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Why I think Maca Ltd shares look a buy now

With just a $353 million market cap and some mixed FY18 results, it’s easy to see why mining and civil construction company Maca Ltd (ASX: MLD) could fly under the radar as a stock pick.

But I think it’s in buy territory, here’s why.

It has prevailed

Maca Ltd reported its FY18 results on August 27 with revenue growth of 13% from $497.9 million in FY17 to $562.6 million in FY18 and a net profit attributable to members of $23.6 million – despite some serious headwinds over the period.

Wet weather hampered Maca’s operations quite substantially in the second half and write downs in the first half were also a major impediment.

But Maca held on, delivering EBITDA of $78.8 million at a margin of 14% and declaring a fully-franked 3.5c per share dividend, with a forecast of $620 million in FY19 revenue.

The company is focusing efforts on improving its operational efficiencies, which should hold it in good stead for its planned growth as there looks to be plenty to look forward to in its project pipeline.

Some of the projects include:

  • A two-year $85 million Pilbara Pilgangoora project
  • Recent wins in its civil and infrastructure business in Victoria
  • Extended tenure at Regis Resources Limited’s (ASX: RRL) Duketon South Operations for five years as of July
  • Continuation of its Ramelius Resources Limited (ASX: RMS) Mt Magnet project with a contract value of more than $100 million
  • Commencement of the Minjar Gold Gossan Hill $11 million contract in March
  • A contract on Carabella Resources’ Bluff Coal Project
  • A $6 million contract by AngloGold Ashanti
  • Progression with Avanco Resources’ international Antas project, and
  • Investigation of opportunities in Brazil and Cambodia.

There’s a lot on Maca’s plate, but the company seems to be primed to leverage it.

It is net cash

According to its FY18 results, Maca’s balance sheet looks strong.

The company has net cash of $108.2 million, and an order book of $1.28 billion – up from $1.13 billion in FY17. It also has relatively low debt of $44.9 million.

With a comfortable PE ratio of 14.5 at today’s share price, an attractive dividend yield of 4.92% along with good historical dividend payments and NTA of $1.19 (around 90% ) – Maca certainly appears to have plenty of value in it.

Its assets are building, and financial discipline seems to be a strength – this looks to be a winning formula.

It is a smooth operator

Maca’s team appear to have a good understanding of its financials, which is a good sign.

A first-half report forecast FY18 revenue of $560 million – and Maca delivered $562.6 million.

Its growth strategy is underpinned by winning new work while performing for existing clients. If the company is successful in diversifying into new markets, services and commodities, it could hit a period of impressive growth.

In terms of buying opportunities there looks to be no time like the present for Maca, with its shares down 1.8% to $1.32 today – a drop from a price of $2 at this time last year.

One to keep highlighted on your watch list for certain.

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Motley Fool contributor Carin Pickworth 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.

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