Costain Share Discussion Threads

[catabrit] 16/5/2023 10:26

Thanks for sharing Rogue. You clearly have access to interesting market intel. I’ll do better to take on board more of what you say. Appreciate it.

[roguemale1] 16/5/2023 10:17

Hi Catabrit.
Ummm, well let's just say that is hopefully the end to something that I said still had some legs a few weeks ago.
And assuming that replacements are sought from the market with the right credentials, the Highways Agency will be pleased on both counts. And irrespective of leading edge and all that stuff, its still an important market.

[catabrit] 16/5/2023 09:38

Yes I noticed that he had left via LinkedIn. Another guy from the consultancy business they acquired (Rhead) has left too

When I pressed IR about the margins vs macro backdrop they alluded to cutting fat / headcount. So I anticipate seeing more of this as they rightsize the business for the risk appetite / pipeline of work they have.

Could you elaborate on why you think this is good news? Curious to get an insider’s perspective I.e. from someone in the industry.

[roguemale1] 16/5/2023 09:11

Morning all.
Well this is going around so I'll post the link.
For me its good news.
hxxps://www.constructionenquirer.com/2023/05/16/top-level-shake-up-looms-at-costain-highways-division/

[catabrit] 16/5/2023 09:07

FYI - Nice update from Hercules Site Services this morning. Also trading in line with expectations. They act as a sort of match-maker between infra projects / contractors and blue collar workers.

Let’s keep seeking / sharing these data points no matter if they support or disprove the hypothesis on Costain.

[disc0dave45] 13/5/2023 18:30

Yep from March finals RNS for FY12/22:o Free cash flow(2) of GBP72.9m (FY21: GBP53.1m) mainly reflecting positive working capital.o Net cash at year(3) end FY22 of GBP123.8m (FY21: GBP119.4m), ahead of market expectations.

[roguemale1] 13/5/2023 15:22

Yep, page 7 2022 report and accounts.

[catabrit] 13/5/2023 13:10

We must have a different Cost. Because ours has £130m.

[playnicely] 13/5/2023 11:42

Construction as a sector seems to be at a low point. COST had £100m in cash a couple of years ago, then £75m at end of 2021, now nothing according to the 2022 annual report. Still showing the same NAV but where did the cash go?

[the count] 12/5/2023 14:50

--->CATABRIT

Me too.

TC!

[catabrit] 12/5/2023 13:56

Happy to buy on weakness here.

[disc0dave45] 12/5/2023 13:43

Like most I'm banking on a rerating here providing they keep delivering.

[brucie5] 11/5/2023 21:27

disc0dave4511 May '23 - 20:02 - 2805 of 2805
0 0 1

A bit surprised they only have a target price of 80p (PE only 7x), I was targeting about £1 (PE 9x), construction median PE is 10.1x.
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Glad you said that, Dave. A comparator I use is MGNS, in itself a very good company most accounts - but somewhat dearer. These figures from Stocko:

MGNS:
PE Ratio (f)
7.9
PEG Ratio (f)
1.2
EPS Growth (f)
6.8%
Dividend Yield (f)
5.88%

COST:
PE Ratio (f)
5.3
PEG Ratio (f)
0.7
EPS Growth (f)
8.4%
Dividend Yield (f)
(3.80%) - N/A

[disc0dave45] 11/5/2023 20:02

Many thanks for posting the Liberum report. It's very reassuring, following their FY22 finals in March id pencilled in an eps of 11.1p for this FY, so nice to see the house broker giving a 11p forecast. This is still massively undervalued on a forward PE of 5.2x.A bit surprised they only have a target price of 80p (PE only 7x), I was targeting about £1 (PE 9x), construction median PE is 10.1x.

[catabrit] 11/5/2023 13:37

And my apologies - I didn’t mean to Pooh pooh your post. I think if you had put a bit more colour to it I might have responded differently. I do try my best to be objective about these things and I don’t stay emotionally attached to a thesis if it’s wrong. Whilst I think it’s probably fair to say that the golden age of infrastructure so many predicted as recently as fifteen months’ ago is probably gone, I likewise don’t believe that the inverse of that (doom and gloom) is true either. It’s probably somewhere in the middle. You could probably speak to a thousand different people and get a thousand different answers re what the future holds for UK government led big infra projects. But my hunch is that if the worst happens and projects get delayed or cancelled, Costain will stick to its margin aspirations and cut operating costs (staff, mostly). Even applying a haircut to revenue we’re still getting a pretty low valuation at today’s market cap and as always that excludes the net cash so whilst we shouldn’t neglect the downside risk, I feel its impact will be pretty immaterial at today’s market cap. It might just put a ceiling on the upside. It’s all speculation of course and I agree that we should just keep an eye on things and continue to share views, news and data points. For every contract that I read about that’s been cancelled or delayed, I read another that’s been awarded.

[catabrit] 11/5/2023 13:26

I see that Sikh is back!

[catabrit] 11/5/2023 13:25

I’ve upvoted your post. I agree. What you’ve written is fair. I concur that the moving of the goal posts from the Highways Agency to numerous others is a concern and not just for Costain but for the entire sector. Arguably the more diversified businesses could be better protected. We will soon find out if Costain’s more focused order book and consultancy mix is the right / better strategy.

[sikhthetech] 11/5/2023 12:24

Liberum, the house broker, have had a 'buy' recommendation for years, so it's nothing new, is it?
Have they upped their target price or has it remained the same?


The govn is making cut backs and construction is one of the areas which are suffering.
With the GE coming up as well, the govn focus is on sectors where they can win votes.





As the house broker, you'd expect them to be positive... lots of could, should, assume, maybes, ifs.

[catabrit] 11/5/2023 10:42

The prior accounting has suffered because of the problem contracts. Even though those were addressed a while ago, accounting as we know is backwards-looking. So I expect this to be picked-up by the screeners in due course.

[brucie5] 11/5/2023 09:20

Catabrit11 May '23 - 08:26 - 2795 of 2795
0 0 0
Liberum have reiterated their buy recommendation. The report is worth a read and I might copy and paste the key sections for people on here.
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Yes please! I'm seeing COST as a recovery discount buy atm, eg in relation to MGNS, though much smaller and not without risk.
Value metrics on Stocko look outstanding.
Therefore I hold. But return of dividends would be an inflexion point in its recovery to confidence.

[catabrit] 11/5/2023 08:26

Liberum have reiterated their buy recommendation. The report is worth a read and I might copy and paste the key sections for people on here. But essentially, all the *bad news* about smart motorways and related contracts was already baked into their forecasts (another sign that management are quite cautious which is positive re contracts).

The energy & defence business is performing strongly and it’s worth stressing that pretty much all those revenues are lower risk, higher quality as they’re mostly consultancy-led.

I’ll copy and paste the key sections for you later.