Hyder Consulting Share Discussion Threads

[foodcritic] 30/6/2010 20:49

£2.90 for SWG means this has got to be worth far north of the current value (imo).

[rivaldo] 30/6/2010 12:35

If I remember correctly, a number of brokers valued HYC at 375p-400p - and that was before any bid speculation at all.

These are the latest broker forecasts. Given around 38p EPS this year and say 41p EPS next year HYC remains cheap on fundamentals - the takeover speculation is froth on top:

2011 2012
Date Rec Pre-tax (£) EPS (p) DPS (p) Pre-tax (£) EPS (p) DPS (p)
Panmure Gordon 28-06-10 BUY 17.50 36.90 7.00 19.00 39.50 8.00
Brewin Dolphin [R]24-06-10 BUY 17.00 36.60 5.00
W H Ireland Ltd [R] 18-06-10 OUTP 17.40 37.00 5.50 19.90 42.00 6.00
Fairfax IS 10-06-10 BUY 18.40 38.00 7.00 18.60 38.50 7.60
Numis Securities Ltd 08-06-10 BUY 18.50 37.90 6.60 20.00 41.50 7.25
Altium Securities [R] 28-05-10 BUY 17.00 36.90 6.20 18.00 37.80 7.50

[indomie] 30/6/2010 09:31

rivaldo

You are now doubt right, although I'd disagree about little cross over - HYC and SWG are in direct competition in many areas (such as transport) where both bid for Crossrail work for example.

SWG will be much better placed going forward to bid for future (limited)government projects such as the new High Speed Rail Link. Ofcourse, this could place further pressure on HYC to buy/merge with another firm or be taken over - which is certainly a possibility now - but there are also possible downside risks if no deal emerges in the near term IMO.

[grigor] 29/6/2010 23:03

Coming out of the shadows

[rivaldo] 29/6/2010 22:57

Have a read of the broker comment above:

"With this transaction standing a good chance of completing, we believe the best way to play the sub-sector is now through Hyder Consulting. Not only could it become a target for large overseas players, but it is also more international than Scott Wilson with 70% of revenues now based overseas and exposure to the UK public sector running less than 10%. Overall we see this as a good read across for all players in this sub-sector given current valuations and await further consolidation developments in this space with great interest."

Since there's very little crossover with SWG, what wasn't a problem before will hardly be one now that SWG is in foreign hands.

What is more likely is that those who lost out for SWG will come looking for acquisitions of their own.

[indomie] 29/6/2010 20:20

Not sure if I'm missing something here but in the event that a bid doesnt emerge in the near term, then surely HYC margins could now come under pressure with SWG set to become part of a huge US multinational? This risk hasnt been mentioned in any of the articles I've read so far - and probably explains the drop after the SWG deal was first announced.

[greenroom78] 29/6/2010 11:25

I bought back in this morning. Had some on a spread bet from 250-270p a short while ago due to lack of ISA funds and closed when the Eurozone issue kicked off.

Liked last weks results, like the rising dividend and cover, like the strong balance sheet, like the diversified portfolio and the non dependence on the UK/Euro market and definitely like the M&A activity in the sector. Free funds in my ISA allows me to be in long term with a proper holding this time.

GLA

[rivaldo] 29/6/2010 11:01

HYC have won another contract:



"Northampton station design team appointed
Michael Donnelly, PlanningResource,
28 June 2010
A team has been appointed to design the redevelopment of Northampton's Castle Rail Station.

Hyder Consulting, in partnership with BDP Architects, has been appointed by Network Rail and West Northamptonshire Development Corporation (WNDC). They are working with partners, including Northamptonshire Enterprise Limited, and the...

Subscriber content only - want to read on?"

[rivaldo] 29/6/2010 09:41

From the Guardian:



"Meanwhile Panmure Gordon said the deal could focus attention on similar businesses to Scott Wilson, in particular Hyder Consulting, down 1p at 294p. Panmure said:

With this transaction standing a good chance of completing, we believe the best way to play the sub-sector is now through Hyder Consulting. Not only could it become a target for large overseas players, but it is also more international than Scott Wilson with 70% of revenues now based overseas and exposure to the UK public sector running less than 10%. Overall we see this as a good read across for all players in this sub-sector given current valuations and await further consolidation developments in this space with great interest."

