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Mincon H2 leads to new upgrade

Mincon Group (LSE:MCON) fan Davy has raised its FY18 (calendar year) profit forecast for the Irish mineral drilling equipment company by 7% on the back of its continuing strong second-half performance this year, and suggested the METS firm’s current enterprise-value-to-earnings multiple remains “unchallenging”.
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Mincon's FY2018 profit forecast has been raised

Staff reporter

Mincon had a market capitalisation this week of ‎€230.5 million (US$271.2 million). Its shares are up marginally this week but have risen by nearly 50% in the past year.

"With the current positively trending [minerals] industry outlook, we see both the new top line and margin estimates as remaining reasonably conservative," Irish broker Davy said this week.

"With this in mind, the company is on an unchallenging 13.4x EV/EBIT 12-month forward [multiple]. This represents a 25% discount to its peer group and a circa-35% discount to its closest peer, [Finland's] Robit."

Robit (FH:ROBIT) is also up about 50% in the past 12 months and was this week worth about €194 million.

The latest earnings upgrade is Davy's fourth this year of similar magnitude.

"Further upside is possible as we head into the New Year," it said.

"While our current expectation for [25%] FY2017 revenue growth this year could be a little light [based on Davy's 29% revenue growth for the first nine months of the year] we are maintaining our forecast on the top line in 2017.

"We are increasing our FY2018 revenue forecast by 1.4% to €101.3 million. This is driven by an increased volume outlook and better price trends considering tight capacity comments. These improvements are mitigated somewhat by higher than previously expected currency headwinds."

Better product price realisation and an improved performance from Mincon's loss-making Nordic arm are expected to favourably impact the company's operating profit margin in FY2018. Davy sees the improvement at about 15.5% at this stage.

"Our operating profit estimate for FY2018 is now €15.7m, circa-7% higher than our previous estimate."