Costain Share Discussion Threads

[casholaa] 26/3/2024 09:48

About time.

[mirabeau] 26/3/2024 09:37

Tipped in Telegraph

[spooky] 26/3/2024 09:19

Looks like all the sellers have left the building.

[roguemale1] 18/3/2024 09:15

hxxps://www.constructionenquirer.com/2024/03/15/balfour-and-costain-take-4bn-teesside-net-zero-power-station/

[roguemale1] 16/3/2024 15:09

Pinemartin-its frustrating but at least it chips away at reinforcing that the turnover secured is not reducing, especially as IR managed to not get the business on the Enquirers top 100 by turnover!

Muckshifter-Ive got to ask-Blackwells? Pryors?

[muckshifter] 16/3/2024 13:59

Initially this is going to be just design / consultancy work over probably quite a long period for Costain, I would think. As I read the RNS there are regulatory hurdles to overcome and then presumably enough design work will have been done to come up with a cost estimate leading hopefully to the Final Investment Decision, after which the real spending begins, but I would agree with you Roguemale that most of the spend is likely to be in the work by others.

[roguemale1] 16/3/2024 10:09

Hi Pinemartin.
I think probably general apathy is the answer to your initial question! But suitably admonished I did check out the website and also looked at a few of the other forms mentioned to try and establish how much and when. Didn't have any joy with that. But it appears that we have to do a load of pipe connections from local industry to a central facility. The rest of the construction work is Balfours who haven't bothered RNSing it.So at least someone listened and put out an RNS. But if you're an analyst you're gonna be scratching your head on what value, what type of work exactly, what year it happens and their expected return. All good pipeline though, but value may not be that high relatively as anything starting with the word 'Offshore' will be hideously expensive and so will all the techy bits onshore...

In turn I was surprised that no one mentioned that 44% min of the days volume went in
as the days UT at 1p over the ask...

[pinemartin9] 15/3/2024 21:41

I'm surprised we haven't had more response on the board to the news today. It's worth taking a look at the Net Zero Teeside website. We are involved with some big names. This is a hell of a vote of confidence and demonstrates our in this area. We will get a chunk of 4 billion from this, but the future opportunies beyond this project could be significant.The selected contractor groups are:Onshore Power, Capture and Compression – Technip Energies and GE Vernova consortium including Balfour Beatty as the construction partner and Shell as the technology licensorOnshore CO2 gathering system and gas connection – CostainLinepipe – Onshore and Offshore – Marubeni-Itochu Tubulars Europe Plc with Liberty Steel Hartlepool, Corinth Pipeworks and Eisenbau Kramer GmbH as the nominated pipe-millsOffshore Pipeline, Landfalls, Onshore Outlet Facilities and Water Outfall – SaipemOffshore Subsea Injection System – TechnipFMCPower and Communications Cable – Alcatel Submarine NetworksOffshore Systems Engineering – GenesisIntegrated Project Management Team – Wood

[riskblue] 15/3/2024 09:51

I'm not sure it will be quick, but recovery pieces are slowly slotting into place.This time next year Rodney ...... lol

[boystown] 14/3/2024 17:52

A bit from Master Investor fwiw:

Costain (LON:COST) – Better Margin Expected Growth
This group shapes, creates and delivers pioneering solutions that transform the performance of the infrastructure ecosystem across the UK’s transport, energy, water, and defence markets.

The year to end December reported revenues lower at £1.33bn (£1.42bn) while adjusted pre-tax profits were up at £44.2m (£34.2m), leaving basic earnings better at 12.2p (9.9p) and paying out an unchanged 1.2p dividend per share.

Impressively the group ended its year with a net cash balance 32.8% higher at £164.4m (£123.8m).

For the current year and going forward the group has a strong opportunities pipeline as well as having in excess of £1bn of revenue secured for 2024 at its year-end, representing more than 80% of expected revenue.

CEO Alex Vaughan stated that:

“The quality and balance of our forward work across our two divisions gives us good visibility on future revenue and margin.

We have more than 80% of expected revenue secured for 2024 and our forward work stands at around three times 2023 revenue.

We see continuing momentum in the business and remain confident in the Group’s growth prospects.”

Analyst Andrew Nussey at Peel Hunt considers that the company is an undervalued stock in an undervalued sector, with its shares trading on just 5.6 times forecast earnings.

Nussey reiterated his Buy recommendation while increasing his Price Objective from 80p to 95p.

Over at Liberum Capital its analysts Joe Brent, Alex O’Hanlon and Sanjay Vidyarthi also rate the group’s shares as a Buy, looking for 100p in due course.

They estimate that current year sales will be £1.22bn, with £46.5m pre-tax profits of £46.5m, generating 12.3p of earnings and covering 1.2p per share of dividend.

For the group’s 2025 trading the analysts go for £1.22bn sales, £52.1m profits, earnings of 13.8p and a 1.4p dividend per share.

The shares touched 72.45p on Tuesday in response to these results, before drifting back to an almost unchanged 66p.

At that level the £190m capitalised group’s shares certainly are an undervalued stock, trading at 5.5 times current year price-to-earnings and just 4.9 times its 2025 hopes.

