Costain Share Discussion Threads

[bobaxe1] 03/7/2023 13:31

Glad to see the market is waking up to the potential value here

[pinemartin9] 03/7/2023 12:52

Yes, things have been turning round here for some time. Surely the value must unwind here before too long. It's been a long journey for me, currently 5% down on my holding. Purchases at 35p ish helped reduce my average. Seems relatively stable though. I have 15% of my pf in Costain so movements have a big impact on me.

All seems good here at the moment. Holding above 200 day MA which is still in uptrend.

[catabrit] 03/7/2023 12:47

Also, for what it’s worth, I think we own *by far* the most inclusive senior management team and executive board in U.K. listed construction / infrastructure. We get zero credit for it now but in time I think we will.

[casholaa] 03/7/2023 12:42

Well, I was thinking that Govt. could allow TW to go bust, take the infrastructure back into public ownership and start a bidding process subject to bidders developing the infrastructure to deal with sewage and leaks (or leeks for them in Wales).

[catabrit] 03/7/2023 12:25

I always liken investing to a game of snakes and ladders. And I honestly cannot think of an easier, safer ladder to climb than Costain at 47p odd. I don't know what the base rate is for buying things at net cash with optionality on profitable going concern value that has the potential to be 2-3x that net cash, but it must be bloody high i.e. there must be a good 70-90% statistical chance of making money.

I have been playing for a long time now and anytime I see this sort of set-up I get the bat out and swing hard. Obviously I could still be wrong but the odds are so favourable that it's worth it.

Let's see what happens. It's going to be a fun H2 I think.

[catabrit] 03/7/2023 11:53

I also think the new pension agreement removes an important impediment to this being acquired. If the shares continue to languish, I would expect Costain to be taken private or bought by a competitor / someone who wants UK infrastructure exposure. Especially considering that they also have no fixed price contracts on their books. It's hard to underwrite a pensions' settlement so now that it's done for the next couple of years, it becomes much easier to model. Likewise, a buyer would want comfort on fixed price contracts and Costain can now provide it. So then from a buyer's perspective, it becomes about the expertise they're buying and where that expertise sits from a competitive position vs peers considering the outlook for UK infrastructure spend across road, rail, water, energy and defence. That's much more palatable.

But the great thing here is that Alex et al have a huge amount of self-help optionality at their disposal. They could reduce the share count by 10-20% and that would be extremely accretive for the rest of us who then see our FCF yield per share go up by the same amount.

Use some of the net cash on the b/s to buy back stock at a depressed share price And voila, your annual FCF generation has 10-20% more purchasing power.

[catabrit] 03/7/2023 11:43

Nobody is going to be selling shares pre H1 results considering the probability of either;

1). dividends being reinstated
2). a buyback being announced
3). more contract wins

So - and I could be wrong - I think the bid has only one way to go; higher.

@ roguemale1 - you don't announce a dividend prematurely. I think there is more scope to announce a buyback early as that can be more accretive to intrinsic value depending on where the shares trade. If I was CEO, I would be using that cash pile to be buying back shares left, right and centre but that's because I'm more of a capital allocator, rather than an operator.

We just need to be patient. Summer is coming!

[casholaa] 03/7/2023 11:20

My short term view is that, even if valued at cash or thereabout, any additional profit-making contract should serve to provide an uplift to the share price There is potentially a whole load of projects that Cost could be involved in, but it's not worth entering into a contract only to bang one's head against a wall although I still think that they should bid to enhance their understanding of projects bid on.

[roguemale1] 03/7/2023 11:13

£7.5m is roughly half the cost of the the annual divi last 2 times it was paid, more than half prior.
Cmon Alex, RNS on reinstatement of Divi now please!

[sikhthetech] 30/6/2023 15:07

Thags,
"as much as Sikh the tech can be seen de-ramping he did have a point with costain."

Thanks.

I follow economic/political newsflow and see how they impact the sector. I also look at company/sector newsflow.

If the bull points can be countered then it makes the bear case stronger.
If the bear points can be countered then it makes the bull case stronger.

I'm negative on HBs and construction. The govn has a huge debt and interest the govn is paying has increased substantially. Taxes have risen as have energy prices.


My posting history on HBs is there to see.

