I would depliy half of it in buying and renting out housing or commercial property, something they can add value to.
Then let it sit as an asset, which gives you an income, and if ever need extra cash, can borrow against that asset, temp until paid back. |
Exactly. Construction firms cashflow is key to winning contracts and securing better terms. Remember also they earn 400bps on cash and the Groups operating margin is only 450bps so holding cash is hardly an opportunity cost! |
A cash buffer is an essential part of the contracting business model. See also GFRD. |
The good news keeps coming |
 11 December 2024
Costain receives confirmation to proceed on East Coast Cluster
Contract progresses to execution phase for Teesside CO2 gathering system
Costain Group PLC ("Costain") announces it has received confirmation to proceed to the execution phase on two landmark projects for Net Zero Teesside Power (NZT Power) and the Northern Endurance Partnership (NEP).
Following Government approval of the final investment decision, Costain's delivery partner role will see it deliver and manage the engineering, procurement and construction (EPCm) of the onshore CO2 gathering system for NEP, and associated utilities for NZT Power, as part of this £4bn investment programme.
Costain is one of nine leading companies selected by the bp joint ventures to deliver the schemes. NZT Power aims to be the world's first gas-fired power station with carbon capture and storage, while NEP will provide the CO2 transportation and storage infrastructure for three Teesside-based carbon capture projects.
The confirmation to proceed follows Costain's successful completion of the front-end engineering design (FEED) for the carbon capture network, and its appointment to deliver the FEED for the East Coast Cluster's hydrogen network.
Construction is expected to commence from mid-2025, with start-up expected in 2028.
Alex Vaughan, CEO of Costain, said:
"The energy transition is a vital part of the UK's move to net zero, and our strategy is focussed on shaping, creating and delivering critical pieces of national infrastructure like this one.
"Another key element of our approach is growing our consultancy business, and being selected as delivery partner on such a pioneering project is recognition of our expertise. We look forward to supporting bp and its partners to deliver a world-class CO2 gathering network." |
That's what I don't understand. Why are they holding so much cash unnecessarily when they could have bought so much of the shares back at a third of the current price. I understand they'll be constrained by the pension stuff etc which I don't really understand but holding so much cash is pretty pointless if they're not going to do anything with it |
Thank you, LT.
Appreciated. |
I cannot post the report but it is available via Research Tree.
Report sees flat revenues for 24/25/26 and profits rising from 46.5m to 52.9m over same period. Maintain stable 3.5% operating margins in construction complemented by growth in higher margin consultancy work. A balance approach with flat revenues and improving margins. Transport revenue declining offset by growth in Natural Resources - Water. Net cash to reach £209m by FY27E - +31% from FY24E. 187p target price is based on a blended FY24/FY25 peer EV/EBIT multiple of 8.9x. Current valuation appears to be driven by Costain's underperforming contracts across 21-22. |
150p is fair value in current state.
200p if good profitable growth.
All IMO. GLA ;) |
Can you share a little more about the Cavendish report? Thank you |
Cavendish published initiation note today with buy recommendation and TP of 187p. |
Probably only works out as an additional 2m per year profit though if they're achieving 3.5 - 4% margin. |
HS2 the gift that keeps on giving |
And more to come :
'minimum of £400m to Costain. This contract, to be signed in due course, starts in Q1 2025 for a seven-year period, with the option for additional contract extensions.' |
Nice £400m contract
Costain Wins New HS2 Systems Contract
Contract to deliver mechanical & electrical systems
Costain Group PLC ("Costain") today announces that it is to be awarded a new contract by HS2 Ltd. as a sole supplier to deliver tunnel and lineside mechanical and electrical (M&E) systems for HS2, with a total contract value worth a minimum of £400m to Costain. This contract, to be signed in due course, starts in Q1 2025 for a seven-year period, with the option for additional contract extensions.
The contract will see Costain deliver the design, supply, manufacture, installation, testing and commissioning of HS2's Tunnel and Lineside M&E systems during construction.
Alex Vaughan, CEO of Costain, said:
"Costain has a long-standing involvement with the UK's largest strategic infrastructure programme and this new contract is a testament to the strength of our collaborative and successful relationship with HS2. Our teams will draw on their experience and expertise to deliver world-class systems, using the latest technology to drive efficiency." |
Every stock is rising or falling but this doesn't move. Its a complete fiddle. |
They have been doing big reorganization last 3 years mostly booked below line will be interesting to see if it brings the overhead savings and improvements it was looking for. Only other issue is old pension scheme until that is in surplus increases in dividends unlikely and more share buy backs. |
Next level is 90p hope that holds |
Well there's 100p let's see if 95p presents itself |
I keep adding here on weakness.
Re-checking my numbers I noted half year accounts reported £166m net cash and increasing margins. According to Stocko market cap is £272m. This is a company expected to report FY net profits around £30m yet with a current enterprise value of just £106m. That's a crazy multiple and considerably lower than other good companies like Kier and MGNS.
Hopefully we'll get an interim trading update soon (Full year results due March 11th). |
Opportunity coming, maybe 95-100 |
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