Waterman Share Discussion Threads

[napoleon 14th] 29/2/2016 08:01

DOOOH! Had a good laugh at myself - a bit early in the day perhaps?
A "senior moment"?! Anyway, happy to be wrong on those terms.

Shares look cheap in that case.
I still hold...

[wilk1] 29/2/2016 07:57

Napoleon it's only the half year. P e ratio more like 10 ?

[eclair] 29/2/2016 07:57

Very strong set of results

[napoleon 14th] 29/2/2016 07:55

Results basically very good, but at 4p basic eps P/E = 22.5, so not cheap.
Order book healthy (nearly 2 years T/O) & ROCE @ 30.3% impressive - target was 20% by June 2016.
Profit margin up 24% & CEO says " I am also pleased to report that (ex. Funds and AIM) Waterman was the 8th highest growth stock on the LSE in 2015.”
Looks good. I hold.

[impvesta] 29/2/2016 07:49

Yes, corking interims released this morning:

hxxp://www.investegate.co.uk/waterman-group-plc--wtm-/rns/half-yearly-report/201602290700102238Q/

[battlebus2] 29/2/2016 07:40

Can't be anything but pleased with this mornings report...

[mattboxy] 28/2/2016 22:21

Hope so would be nice to see them flirt with£1-00!!

[battlebus2] 28/2/2016 20:22

Expecting good results in the morning....

[norbert colon] 25/2/2016 16:21

More good PR for Waterman and a clear demonstration of their technical capabilities and why clients want to work with them.

hxxp://www.cibse.org/news-and-policy/february-2016/liverpool-win-the-double-at-building-performance-a?utm_source=ActiveCampaign&utm_medium=email&utm_content=2016+Winners+Announced&utm_campaign=2016+Award+winners

[norbert colon] 24/2/2016 15:01

David. I have just sent you a text. Please include me thanks.

[davidosh] 24/2/2016 14:11

I have two places available for lunch with the directors of Waterman next Thursday to discuss the results and do a presentation if any of you would like to join me ?

[norbert colon] 18/2/2016 16:03

Brummy

Thanks for your useful input and observations; much appreciated and I concur with your thoughts. FY2014 figures taken from the annual report.

I still have a circa 150p price target on an approx 12m basis although this will require a the civil and transportation consulting business moving back into the black upon which (and with a growing order book) this should be easily achievable.

[brummy_git] 18/2/2016 13:00

Many thanks Norbert – By the way, where did you get the FY14 figures?

According to Companies house, Aspen did £489k of EBIT on turnover of £14,748k (ie 3.3% RoS) for the year ending June 2014. This type of profit margin is pretty consistent with the rest of the recruitment sector. What typically happens is that the seconding agent charges the customer (ie local government) around 7% to 9% on the fully loaded cost per employee, which translates (post overheads) into a 3% to 4% EBITA margin.

Consequently for Aspen – rather than using say a 0.7x revenue multiple (ie in line with ATK, RPS & WYG) – I suspect it maybe perhaps more sensible to value the division at circa 10x EBIT?

Meaning that if one assumed Aspen generated FY15 sales of circa £20m, producing an EBIT of £700,000, then I would value this part of the Watermen group at £7 million versus the more optimistic £14 million, as per the peer average for engineering consultants.

That said I think we may be simply splitting hairs, since the £7m variance only equates to a difference in valuation of 22p/share - compared to my 12m price target of 135p. Either way plenty of upside from current levels.

[norbert colon] 18/2/2016 11:42

Brummy

Waterman Aspen delivered operating margins of 4.8% in 2014 and 4% in 2015 (up from circa 2% in 2013) so not wafer thin.

Overall Group operating margins are on the increase year-on-year (toward 6% target) bringing them more in-line with their peer group. Their peer group (listed companies include ATK, RPS and WYG), you will note, are valued considerably higher than WTM on P/S ratios of 0.65-0.75 compared to Waterman's 0.35. Granted this is a simplistic ratio and only one of many to be considered.

Results out in 11 days time (Mon 29th).

[napoleon 14th] 16/2/2016 08:08

"wilk1 - 4 Feb'16 - 09:48 - 1541 of 1548 £1 today chaps?"
What, in this market?

I prefer WTM to AUK, tho'.

[brummy_git] 11/2/2016 14:17

Many thanks Norbert. Assuming the cycle doesn't roll-over prematurely, then I could easily see the stock trading at circa 135p/share in 12 months - equivalent to 13x 2017 PER (excluding cash).

The revenue based rating (ie vs the rest of the sector) that is often mentioned here, is slightly mis-leading given WTM's inherently lower profit margins thanks to its public sector orientated engineer/contractor placement arm.

[norbert colon] 11/2/2016 12:20

Brummy

Please see my post 1540 which addressed my thoughts on WTM's exposure to the commercial market.

Their revenue is typically 50% Infra and Environment and 50% Property. Commercial is around 20% of Group revenue with around 20% Retail, 16% Residential, 35% Highways and the balance (9%) across Education, Healthcare, Power and Utilities. These % are approx only.

Hence, their income is not solely reliant on the London Commercial market. Their operations are regional (UK) and also Australia to also help diversify.

That aside, clearly the economic cycle is something to watch and at some point in time the valuation will get ahead of itself and that is the time to reconsider the investment case. That time is not here yet.

[brummy_git] 11/2/2016 08:44

Hi Norbert – what are your thoughts with regards to where Waterman is positioned in terms of the economic cycle? Growth drivers across the engineering consultancy patch still continue to be relatively strong - UK infrastructure, albeit this segment contributes only a small part of the group's revenues.

Personally on just about every valuation metric the stock is cheap, but I guess battle-hardened investors have a nagging doubt that if the London commercial property market turns (perhaps because of less overseas investment) - together with a possible dip ahead of the EU referendum - then 2016/7 performance (especially order intake) could be impacted.

Clearly though nothing is showing up yet in the numbers to suggest this is the case, so I guess for the time being the shares should hold well?

[wilk1] 04/2/2016 09:48

£1 today chaps ?

[norbert colon] 04/2/2016 08:09

Arthur. I believe there is a general understanding that the London Commercial sector is at, or near, a peak and there is certainly a realisation that things are looking toppy although it depends, as ever, on what research you read. Deloitte cover this area well and it's worth looking at their publications including hxxp://www2.deloitte.com/uk/en/pages/real-estate/articles/crane-survey.html.

Waterman see more opportunities in retail at this moment in time than they do in commercial and investors need to familiarise themselves with the breakdown of WTM's revenues across the various sectors in which they operate.

As they work with a large number of the major London developers, land owners and investors and at all ends of the cycle I.e from early master planning to projects being built on site they are able to gauge the market and react accordingly.

I did look at Aukett's results and agree with your comment although their service offering is somewhat different to WTM.

Interestingly Aukett's are looking to expand in the UAE at a time when I believe (despite Expo 2020 etc) things are looking a little frothy due in part to significant growth since 2010 and the oil price. hxxp://www.constructionweekonline.com/article-37322-uk-based-atkins-lays-off-100-staff-in-middle-east/#.VrNceEXfXCQ

Happy investing