Look at PSN/TW. I was saying 2 yrs ago that there's inflationary pressures and BoE will have to increase interest rates. 6 months before they actually started increasing them. A year ago when HBs and investors were bullish, my opinion was not to buy any HB due to affordability and my target on PSN was 1200p-1500p when the share price was around 2000p. The share price has fallen back due to the challenges I mentioned.


sikhthetech - 07 Jul 2022 - 16:22:15 - 2901 of 3086 PERSIMMON PLC - THE
I wouldn't buy any HB at the moment...
Affordability issues still mounting up with energy cap set to rise to around £3000 pa in Oct, inflationary pressures pushing up interest rates.

House prices slowing which happens before a crash..

<...>

[casholaa] 30/6/2023 11:06

Wow. Look's like they are now maximizing the strength of the balance sheet and more importantly, the company itself.

[catabrit] 30/6/2023 10:47

It looks like the market is finally waking up to the impact of that announcement on Costain’s FCF. It’s probably a bit hungover as I’ve heard that Thursday’s are the new Friday’s these days!

But c’mon Mr Market - an extra £7.5m per annum will be available for corporate purposes (cash pile, divi, growth) for the next 3.5yrs. So £22.5m. The NPV of that alone should add 15-17% to the market cap!

[catabrit] 30/6/2023 10:19

Welcome bobaxe1.

[bobaxe1] 30/6/2023 10:13

Agreed which is why I have just taken a position

[catabrit] 30/6/2023 09:47

Liberum have upgraded their y/e net cash figures. They’re expecting the following (assuming we don’t have a buyback which we can talk about another day).

FY 23: £134m
FY 24: £164m
FY 25: £181m

As I stressed in a prior post, even if you want to be super mean and assume this merely trades in line with net cash you’re looking at a share price 40% higher by 2025.

[catabrit] 30/6/2023 08:55

This is more than a little bit of good news. It’s excellent news and the end result will mean more of that FCF accruing to us via dividends. It was always the biggest impediment to the resumption of a dividend and with that now cleared I’d expect some sort of announcement at the half year results.

[this_is_me] 30/6/2023 08:18

A little bit of good news can't do any harm, particularly as the share price seems to be on an upward path.

[casholaa] 30/6/2023 00:35

O/T but amusing "As of last September, Thames Water owed around £13.8 billion to its lenders, a figure that was around £840 million higher than six months earlier.

The company’s net debt has grown from just under £11 billion in 2018. Much of the debt was added when Thames Water was owned by Macquarie, the massive Australian investor.

In December 2005, before Macquarie bought the utility, Thames Water’s net debt was just £2.4 billion. When Macquarie sold it around a decade later, the debt pile had ballooned to more than £10 billion."

I find it amusing because I recall that other antipodeans bought Homebase and I lost thousands on Range Resources and the Puntland dream lol!

[casholaa] 29/6/2023 21:28

I'm thinking Railtrack as far as TW is concerned.

[catabrit] 29/6/2023 19:10

Reading up on all this Thames Water stuff and seeing signs of drought everywhere, I can’t help but think there’s a decent probability of us witnessing a massive capex boom in the water space. So many of these firms have starved their infrastructure of the capex needed to a). Deal with a rise in water demand and b). Deal with a drop in supply.

I mean water is of national importance. And if these firms want to stay private they’re going to need to spend or the government will take them over and do it themselves. Obviously there’s a question mark over costs and whether the government could even afford it but this is water - we can live without upgrades to roads and rail. We can’t live without a solid climate change protected supply of water.

Anyone else have thoughts on the above?

The new chair of Thames is / was chair of Cadent and obviously Costain do a lot of work with them via that 10-yr £150m consultancy framework announced back in 2020.

I think a lot of the big players in water - not just Costain - could see an unprecedented capex boom.

[catabrit] 28/6/2023 17:00

Nice rise in the bid today. I’ve been hoovering up shares the last few weeks and so it will be interesting to see where this goes as I think there’s been a big clear out of retail who got spooked and sold.

[catabrit] 23/6/2023 13:20

I’ve been buying shares every single day this week.

[casholaa] 22/6/2023 11:27

lol. Of course it all affects the revenue and bottom line.

[smackeraim] 22/6/2023 11:17

Well the news is non regulatory so it's not a price sensitive amount.

[salpara111] 22/6/2023 11:13

As previous poster says they have won a "share" of the contract.
Have they got a contract to sharpen the office pencils?
I have been tracking Costain with a view to taking a stake but as alluded to by previous posters the company is absolutely sh*t at communicating with the market.
The fact that they have chosen not to indicate the size of their share would suggest minimal involvement.
I'm still inclined to take a stake but as risk free interest rates continue to rise I'm holding more in cash at present.