GR Engineering Stands Out

Mining services is a sector where poor margins, woeful returns on capital and poor management decisions seem to be the norm. One company that bucks the trend, though, is GR Engineering. Since listing in 2011, annual revenue has ranged between $110 million and $217m. But despite this inherent volatility the business has proven resilient. Profits have averaged $18m per annum and have been increasing since bottoming in 2013 at $10m. Importantly, contrary to the other mining services businesses in our portfolio, GR doesn’t require much capital to grow. Since 2011 the company has spent only $6m in capital expenditure and paid out $77m, nearly all of its profits, as dividends. Perhaps that's because directors and senior managers own more than 50% of the company. GR currently has a market capitalisation of $240m and $65m in net cash. Its PE ratio and dividend yield are 13 and 6% respectively. Despite the stock price nearly doubling since the our purchase, these valuation metrics are not demanding for a well-run business that should grow over the coming years. (VIEW LINK)

Forager Funds 

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Steve Johnson
Founder & Chief Investment Officer

Steve began Forager Funds in 2009, and now manages approximately $470m across two funds. Offering a listed Australian Shares Fund (FOR) and an unlisted International Shares Fund, Steve focuses on long-term investing in undervalued companies.

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