Costain Share Discussion Threads

[volsung] 03/9/2020 08:36

Can’t invest in road builders given the current environmental crisis

[billybankrupt] 03/9/2020 08:19

Really?One fifth of the price???

[skinny] 03/9/2020 08:04

Extended auction............

[imastu pidgitaswell] 03/9/2020 07:59

Yes, not good. No quantum, and the cash has largely been spent - so the net cash at 30 June equal to the market cap remains the position. But the upside has gone, it seems.

[essentialinvestor] 03/9/2020 07:19

Arguably only two (LSE listed) sector companies that are investable imv,

MGNS and BBY - and even with those two there have seen past disappointments.

[skinny] 03/9/2020 07:13

Hmmmmm :- .

[imastu pidgitaswell] 02/9/2020 09:04

Excellent. Now trading at a discount to the net cash position.

Results on 14th September.




PLEASE IGNORE - STORED FOR LATER:

................................KIE....................COST

Number of shares................446.....................275
Share price....................1.30....................0.583
Market Cap .....................579.....................160

Financial Debt at 31.12.20......436
Delayed Tax......................50
Trade Finance...................110
Cash raised....................(229)
KL sale....................... (100)

Net debt / (cash)...............267.....................(80)

Enterprise Value................846......................80

Projecting forward earnings:

................................KIE....................COST

Turnover......................4,000...................1,200
Margin.........................3.0%....................3.5%
PBT.............................120......................42
Tax............................ (30)..... ..............(11)
PAT..............................90......................32
Number of shares................446.....................275
EPS(p).........................20.2p...................11.5p


PE ratio.......................6.44....................5.09
E/V : Profit ratio.............9.40....................2.55

[farrugia] 28/8/2020 15:15

they are a 29.68B market cap so it should be spare change for them.

[skinny] 25/8/2020 17:10

Don't mention Jarvis.......

[imastu pidgitaswell] 25/8/2020 16:36

I don't know too much about either, but KIE (large debt, no recent information and a very entertaining thread) and GFRD have some activities in the same field - GFRD a similar balance sheet with significant net cash. But I agree, they are much more pure building construction, especially GFRD - city centre stuff etc, and I can therefore understand their share prices.

MGNS is more successful, maybe a better comparator.

All the rest (Jarvis, Carillion, Amey et al) went bust.

Worth remembering the COST order book is over £5 billion, or c5 years' work.

It's not a great sector recently, as their share prices show - but when the business is available for less than 1p per share (as it was just before the close), there comes a point...What is needed is institutional support, i.e. demand for their shares. Currently there just isn't any. They need to generate some appetite.

I do keep reminding myself that when I first bought these at 38p, just before they shot up (thanks to a lot of shorts caught, erm, short) to over 100 (intraday), that it was meant to be a long term hold and a proper 'investment'. As such it doesn't matter whether it is 38p, 100p, 200p or 52p. Yes, I keep telling myself that...

:-)

[farrugia] 25/8/2020 16:22

which listed companies are most similar to Costain? Perhaps, Galliford but that's more construction no?

[npp62] 25/8/2020 14:22

I'm not investing another penny until we know what's happening with the Welsh etc.

[farrugia] 25/8/2020 14:11

i keep accumulating at 53p

[imastu pidgitaswell] 25/8/2020 11:47

With their results for the Welsh one - hence why they have delayed them to 14th September.

The other one (Peterborough) not known.


Extraordinarily weak on tiny volumes (for a change...) We do need some financial information to at least highlight the proposition.

The entire business for less than 2p per share after deducting net cash. Anyone? Anyone?

Nope...

[farrugia] 25/8/2020 11:30

how will we know the outcomes of the cases - are they published somewhere?

[imastu pidgitaswell] 20/8/2020 11:14

They are different contracts, but certainly for the Peterborough one, they have largely paid out and expect (they would say that...) to be reimbursed. From the trading update a few days ago:

"The Group has £42.0 million of P&H contract asset (i.e. work undertaken but not yet paid) as at 30 June 2020 which will increase to £49.3 million at the end of our works, to be recovered through the resolution process."

I would expect the A465 to be similar in terms of cashflow - COST pay and then get paid. But not as clear cut, so far.

RE the cash and scoring - to be clear, the balance sheet strength isn't scored, it is just 'pass' or 'fail', then the process moves on to the scoring of the various bid elements. All I am saying is that while it is theoretically not considered in the scoring, the perception remains of their relative strength on these non-financial aspects. Scorers are more likely (imho) to score a company well if it well funded than one that is in trouble - we're all human.

[farrugia] 20/8/2020 10:58

DAMN there is always something that seems to hold Costain back - first it was the rights issue now the pending cases which should hopefully be cleared soon!!

[sophia1982] 20/8/2020 10:20

IP, you are right about the closed period. I should have said that they might have bought at least a few shares in the recent past (their participation to the rights issue was really minimal). Bicker and AV just own a few hundreds shares...

Unfortuately I don't think you are right about the potential costs unless they win the arbitration. It is a bit complicated here and the two contracts are different. But some aspects to consider if they lose: they still have to pay subcontractors etc and the cash held in the JV accounts goes to the winner. They may also have to incur additional costs for the winner to complete the project, etc. It is a mess! I could not find any reliable estimate of this potential liability, but it can be material.
On the positive side, they have an excellent cash position so they should be able to weather the storm. I don't have a clear idea of what level of net cash they need to have in order to score well when bidding for new work.

I am long but with a truly disastrous capital raise and all these bad contracts, this company needs to be scrutinized very closely.

[imastu pidgitaswell] 20/8/2020 08:53

They can't buy as it is in a closed period - until the results are published.

The thing about the ballsed-up contracts is that COST have paid almost all of the costs (staff costs, contractor costs, supplies etc). From a cash perspective, there is only potential upside - broadly speaking - from the arbitration process.

Regarding cash needed to operate - they just need sufficient liquidity, be it cash in the bank or borrowings, same as any business, but even more so for a long term contract construction company where you pay for stuff ahead of being reimbursed by the client. Also for the reasons they stated at the time of the placement - potential clients do like to see a financially robust company servicing their business, they do not want it to go bust and deal with all of the complexities and expense of that - I have seen it happen professionally and it's a mess when it happens. It is all part of a scoring system that is reduced to just 'pass' or 'fail' in theory, but in practice all of the other scoring (to decide who to award the contract to) is influenced by that initial perception of the company's stability. Basically having net cash on the balance sheet and plenty of it helps.

Re selling - me too. Holders seems a bit silly, at these prices, and after the placement at 60p.

For me, the question is what needs to happen to turn the share price around. Nobody wants this (from the institutions - I want plenty) - doesn't matter how cheap it gets. I guess the answer is they want to see certainty re these 2 contracts (although I think they're not relevant going forward), and that COST (and others in the sector, e.g. KIE) can generate cash on a consistent basis without regular contract messes. The balance sheet cash, the future income is all there for COST (not so for KIE) - it's all about execution and delivery.

[sophia1982] 20/8/2020 08:42

IP, I agree it is extremely cheap but costs and cash outflows from the two bad contracts can be much higher. At the moment it is impossible to quantify.
You can find some elements here, but Costain's share of pain is not disclosed because commercially sensitive.

It is a shame that management is not buying any shares at this level.
I also wonder who has been selling for the last month because we have only one buy notification from Gresham and nothing else.
One relevant question for me is: how much net cash does this company need to operate?