Is this the cheapest stock on the ASX?

While investment in the resources sector continues to fall, miners are continuing to dig up massive amounts of dirt, as production volumes, especially in iron ore, grow.

For companies exposed to the production phase, work continues to flow in. One such company is MACA Limited (ASX: MLD), which provides crushing and mining services to iron ore and gold companies such as Atlas Iron (ASX: AGO), Regis Resources (ASX: RRL) and Arrium (ASX: ARI) – ex-OneSteel.

And it could just be one of the cheapest stocks on the ASX.

MACA’s resources division has around 10 existing contracts that expire after December 2015, with some contracts heading out beyond December 2018. And that ignores the potential for future work extensions.

Financial year 2014 revenues are expected to grow by more than 15% over the previous year, after recording a 47% increase in first half revenues to $305 million. Net profit after tax rose 44% to $32.6m, while operating cash flows came in at $61.4m, close to 50% higher than the previous period.

With a net cash balance of $52.5m and a market cap of $454m, MACA is trading on a P/E ratio of around 7 times, and paying a fully franked dividend yield of more than 4%. The company also recently announced a special dividend of 30 cents a share fully franked, to return franking credits to shareholders.

The company has $430 million of contracted revenue already for financial year 2015, and says it is in advanced negotiations which would add another $50 million to that total.

The one blot on the company’s sheet is that despite its net cash position, MACA has decided to raise $59 million in capital from institutional clients, resulting in an additional 26.2 million shares being issued. The company has not announced any share purchase plan for retail and other existing shareholders.

Foolish takeaway

Trading on a prospective P/E ratio of around 7 times and paying a decent dividend of over 4%, Foolish investors may want to put MACA on their watchlist.

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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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