this trades on a low earnings multiple (~7x) for a reason.
