Decmil (ASX:DCG, Financial) offers design, construction and accommodation services to mining and government sectors. The share price has been absolutely hammered (down 50% in the last year, 70% in the last three years) because of the mining pullback in Australia. However, the company remains profitable and has managed to diversify away from mining into building bridges, schools and other infrastructure.
Page 14 of the annual report shows where it expects its 2016 revenue to come from:http://www.asx.com.au/asxpdf/20150826/pdf/430swdshv9w963.pdf
Because of the pessimism, this company trades at a P/E of just 4! It made $40 million in fiscal 2015, and yet it trades for just $160 million. In addition, the company has a net cash position of $45 million.
Even if profits were to drop by half this year, to just $20 million, that makes a P/E ex-cash of just 6. The company uses its earnings to buy back shares and pay a dividend. The dividend over the last 12 months provides a yield of 12.5% on the current price, which is a payout ratio of 54% of earnings.
Management appears to be competent, as it has generated good returns on capital. Where it doesn't generate good returns (e.g. potentially in its accommodation sector), it is considering selling assets. Since the company trades at about half of book value, such a sale would be very good news for shareholders if it took place anywhere close to book value.
This is another stop in my tour of Australia, where I'm finding terrific value thanks to the downturn in commodities. Wish me luck!
Disclosure: Author has a long position in shares of DCG