[rivaldo] 29/6/2010 08:35

Nice - thanks fallenbull. Worth reproducing in full as it's a decent summary. I like the 400p-450p valuation:

"The dramatic premium - well over double recent market value - being offered by at least one US bidder for Scott Wilson Group (SWG) suggests the market has been overly cautious towards small cap engineering consultants. After I flagged bid potential in SWG as one reason why it rated a 'Share for 2010', the drift in its price from about 100p near 80p - then bid approaches - exemplifies this and is a good lesson not to be swayed by market sentiment. Reportedly, both American and European firms have examined SWG as they look beyond short-term issues with the business cycle to how well such consultancies can perform in better times.

Despite fears over UK public sector spending, SWG has also just released better-than-expected figures for the 12-month period to 2 May, with a doubling of operating profit helped by cost cutting. This is noteworthy for other such listed consultancies of which Hyder Consulting (HYC) merits attention given about 70% of revenues derived from overseas and only about 10% exposure to the UK public sector.

This is a 'modest multinational' capitalised at £113 million yet with a genuine heritage as one of the world's longest established engineering consultancies - being involved with high profile projects such as London's Tower Bridge, Sydney Harbour Bridge, the Taiwan High Speed Railway and Berlin's main station. A group restructuring in 2009 has more closely attuned it to client needs in four key sectors: transport, utilities, property and the environment. Management points to higher margins and better cash generation as proof this means a stronger position going forward.

The market remains jaundiced, however, with HYC down about 5% to 295p, yet for patient investors the prospect looks opportune.

On a standalone basis, the forward price-earnings multiples applied to SWG and HYC have both been about seven times. Company REFS shows the consensus broker forecast on HYC is for normalised earnings per share to remain effectively static at about 40p, from the last financial year to end-March 2010 through to 2011/12. Even so, there is a solid profit and earnings record which rates the shares as investment grade.

The recent 2009/10 prelims cited Asia-Pacific and the Middle East as key areas, with exposure to Dubai about 10% of group revenue - helping to explain why sentiment has been cautious. HYC has been architect and engineer for the world's tallest building, quite symbolising Dubai's over-ambition. Slowdown there explains why HYC's order book has fallen from £384 million to £346 million although more positively, over 60% of the next 12 months' budgeted revenue is secured. About 70% of revenue and 80% of operating profits earned overseas, across different sectors.

Typifying a consultancy type business, HYC's balance sheet has significant intangible assets: £42.2 million of £63.5 million non-current assets, relative to £67.6 million net assets. At end-March there was £2.6 million short-term debt and £15.1 million long-term, more than offset by £21.4 million cash. So HYC has a strong balance sheet with ample scope for acquisitions given total borrowing facilities of £46.5 million. Management remains quite coy however beyond saying it maintains "a pipeline of opportunities".

HYC's strong cash position quite begs the question whether more should be returned to shareholders. Consultancy businesses are inherently cash generative, not needing large ongoing investment to remain competitive. So although HYC has proposed a 33% increase in its dividend to 6.0p, covered 5.8 times by fully diluted earnings per share, the prospective yield is only about 2% and edging up - which is hardly significant. There was a gross interest charge of £2.2 million, so despite its being insubstantial against £15.2 million operating profit, the board would probably still argue in favour of paying down debt or making acquisitions, than a further distribution to shareholders.

So the main questions for shareholder return here are twofold: what scope for an improvement in the price-earnings multiple from about seven times currently, and might HYC end up getting approached like SWG?

Over 2006-07, HYC enjoyed a P/E multiple in the late teens to mid twenties, its share price rising from 475p to 565p. While showing what consultancy firms can achieve by way of financial values, this was arguably a feature of the easy money years stimulating the global construction industry - and they are hardly set to return soon. With the bear market, HYC slumped to 74p and its P/E multiple averaged just five times last year even though the extent of de-rating owed more to sentiment than operating issues. By last September, HYC was able to assert revenue and operating profit at the top end of expectations.

The challenge the shares face now is whether HYC can beat the sense of lacklustre earnings growth within the next two years, with a similar announcement that it is - ideally - ahead of budget. The market is likely concerned about the risk of global recovery faltering. So your best approach here is to tuck the shares away on a minimum two-year view, by which time both the earnings outlook and P/E multiple should have improved. I target 400p to 450p a share, on a standalone basis.

