Costain Share Discussion Threads

[al101uk] 12/12/2019 11:50

I was worried about cash flow more than I was worried about profit, the latest news doesn't help.

They had a Net decrease in cash, cash equivalents and overdrafts of £58.7 million at interims, on a "underlying operating profit" of £21.2 million.

Second half is looking similar to first half if they hit the top end of their projections, but what does todays news do for cash flow?

Reported interim operating profit was £10 million.

[f15jcm] 12/12/2019 11:42

Actually, with the (non-cash) loss on the disposal of Spanish assets, there is likely to be an accounting loss for the year.

[f15jcm] 12/12/2019 11:16

Absolutely, if they were carrying debt it would have been a bloodbath this morning! So what is the (non-adjusted) profit after tax for the year going to be, ~£7m? It certainly doesn't look cheap on that basis.

[ny boy] 12/12/2019 11:15

From the June profit warning

As a result, the group expects 2019 revenue to be lower than previously anticipated, while underlying operating profit for the year is expected to come in between £38m and £42m.

Today’s rns

As a result, the Group now expects FY19 underlying operating profit to be in the range of GBP17 million - GBP19 million

How much is the current cash?

[bogdan branislov] 12/12/2019 10:39

Shows the importance of a large cash pile and a strong balance sheet. Definitely a year of set backs for Costain, but the business remains in a strong position and is very cheaply priced, far too cheaply priced considering the underlying business strength. Price falls during the last year still look very overdone to me.

[elsa7878] 12/12/2019 09:32

So unclear - crazy...

[lonrho] 12/12/2019 09:23

Looks like half of it so presumably get half of the 40 million cash back.

[elsa7878] 12/12/2019 09:13

Being a bit thick. Is the loss on the A465 £40 million or half of that?

[f15jcm] 12/12/2019 09:06

Underlying profits have been cut in half though, and that's before you allow £10m for the collapsed roof which has been treated as a non-underlying item. The Welsh seem to be a thorn in the side of Costain, they had already shafted them over M4 work.

[sanmiguel1] 12/12/2019 09:01

Special situation investment here. Already irrationally undervalued before today’s drop, with today’s election exaggerating the sell down to this level. No matter who gets in, investment in infrastructure will be a priority. The cheapest company on the stock exchange by some distance.

[ch1ck] 12/12/2019 08:26

Anyone who tried to ride the short position here will get burned there is a solid Div and lots of institutional buying.

[ch1ck] 12/12/2019 08:17

Sell way over done I just bought @ 153p look at Tullow, and AA the rebound is culpable

[f15jcm] 12/12/2019 08:16

Sold out, was expecting more damage. This CEO has not had a good start.

[bookbroker] 12/12/2019 08:11

Not good, it is the knock to the cash, and is this end when the project not due to complete until 2021!

[bookbroker] 12/12/2019 07:52

Back to 170p!

[sophia1982] 10/12/2019 12:44

Joey, can you please post link? Thank you

[joeyredeye1] 09/12/2019 19:42

Well Bogdan, I note Simon Cawkwell is tipping Costain now, apparently The DT are too!

[cheshire man] 29/11/2019 09:52

Good to see the chart turning up :)

[bogdan branislov] 27/11/2019 19:54

The more I look at Costain, the more I am becoming convinced that it is the cheapest stock on the UK exchanges. PE ratio under 8. Cash adjust and it is 6.5, by the end of 2020, the cash adjusted PE is likely to be nearer 6. The cash pile is 20% of the market cap by the way, and that is after the sector generally has had a tough time over recent years, although there is no evidence of that at all in Costain's balance sheet, none whatsoever. Growth in balance sheet equity - the real measure of growth in shareholder value - has been building steady for a decade, and that is after paying generous dividends, and is still expected to grow this year even though earnings will be about a third down on last year. Balance sheet equity for Costain is about 5 times higher than it was in 2010. The share price is actually slightly lower now than it was in 2010, if you allow for the small amount of share issuing over this period, the share price is effectively unchanged despite the considerable build up in value within the balance sheet since 2010. And then there is market cap, a mere 1.5 times TBV, bear in mind that Costain is not a land holding house builder or a real estate investment trust. This is a high quality company selling for a giveaway price. Bogdan

[bogdan branislov] 02/11/2019 14:57

Joey, CSP still my largest holding, followed by MGNS, COST, CAML, FORT, GLE and LGEN. CSP's business model, growth profile and margins are all very compelling. I had a bit of a beef with CSP about their claimed ROCE. They claimed a high 30s % ROCE, nobody else gets the ROCE figure this high for CSP. But they removed intangibles from the calculation of capital employed. But these intangibles are due to the goodwill from the aquisition, which is employed capital. The conventionally calculated ROCE for CSP is very strong anyway, so why torture the data like this! I spoke to CSP and they said that ROCE calcs are none statutory in format, which is true, and they think that their method best reflects their actual capital deployment. We had to agree to differ. Not a big issue, still just my largest holding, but they do have a weakness for trying to maximise every bit of news in the very short term. The recent half year margin drop was not really a surprise when you consider the move to partnership builds, margins will always be higher for land holding builds as they need to be, but CSP did not forewarn of the margin drop, which they should have done. Still a compelling case, remains around 20% of my total holdings now, some CSP and MGNS was sold to make space for Costain. Bogdan

[joeyredeye1] 31/10/2019 13:31

Thanks for this comment. It was you who put me onto CSP vis the comments section in the IC. I’ll have a look at this too...

[bogdan branislov] 31/10/2019 09:57

Intently watching and trying to draw inferences from the day to day price moves is a mugs game. I am a new arrival as a Costain shareholder. Taking a while to build a stake, I have been buying in this week, I should be fully there by tomorrow - that is for a low 6 fig holding. There is currently some great value in the UK construction sector. I see the low prices as partly Brexit uncertainty jitters and a few disasters in the sector. The sector dross is hardly difficult to spot is it - carillion and Kier balance sheet have been ugly for many years. I thought Costain was good value before the price drop and I felt that the price fall on contract delays was hugely overdone - I don't mind the market being moronic at times, in fact i rely on it to make my living. IC type stock screens misunderstand true growth. They effectively obsess on year by year earnings growth, ignoring he far more important balance sheet equity growth, which, so long as the company concerned is not loading on intangibles, is a far more accurate guide to growth in shareholder value. Costain has a strong balance sheet, steady equity growth, a cleat strategy and honest management. This is a high quality business selling very cheaply. The recent contract wins were just the last straw, my other holdings are strong, but I just had to make space for Costain.

[galles] 16/10/2019 14:02

And off it goes!

[sophia1982] 16/10/2019 10:05

Quite unusual price reaction. The win is not a new contract, but an extension. However assuming a margin of 4-5%, this should add at least 13-15m in profit. Even if we discount this, one would expect market cap to increase by a few percentage points.