Perenti Pleases with Guidance Upgrade

Small Caps | Dec 22 2022

Perenti has pleased analysts with a second upgrade to full year guidance in five weeks, as the company benefits from successfully negotiating improved contract terms. 

-Perenti issues its second guidance upgrade in just five weeks
-Improved contract terms allowed the company to upgrade full year revenue and earnings
-Brokers optimistic wider guidance range allows for further upside

By Danielle Austin

Upgrading guidance for the second time in five weeks, mining services company Perenti ((PRN)) is now targeting revenue of $2.7-2.9bn and earnings of $185-205m. At the midpoint, this reflects a 6% and 8% increase to the respective $2.6-2.7bn and $215-230m targets the company upgraded to in mid November. Perenti’s guidance upgrade also implies better margins, reflecting a return to pre-covid levels of 8.3-8.5%. 

The latest upgrade comes off the back of Perenti securing better rates and terms across a number of its Australian and African projects, including some retrospective adjustments on complete work. The company highlighted these retrospective upgrades should provide fairly immediate benefit, and positively impact on first half performance. Contract wins at Evolution’s Ernest Henry and Regis’ Garden Well also supported the guidance upgrade, but the relatively small wins had less impact than rate adjustments. 

The company continues to work towards its 2025 strategy, which targets revenue of $2.5bn, a 10% earnings margin, and a 20% return on average capital employed. Its near-term outlook remains strong, with more than 90% of FY23 revenue secured and a transition to tier 1 jurisdictions ongoing.

Brokers look to further upside potential 

With Perenti commenting that its work outlook remains strong despite persisting labour challenges, Macquarie (Outperform, target price $1.40) is constructive on the near-term view. The broker finds work in hand of $6.5bn and a $8.5bn pipeline to be supported by an anticipated ramp-up and alleviation of headwinds moving forward. 

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