Perenti jumps after lifting FY23 guidance

After hitting a 52-week high last week, Perenti was up another 4.81% at noon after the mid-cap mining services group upgraded its FY23 guidance.

In short, upgrades reflect better than expected movements in the US$ to A$ exchange rate and improved and operational and commercial conditions.

Today’s revised FY23 guidance include upgraded revenue expectations of between $2.6bn and $2.7bn, compared to its August forecast of between $2.4bn and $2.5bn.

Earnings (EBITA) are expected to land somewhere between $215m and $230m, up from $185m-$205m.

Net capital expenditure is also expected to be slightly higher at $340m, compared to $330m previously.

Meantime, the impact of forex volatility on FY23 guidance is expected to be between $12m to $16m of additional earnings (EBITA) and around $10m unfavourable movement in capital expenditure.

Unpredictability

While Perenti looks well placed to continue delivering its updated 2025 strategy, CEO Mark Norwell flagged the ongoing impact of volatility [within the macro-economic landscape], which is making exchange rates, supply chain challenges and labour shortages difficult to predict.

“Our upgraded FY23 guidance reflects how our embedded disciplines and robust foundations have enabled our exceptional workforce to deliver beyond expectations… we strive to deliver enduring value and certainty for all our stakeholders,” Norwell noted.

Recent developments

Perenti’s share price has been trending higher since announcing early June that its Barminco underground mining business had been awarded a contract for all of the underground development and production works for Evolution Mining’s (ASX: EVN) Cowal Underground project, located in NSW.

The Cowal contract is expected to generate revenue of around $520m with an initial term of four years.

Commenting on the contract win at the time Norwell noted:

“The project represents a significant improvement to our Australian underground earnings base and will generate strong project cash flows and returns in support of our capital allocation and investment.”

What happened at the full year

Perenti delivered strong FY22 financial and operational results, headlined by a significant step-up in 2H22 earnings, and continued improvement in leverage.

• Underlying earnings (EBITA) exceeded the top end of the revised FY22 guidance range at $176.3m, with 2H22 (EBITA) up 18% on 1H22.

• Record underlying revenue was in-line with expectations at $2,438m, and represented a 21% increase on FY21.

• Statutory net profit of $42.5m, was up $94.8m from a statutory loss of $52.3m in FY21.

• A FY22 dividend was not declared.

What brokers think

Perenti’s share price is up 15% over 12 months and has been on a tear since early August.

Consensus on Perenti is Strong Buy.

Based on Morningstar’s fair value of $1.57 the stock appears to be undervalued.

Perenti share price over 12 months.