Mining services providers tend to grow when the resources sector is strong, but they can also be more resilient than miners to swings in commodity prices, if they are sufficiently diversified.
Here are three mining services shares on my watch list.
Emeco Holdings Limited (ASX: EHL)
The share price of this earthmoving vehicles rental firm grew 275% in the past year on the back of increasing revenue and a number of acquisitions, including the purchase of industry peer Matilda Equipment for $80 million last week. Emeco’s deleveraging strategy is expected to bring its net debt EBITDA ratio below 1.5 in FY20. A major turnaround for a company that only three years ago was close to defaulting on its debt.
The Emeco stock price fell 5% to 30 cents today, as 300 million new shares were issued to finance the latest acquisition.
NRW Holdings Limited (ASX: NWH)
This civil construction and mining services business was traditionally based in Western Australia, but in 2017 the company expanded in Queensland with the acquisition of Golding. In the first half of FY18, NRW’s revenue nearly doubled on the previous corresponding period, reaching $345 million. That figure is expected to increase to $400 million in the second half, and the company has an order book of $2 billion.
The NRW share price climbed 130% higher in the past 12 months, despite being 2% down to $1.24 today.
Mineral Resources Limited (ASX: MIN)
Mineral Resources produces iron ore and lithium but, given the uncertain outlook for both these materials, is looking for growth opportunities elsewhere. The company provides services to the resources sector, ranging from mining and processing to transport. Agreeing a deal to acquire Atlas Iron (ASX: AGO) in April, Mineral Resources may be able to take control of a large facility in Port Hedland. Next year the company will commence construction of a low-cost lightweight rail system in the Pilbara. Mineral Resources recently confirmed its FY18 EBITDA guidance of more than $500 million.
Today the stock is 1% up to $19.84, more than double its price this time last year.
Despite their recent price run, I think these three shares have potential for further growth. I particularly like NRW, for its dual exposure to mining and civil construction.
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Motley Fool contributor Tommaso Autorino has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.