Monadelphous Group Limited drops despite contract wins

Monadelphous Group Limited (ASX:MND) shares fall 0.9%

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Published July 31, 2015 2:33 pm AEST

Monadelphous Group Limited (ASX: MND) has seen its shares drop by 0.9% to $8.62, despite announcing four new contracts worth a combined $130 million.

The construction and engineering group announced that it had won the following contracts:

A three-year contract to provide project, maintenance and shutdown works for Queensland Alumina Limited – owned by Alumina Limited (ASX: AWC) – in Gladstone, Queensland.
A three-year contract, with options to extend further for Australia Pacific LNG Pty Ltd for the fabrication and supply of wellhead separator skids to be commission at various locations around the Surat Basin, Queensland. AP LNG is an LNG processing project, in which Origin Energy Ltd (ASX: ORG) has a 37.5% stake and is the operator of the upstream assets (gas fields and pipeline).
A three-year contract with a one-year extension option for the provision of labour services for South32 Worsley Alumina Pty Ltd at Collie, Western Australia. South32 Ltd (ASX: S32) was spun out of BHP Billiton Limited (ASX: BHP) recently.
A contract with BM Alliance Coal Operations Pty Ltd to provide maintenance works for a major dragline shutdown at Blackwater coal mine, Queensland. BM Alliance is a joint venture between BHP and Mitsubishi and reportedly Australia's largest coal producer.

This is the first announcement of new contract wins so far this calendar year, compared to rough six different contract announcements in 2014. That suggests that Monadelphous is struggling to win new work – despite the company being rated one of the best in the business. It's more likely to be the company's customers dragging the chain on new contract awards than anything Monadelphous has or hasn't done. For a company that generates roughly $2 billion in revenues annually, $130 million over 3 years is virtually peanuts.

That's an ominous sign for other construction and engineering businesses in Australia – as we wrote on Wednesday and in early June. Buyer beware.

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