[catabrit] 14/3/2024 15:22

I stand by my original comments on Costain vs Kier and continue to believe the biz model is different and that the risk reward was better for Costain considering the stronger balance sheet. The outcome (whilst important) says little about the risk or the process and is merely a moment in time. In a levered equity situation (as Kier was and still is) you would expect to do better when the business inflects. Kier likewise still has exposure to fixed price contracts within its construction order book. Finally the graveyard of property trading firms is a big one and very very few of them have made money over time. I don't expect Kier to be any different over the long run.

I otherwise agree with a lot of what you said, don't mind the reminder or the rebuttal and welcome more constructive and informative posts such as the one just posted.

[catabrit] 14/3/2024 15:13

I like Leo and considering the liquidity I think BBY will be a better bet for the vast majority of institutional money. You are basically paying nothing for the going concern value so similar to costain. However, the US exposure would concern me a bit as fixed price contracts are more prevalent. Likewise whilst I think the whole sector has smartened up and sorted out its attitude towards risk management, the business model will always command a lousy valuation. I do think Costain is differentiated which is why I picked it but if they are not prepared to break out the consulting data then perhaps I need to accept it will get priced like a contractor in perpetuity.

I agree that AV is in a precarious position considering the share price He will be given leeway until the pension situation is confirmed and will be judged by the course of action post that.

[catabrit] 14/3/2024 14:28

Stdyeddy - thank you. I try my best to be objective.

Rougemale1 - my rant is about Costain pre and post Alex. In Alex’s defence he would point to zero contract issues (albeit the problems tend to be back ended so if there are provisions on contracts signed during his reign we won’t know for another few years). But if he was in charge of consulting and digital pre becoming CEO why have we gone from smart infra company to just infra? Why are we re-structuring digital? Does that mean he got the strategy wrong? And why are we not breaking out the consulting revenue and income line? I don’t care if it is bundled or hard to figure out - just do it. Don’t tell us - show us. Show us your revenue and income pie is safer / better than peers. Why should we investors do the hard work? If he wants his LTIP then he better break it out AND hit margins AND sort out the derisory capital return. Yes he’s handcuffed by the pension trustees and yes the wording has changed to allow him to return cash to shareholders if it’s in surplus but for God’s sake, bang the bloody drum as CEO. The Balfour CEO clearly articulated the value proposition in his shares during the presentation yesterday. He said here are our infrastructure investments, here’s our net cash and here’s our market cap. Oh and here’s all the cash we plan to generate over the next 5-yrs. Very simple math.

Even IR should be breaking this out in their presentations. There should be an entire page in the deck about the market cap vs the net cash and the 30m of annual free cash flow they think they can generate I.e. we are aware of the past guys and we are sorry but here is the future and it is going to be rosy.

Alex talks about the business and customers and mega trends and that’s great. It’s part of the job. But it’s only one part. The other is to be a steward of our capital and to send the tanks in when there is blood on the streets. I will likely sell my shares regardless if the buyback isn’t a very meaningful one as it shows he does not get it. Or I will go activist and put it up for a vote.

We know they need at least 100m for banking purposes. Make that 120m. Does 160m in the bank vs 120m really move the needle order book wise? I doubt it. But a 30-40m buyback meaningfully moves the needle in terms of market cap. So divi at level of FTSE all share and buy back as much as the business will allow.

If he refuses to do it, it either means he cannot because of business purposes which means the cash is a value trap or he does not get how capital allocation works.

Nigelpm - I also bought in 2022 because of this and have done well as net cash has risen. But I believe that Costain spent a long time trading at net cash in the past. From 2010 to 2013 I believe. They only started to get a proper valuation on the core business from 2014 to 2018 when the order book was growing.

I do think we will get there and we just need the actuarial surplus to be confirmed or not. And we probably need a few more years of zero contract issues. So I anticipate a good risk adjusted return from these levels but it might take longer than we all expect and I think that scepticism from the wider market is probably valid considering Costain’s prior promises and the general disdain towards contractors and contracting. Costain was openly telling shareholders that its target cost model was better than a fixed cost one (and 90 percent of its book was target cost as far back as 2013). Yet target cost can lead to issues if there is too much vagueness around scope and a high degree of complexity. So I think management need to be more open with us about what is in the order book and how they have dealt with target cost risk management and why they believe no major provisions will be forthcoming.

Trust us is not enough considering the past.

[nigelpm] 14/3/2024 13:53

Why hold it? Market cap is barely higher than cash balance?

[roguemale1] 14/3/2024 13:33

Bloody hell Catabrit...
A (year? )on from me joining on here we've swapped perspectives! I'm still holding because when you go back through the years from say 2016, the business is back at those metrics. But the MC is less than half what it was.
Back then the divi was roughly 50% EPS. Now we know its only going to be 33%, and it may take until 2027 to get there because of the pension. You can bet that the IIs are going to force him to solve that, just liked they forced him to accept a link to his bonus from the shareprice. But yes we have to wait a few months but im sure it will happen.
Your view of AV now seems to reflect mine....you will recall our sparring on that subject....unfortunately the city doesn't like him. I was told that from the get go and it certainly seems to have come to pass.
I don't know what the answer is. If the divi coming back and up doesn't do it what will?
I should see a few, that normally means the price rises the next day!

[stdyeddy] 14/3/2024 12:23

I like your posts btw. They're the way that the conversation should be on advfn. Candid. Not ramping, not deramping. Genuine perspective.

[stdyeddy] 14/3/2024 12:20

Catbreath, are you the poster who started this thread, the one known originally as 'masturpig'?

I am not sure. If not, whatever happened to him?