Investors disappointed with Monadelphous, Bradken updates
Shares in Monadelphous and Bradken have plunged following market updates, after signs of hope for the sector.
The mining services sector is again on the nose after investors were left disappointed with market updates from Monadelphous and Bradken today, and yesterday’s talk of a potential collapse at Boart Longyear.
In lunchtime deals today Monadelphous plunged 16 per cent, while Bradken tumbled 5 per cent and Boart Longyear extended yesterday’s retreat by a further 3.2 per cent.
Other big names in the industry also gave back some of their recent gains, with Worley Parsons sinking 4.9 per cent, UGL off 2.7 per cent, Downer EDI easing 0.5 per cent and Seven Group dipping 1.6 per cent at 12.45pm (AEST).
The heaviest selling was reserved for Monadelphous, however, after it reported a revenue fall that was deeper than its guidance had indicated, while its net profit was below forecasts and its view on the coming year was mixed.
“Monadelphous’ share price has run up aggressively ahead of fundamentals and we expect a share price pullback post a slightly weaker-than-expected result and cautious outlook statement,” Macquarie analysts said in a note.
“Stronger commodity prices suggest we are close to a bottom — however it will take some time for conditions to improve.”
In contrast, the more troubled Bradken had a better story to tell as it reported a stabilisation in market conditions and tipped its pre-tax earnings to hold steady in the coming year, a stark improvement from the past couple of miserable years.
Still, investors were displeased as a strong turnaround had been factored in by recent market moves, with its share price doubling over the past month.
The group’s mixed report also came on the heels of a worrying update from Boart yesterday, which sank 10 per cent during the Monday session as it flagged heightened concerns about its ability to operate as a “going concern” and called in restructuring experts.
The sector has endured a rough few years on the back of the sudden and swift collapse of the mining investment boom, but traders have warmed to the sector this year as commodity prices have appeared to bottom and the sharp declines in capital expenditure are tipped to level off.
The enthusiasm was aided by better-than-expected results from Downer EDI, UGL and Seven Group through the August earnings season, but today’s test serves as a fail in the eyes of the market.
The final, and potentially, most significant test for the industry during earnings season comes tomorrow when Worley Parsons delivers its full year results.
The former market darling has enjoyed a sparkling run on the ASX in recent months, rising 25 per cent in the fortnight ahead of today’s retreat and almost trebling its valuation from a February low of $3.11 to a peak of $9.20 yesterday.
It points to confidence in a robust result, but today’s action highlights any miss on expectations will be met with disdain from traders.
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