Ann: NRW awarded FMG's Stage 1 Eliwana Rail Project, page-8

NWH has the capability to meet the requirements of Work Packages 22 and 23, but they may not have bid for the work, because the RCR-supplied capability was at the time of bidding not locked into NWH's bag of tricks. There has been so much work required in the mining and infrastructure sectors that I expect NWH has been fairly selective in its tendering. The complexion of work for which NWH is henceforth going to bid is going to change, because of its enhanced capability, both grown organically, or grown by company acquisitions.

There are, for me, two significant takeaways from two Announcements. One was not mentioned, but the 31/12/2015 Announcement related to a nod-nod relationship, not a formal contract. This informs me that NWH has earned a high level of trust with FMG, and this bodes well for the give-and-take style contracting that I have mentioned a few times over the last year or so. I made a significant part of my living negotiating relatively large contracts, and I can assert with much conviction that this negotiation style delivers better outcomes for both parties than formal tendering does. Sometimes the tendering process is akin to a formalisation process at the end of a courtship, and the tenderer has to be unlucky not to win such tenders.

Earlier today Jules Pemberton's words, “This acquisition delivers a complementary business to NRW and aligns with NRW’s strategy to broaden the service offering to Tier 1 clients at a time of improving market sentiment." tell me that NWH shareholders should start getting used to contract wins, because finding the work is no longer the central game - optimising the nature and the timing of the work is where Management should focus its attention. One could write a weighty tome on that optimisation process, which includes optimal: CAPEX management: marketing;tendering and contract negotiation policy. Acquiring add-on capability is just part of the overall picture.

PS for pbawley. A topic that I intend to cover in future posts is the theoretical pace of expansion, or the compound annual growth rate (CAGR). In loose terms a company share value can grow ROE x Retained Earnings, or ROE x (1-D) where D is the dividend payout ratio. Growth can, and will be, distorted at times, like in the immediate past and immediate future in NWH's case. Understanding likely EPS metrics in future years gives a basis of reasonableness for a PER used on the current financial year's estimated EPS, or some variant thereof that looks beyond Y1 .