Mondelphous wins multiple new contracts

Monadelphous wins multiple new contracts

The business may offer value to income and growth investors alike.

Tom Richardson

Tom is a holder of the CFA Society of the UK administered Investment Management Certificate (IMC) and has more than a decade's professional experience in the investment management industry in Australia and the UK. Tom now works as a writer and editor for TMF Australia and has two easy to remember rules of investing he likes to follow. Avoid overpaying for growth stocks and avoid paying at all for stocks that are cheap for a reason. Tom prefers growth investing over value investing and says it's not rocket science, just avoid overpaying for the best returns.

Published October 9, 2013 2:00 pm AEDT

Engineering firm Monadelphous (ASX: MND) has been awarded new infrastructure and construction contracts with a combined value of approximately $250 milllion. The group provides engineering services to the resources, energy and infrastructure sectors.

A one-year contract extension valued at $150 million has been awarded for facilities management services at the Chevron-operated Gorgon project in Western Australia. It has also secured a contract to construct a water treatment plant for the Central Highlands Regional Council in Emerald, Queensland. In September the group won a contract valued at approximately $235 million with Rio Tinto (ASX: RIO) to help develop its Pilbara iron ore operations.

Despite announcing a record net profit after tax of $156 million for fiscal 2013 the stock has been in a downtrend recently, falling over 35% from 2013's highs. The boom times for the engineering services sector may be over but Monadelphous is proving resilient in picking up new contracts and has now reported 12 consecutive years of earnings growth.

In fiscal 2013 the company paid out a total dividend of $1.37 per share, fully franked. That puts it on a trailing yield of approximately 8% at today's price of $17. That yield would go even higher if expectations of a bigger payout in the forthcoming year were met.

Foolish takeaway

Negative sentiment towards the engineering services sector may have resulted in Mondelphous being oversold in recent times. The positive news coming from the company combined with its attractive yield mean it appears well worth consideration as an investment.

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Motley Fool contributor Tom Richardson does not own shares in any of the companies mentioned in this article.

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