How can you say it’s in a range? It’s up 25% in 6 months and at 5 year highs… |
Fundamentals no longer mean much. This is a degen market and will remain that way for quite a while until we get a real recession |
Similarly there are 3 analysts covering Costain with a 12 month forecastMin 115pMax 187pAverage 145pAgree there yours and analysts forecast that there will be further highs to come. My target is 160p this year. |
I look at it like this. Its nearest comparator is GFRD - cashed up small constructor who went wrong and now rebuilding. GFRD shares bottomed mid 2019 c100p and are up 4x since. COST bottomed mid 2022 c35p and 4x from there puts you on 140p. And that is before you allow for the fact that COST likely has the higher m/t margin potential. |
Volume about average, needs to clear 114 to be out of the current range. Removing the very large cash position, this is still on an undemanding multiple.
Said it before, another 10m buyback is currently small change out of that cash pile and good bang for buck at these low prices. |
Good to see, but it's still in a range. |
Share Price Spike? Hmmmm :) |
Good to see this hitting new highs as the year starts. |
The ratings you refer to Sophia were achieved, from (fallible) memory perhaps ten years after Costain's last disaster, so it can be a slow progression while the most recent disaster is still a painful memory for many.
I also expect the management to be careful in two respects over the medium term future.
Firstly they will, I hope, exercise great care in selecting tender targets and pricing them, and secondly they will, I expect, hold on to undeclared profits each year to ensure no hiccups - ie. they will want to make the profits rise consistently. If they manage that the share price will do very well over time I'm sure. My first ever share buy was in a construction company which did precisely those things and the shares went from 7 pence to £2.68 in ten years after a "near death" experience. |
For those who like a little bit of history when estimating the value of a company.
In 2015 Costain generated decent results: revenue was 1.3bn, adj operating income 33m (op. margin was 2.5%. With 105 outstading shares, adj EPS was 25. Order book: 3.9bn. Net cash balance 108.
With a share price of £3.6, market cap was 378, ie a P/E of 14.4 time.
With an EV of 270m, the company was valued at 8 times the operating profit.
TODAY:
If we apply the same multiples to the consensus' figures we would have:
- Based on P/E = £1.77
- Based on EV/Ebit = £1.82 (Market cap of £498 - net cash 160 = EV 338/adj Ebit42)
Consensus often tends to be optimistic so you can make your own estimates, but in any case, even after a very nice run, this remains undervalued.
The recent wins make it also probable that the forward work position (although different from order book) will be very good and significantly ahead of 1H24. With today's announcement, I think we have surpassed the 5bn's mark. |
Indeed, never expected Costain to be one of my good performers.
Approx 160m still in cash values the business at just over 130m, this is still massively undervalued. |
This company really is going places now. Well done all LTHs. I remember getting my final chunk at 35p! |
Siemens Mobility and Costain Joint Venture Wins HS2 Systems ContractNew contract to deliver high voltage power supply systemsCostain Group PLC ("Costain" or the "Group") today announces that a Siemens Mobility and Costain Limited 50/50 Joint Venture is the successful bidder for a contract, to be signed in due course, to deliver high voltage power supply systems for the HS2 project throughout the 225km route from Birmingham to London.The contract is expected to be worth in the region of £300m to the joint venture, with optional contract extensions. There is a separate maintenance contract following the design and build phase which will operate for seven years and is valued at £32m for the joint venture. |
104bn upgrade announced by Ofwat, Costain should benefit from the investment programme upgrade |
I'm not sure of Costain's situation but companies usually constrain themselves to a 10% annual limit on buying in shares. Also, from the 2023 accounts:
11. CASH AND CASH EQUIVALENTS
Cash and cash equivalents are analysed below and include the Group's share of cash held by joint operations of £59.2m (2022: £56.5m). |
Don't forget they went from approx 110m shares in issue to approx 275m shares in issue back in May 2020.
So they need to buy back over half the shares currently in issue to get back to old days of numbers available.
That kinda matches the cash in bank, BTW. |
Sophia, The failure to move onto another £10 mil share buyback immediately after the first £10 mil was completed suggests to me that they were looking at it as enhancing the 1.2p dividend. I.e. a circa 4.8p total.
FWIW I think they should be buying in circa 10% of their equity in a year when cash is so high. |
The cash they have is far beyond what they need. In the last analyst call the CFO mentioned the possibility of M&A, but there was nothing concrete and short/medium term. So if you think that the stock is undervalued (I think it trades at a much lower valuation than peers) they should start a new buyback and do it.. NOW! while the so called dividend parity is suspended
For reference: An assessment of the Scheme funding position was carried out on 31 March 2024 and, as the funding level (on a Technical Provisions basis) was more than 101%, contributions will stop from 1 July 2024 to 30 June 2025. These contributions would have amounted to £3.4m for the period if the Scheme funding level had been less than 101%.
In addition to contributions being stopped for a year, as the funding level is above 101%, "dividend parity" will be suspended for a year. |
Road and rail business may not be highly valued in terms of p/e but energy and water must surely be worth a high rating given the prospects for spending in those areas in the foreseeable future.
Ex any SNAFUs I think we can look forward to earnings growth and a growing p/e valuation of those earnings. For patient investors. |
Although a 'NON' RNS, interesting that yesterday saw a move up in share price with higher volume. Hope we haven't got a leaky ship here. |
As a ballpark figure, 50m should prove more than enough for contract bonds and assurances held in escrow.
The fact that they earn interest for holding +160m is good in a sense, but bank deposit interest rates are coming down and Costain is not a bank deposit business.
I doubt they earn north of 3% on holding cash, you tend to get higher amounts in retail accounts at least for low amounts of cash, the more cash one has the rate comes down.
Anyways, they need cash to back the contracts, they do not need +160m. It is after all, shareholders money. I think they'll announce another buy back at next results IMO. |
You are missing the point. What you describe is a reit or property investment company. This isn't their sector or area of expertise. If you can earn 400bps on current liquid assets on deposit and need strong cashflow for your bau business why would you. I don't think reits earn a margin in excess of 400bps either lol |
I think they should stick to building things for other people rather than turning into property speculators |
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