Romano Sala Tenna

We conducted a small investor tour this week visiting 8 prominent, listed West Australian companies. The general mood was still somewhat sombre and the initials WA may indeed stand for ‘Wait Awhile’ longer. There were a number of bright spots however, with the standouts being Pioneer Credit Limited (ASX:PNC) and Global Construction Services Limited (ASX:GCS). Both are trading on single digit PERs with strong earnings growth, excellent management and transparent and definable prospects. We hold both companies in our portfolios and came away from these meetings affirmed and dare I say ‘confident’. The same cannot be said for the majority of businesses operating in the mining services and auxiliary support sectors, with conditions still ranging from bad to worse. Decmil Group (ASX:DCG) is working diligently to make the best of the conditions, but we believe that the consensus forecasts for FY16 maybe a “bridge to far”. Worse still is the outlook for Ausdrill Limited (ASX:ASL). This is a well-run business, but it has a worrisome combination of high debt, continuing margin pressure and low utilisation rates.


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James Marlay

Romano, have you reviewed the fortunes or prospects of Atlas Iron? We have read some positive commentary on the prospects for FMG but is Atlas a step too far?

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Romano Sala Tenna

Atlas does indeed face greater challenges than FMG, the most pronounced of which is the mode of transportation and associated costs. At this stage its a watching brief.

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