There is a huge mining bust going on, clearly. All the junior miners are getting slaughtered and in many cases in Australia one does wonder how many of the Mining Services names are actually going concerns. The thing is it is NOT just Australia. It is Brazil, Canada, Indonesia etc. Forgive us then for remaining cautious on providers of kit (Sandvik, Atlas, Metso, Outotec etc etc) and wondering why they are not an awful lot cheaper. All the more so since the Japanese are back (lookout SKF) and there is huge overcapacity of Construction Machinery, amongst other things, in China (see Zoomlion below), remain a seller Volvo.
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Similarly SGS and Intertek have decent ‘exposure’ here and although they are off in line with the market, the relative performances are still pretty stellar as are the valuations when you consider that Rio Tinto is on 6x, McMahon in Australia is on 2x and so on. Bottom line: just because it doesn’t say ‘Mining’ on the tin does not mean it is not a miner in disguise… beware miners in disguise!
