Ausdrill up 12% on full-year results

There might be value for some investors who are more bullish than others.

Owen Raszkiewicz

Owen Raszkiewicz is a Motley Fool Contributor. Owen has been a Contributor since 2013, having also spent time as a Fool writer/analyst. He also worked as an Investment Analyst at Zenith Investment Partners, Australia's top research house specialising in managed funds. Owen has appeared on Channel 10's The Project and was invited on the BBC. He holds a Masters of Applied Finance, Masters of Financial Planning, Bachelor of Technology, Advanced Diploma of Financial Services and Diploma of Mortgage Broking Management. In addition, Owen has passed Level 1 of the Chartered Financial Analyst (CFA) Program. He has taken the Banking + Finance Oath (BFO). When he is not writing, Owen is Managing Director of Rask Finance, an Australian financial education company. You can email him: [email protected].

Published August 29, 2013 2:15 pm AEST

Shares in Ausdrill (ASX: ASL) are trading 12% higher in early trade this morning thanks to a better-than-expected annual report.

Unlike Emerco (ASX: EHL) or NRW Holdings (ASX: NWH), Ausdrill is a more diversified end-to-end mining services company, providing 'packages' for new and existing mining projects throughout Australia and Africa.

Some of the key results from today's annual report include:

Sales Revenue of $1.128 billion (up 6.6%)
EBITDA of $272.7 million (down 5.5%)
EBIT of $149 million (down 13.5%)
Profit after tax of $90.4 million (down 19.4%)
EPS of 29.63 cents, (down 20.5%)
Final dividends of 5.5 cents per shares fully franked
Gearing ratio of 36.6%
Cash of $78.8 million
Interest cover of 6.9 times

Although the company's results on face value may look bleak. The share price has been punished in the past 12 months and some might argue that the stock has been hit too hard by investors' expectations.

Source: Google Finance

Per the graph above, Ausdrill shares were pushed down almost 80% but have mildly recovered. With a relatively comfortable debt position and a dividend of around 10.7% (when grossed-up) it's easy to see why some investors have decided to purchase shares in the company.

At current prices and earnings, the company trades on a P/E of around 4.8 which isn't surprising given the amount of uncertainty going forward.

Outlook

Although the past 12 months have resulted in fewer new projects and cost cutting by both major and smaller mining companies, Ausdrill expects the medium term to stabilise earnings. Although, in the short term, the company expects mining operations to "change" it said "Ausdrill continues to pursue a strategy of providing a complete mining service solution to the mining industry, and believes this will provide the basis for the Group's continued growth and success in the years ahead". It also said "opportunities remain for the Group to secure new work in the near term".

Foolish takeaway

Today's result was expected. When the company's share price dropped to below $0.90 it was a bargain but, currently trading around $1.42, investors must take a more bullish stance on the outlook. However the company does pay a great dividend and with a fall of over 50% in share price from this time a year ago, a large part of the downside has been accounted for.

Interested in our #1 dividend-paying stock? Discover The Motley Fool's favourite income idea for 2013-2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

More reading

Motley Fool contributor Owen Raszkiewicz owns shares in Ausdrill.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.