Clime analyst Adrian Ezquerro has written up an interesting mining services company called MACA Limited (ASX:MLD). MLD is a leading supplier of mining and civil services to clients in the mining and construction sector, primarily in Western Australia. It provides “mine to mill” contract mining services for open pit mining including loading and hauling, drilling and blasting, crushing and screening, and civil works.

MLD’s balance sheet is strong, with cash on hand of $50m and debt of $37m. Normalised return on equity is forecast to be above 40% in 2012 and 2013. Operating cash flow has been strong in recent years and well exceeded reported profits in FY2011.

A few points from the report:

MLD is well placed to take advantage of the record level of resources capital expenditure, and we expect significant growth in profit and a high level of profitability. It has a strong order book with work in hand, tenure of contracts, and cross selling opportunities.
MLD predominantly services mid-tier mining projects across a range of commodities, and has a workforce of 600 employees and subcontractors. The business is comprised of three complementary operating divisions: contract mining (90% of 2011 revenue); crushing services (10% of revenue); and the recently formed Civil Works division, which provides professional expertise and machinery to build infrastructure for mining and civil infrastructure projects.

As a contract miner, MLD is exposed to risks including reliance on the mining industry, commodity price risks, ability to win new contracts, contractual risk, disruption or discontinuance of operations.

Currently MLD is trading at $1.84, which is a reasonable discount to our assessed value of $2.59 and value looks to be growing in the medium-term.

Read the full report on MACA Limited