Why did MM choose WOR over MND?

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Question asked 26/08/2023

Why did MM choose WOR over MND?

Dear James and Team, Following your recent purchase of WOR for your Flagship Growth portfolio I was doing some of my own research into Engineering Services companies. To my untrained amateur eye MND has better metrics than WOR (ROIC, ROE, eps fwd growth, yield and PE). MND has also not had quite the same share price growth over the last 3 & 6 months. So my question, why did MM choose WOR over MND. I know you will have a very good reason and would be interested to hear your logic. Taking a long term view, is MND a buy at around $13? Thanks for all the great insights. Charles

Answer

Hi Charles,

We backed Worley (WOR) because they are more focused on transitioning their business towards decarbonization work than Monadelphous (MND) and have been an earlier mover in the space to build capability. That will help drive a bigger improvement in margins which will flow through to a bigger uplift in earnings. From an investment standpoint, while understanding past fundamentals is important for the future, they do not show us the future, we need to think about that ourselves by assessing all the information at hand.

That said, we also like MND, and believe it is a long term buy. We had Nick Guidera on a webinar recently from Eley Griffiths who is backing MND to perform from here. Nicks a good investor, with sensible opinions.

Regarding the metrics, you are right as WOR has had a very up and down history, taking on very low margin work, largely in the traditional energy space. Things are changing at WOR and we are backing what comes next.

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Worley Ltd (WOR)

LAST UPDATED 25/08/2023 12:10

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