There is just a possibility that after being drawn into the contest for SWG, dissatisfied suitors may look elsewhere in the London-listed sector. Two American firms currently involved show the appeal of UK-listed assets given the recent strength of the US dollar versus sterling."

[wcjan26] 28/6/2010 16:18

interesting indeed. i just posted on SWG board that typical exit multiples have been 0.6 to 0.7 * revenue

so a bid for HYC would be at leat 450p i think!

[rivaldo] 28/6/2010 14:01

Heavy volumes today are certainly intriguing - 654k shares already (plus those on PLUS).

[spot1034] 28/6/2010 09:31

I'm a very happy SWG holder but am also in HYC and somewhat surpised not to see more of a reaction here. This is now looking even cheaper than it did before given the bid for SWG, and must be vulnerable to a predator itself.

[wcjan26] 28/6/2010 09:27

... scott wilson offer is HUGE

[wcjan26] 25/6/2010 08:55

not sure about a bid, but the chart looks like a cup with handle forming, with target 390p

[rivaldo] 25/6/2010 07:33

Contract win in NZ:



"M80 Contract Fixed at $623m by Leighton
Submitted by Manish Verma on Mon, 06/21/2010

The value of the labor on Victoria's M80 ring road upgrade, as announced by Leighton Holdings Ltd. subsidiary Thiess, has been fixed up at $623 million. He also added that the scope of jobs between the Calder Freeway and Sydney Road has been brought to completion.

The Company asserted that the work on the Tulla Sydney section, which is to be completed by the end of year 2012, is on progress. This project had commenced in December in the previous year, and will offer new lanes on track.

A project of 9.7km was planned to be accomplished by the Tulla Sydney Alliance, which includes Thiess, VicRoads and design partners Parsons Brinkerhoff and Hyder Consulting. This project incorporates various works like, expanding to three lanes in every direction and a fourth and fifth lane amid some interchanges.

The above also includes the setting up of quick and sharp transportation systems, along with the reconfiguration of freeway interchanges and access ramps. The project is in profit due to the heavy know-how of Thiess in the field of delivering significant infrastructure proficiently.

David Saxelby, Thiess Managing Director, said, "We completed the $2.6bn EastLink project five months early. This is yet another important project for Victoria and we look forward to the role it will soon play in positively positioning the state's roads for future economic growth"."

[rivaldo] 24/6/2010 11:18

Nice one CR.

I hadn't realised Robbie Naked Trader had been buying here - he's bought two lots now so must be pretty keen. His last comment when he bought the second lot:



"I tried my hardest to get more Hyder Consulting shares (HYC) on the order book at the sell price but no luck so caved in and bought 1,500 shares at 277.72 to add to the ones I did get on the order book at 265.75.

The last update has my reasons for buying it but in the main a bid to me looks inevitable sooner rather than later - I would guess at about 350. Target 350 stop 260."

[cockneyrebel] 24/6/2010 10:50

Picked up a few more today - still buing in here - the chart is a beauty and once through that recent high it just gets even better imo.

Been firming up all morning.

Thanks for the link.


CR

[rivaldo] 24/6/2010 07:19

GCI recommended HYC yesterday, but for subscribers only - anyone able to access it?



"Share Recommendations
Hyder Consulting
23/06/2010
Engineering design consultant Hyder increased profits and margins in a tough year to March and moves forward with highly visible orders....."

[cockneyrebel] 23/6/2010 11:56

Definitely looks like that voume last night is an overhang cleared imo.

Up today after that.

CR

[rivaldo] 23/6/2010 09:56

HYC working with Crossrail for the opening in 2017:

[sleveen] 22/6/2010 18:23

probably explains it

cheers CR

[cockneyrebel] 22/6/2010 18:17

looks like 1m trade one side and all the other small trades (900K in smaller trades) filled it - ie, two way trades done off market.

Probably what's caused the pull back - now that's out the way these might be able to rise.

might be a tad more left - say 50K but they'll get shifted pretty quick here imo.

Uncrossed at 285p in the auction - way higher than where it was late afternoon.

CR