• Will we see any special dividends from the banks as bad debt loan provisions are unwound? Watch here.

Our top picks in the mining services space

07122020_Mining services

Our top picks in the mining services space

Surging commodity prices and a deep infrastructure pipeline support a positive medium-term outlook for contractors, a sector which has broadly lagged the market recovery. Here, we share our preferred businesses – we favour players with strong management teams, scaled business with ability to take market share as the cycle strengthens.

Better than expected vaccine news has driven a strong response from global equity markets, setting a clearer path towards a potential broad-based macroeconomic recovery scenario. Commodity prices have rallied accordingly, particularly copper – a bellwether for global growth – which is up 12 per cent over the past month to five-year highs on anticipated improving fundamentals.

Leveraged to this thematic, we still see value in a select group of mining services companies which are effectively derivatives of underlying mining activity. Despite mining activity remaining relatively robust throughout the pandemic, the mining services sector has generally lagged the broader equity market over the past year (down 11 per cent Vs Small Ordinaries up 6 per cent) and continues to trade at a meaningful discount to the market (7x FY1 EV/EBIT Vs Small Ordinaries on 19x).

EXCLUSIVE CONTENT

subscribe for free
or sign in to access the article
INVEST WITH MONTGOMERY

Dominic is the Portfolio Manager of the Montgomery Small Companies Fund. Dominic joined Montgomery in August 2019 after spending thirteen years specialising in smaller companies in portfolio management and equities research. Most recently, Dominic was a Portfolio Manager and Senior Research Analyst at MHOR Asset Management in Sydney for three years. Prior to this, he ran Deutsche Bank’s Small Caps Equity Research Team in Sydney for six years. He was also previously Head of Research at Foster Stockbroking.  

This post was contributed by a representative of Montgomery Investment Management Pty Limited (AFSL No. 354564). The principal purpose of this post is to provide factual information and not provide financial product advice. Additionally, the information provided is not intended to provide any recommendation or opinion about any financial product. Any commentary and statements of opinion however may contain general advice only that is prepared without taking into account your personal objectives, financial circumstances or needs. Because of this, before acting on any of the information provided, you should always consider its appropriateness in light of your personal objectives, financial circumstances and needs and should consider seeking independent advice from a financial advisor if necessary before making any decisions. This post specifically excludes personal advice.

Why every investor should read Roger’s book VALUE.ABLE

NOW FOR JUST $49.95

find out more

SUBSCRIBERS RECEIVE 20% OFF WHEN THEY SIGN UP


Post your comments