Clough Ltd has been exhibiting some strength of late after its share price fall of more than 50%.
Cost overruns on two projects will mean that last year's profit of $30 million will not be achieved. Quite possibly the company will report a loss in the first half of 2003.
What the two loss making projects are is anyone's guess - one is an offshore project.
This is the bad news - bad news that is already factored into the current shareprice.
Now for the other side of the coin:
1. CLO's diversified income stream is solid with 60%+ of it emmanating from overseas operations
2. Its offshore division has recently been awarded a contract worth over $100 million (A) on the Western Coast of India in the Bay of Cambay. This is a gas project and is indicative of CLO's strength in the oil/gas sector from which around 47% of income is generated.
3. With world oil prices strong and demand for gas showing no sign of abating CLO, as the only domestic contractor with the facilities to undertake both oil & gas works, should continue to do well.
4. Opportunities in the oil/gas arena abound in Indonesia (the BP Tangguh project), Thailand, the Sub-Continent, the NW Shelf & Bass Strait.
5. The company itself has had significant management changes that augur well for 2003. In their end of year report the company made this prediction:
"We are forecasting substantial growth in 2002 - 2003 with the Group revenue exceeding the billion dollar mark for the first time in the company's history". This may be a little optimistic given the recent profit warning
BUT ... the company has the potential to recover strongly ...its order book at JUNE 30, 2002 was over 2.2 billion dollars (that figure, given recent contracts looks to be well and truly exceeded). So revenue growth over the next few years looks very promising.
With the recovery will come a stronger share price and gains for the patient investor.
CLO looks like it will be one of the winning stocks in 2003 and beyond.
CLO Price at posting:
0.0¢ Sentiment: LT Buy Disclosure: Held
