DSD,
"Contracted Rev for FY16 is 2.5B"
Sure, tendering aggressively to contract big revenue numbers is one thing, but when your margins are wafer thin, there is no wiggle room for any cost slippage (and hey, one thing we know about contracting businesses, is that execution risk is far from zero).
For the past two years, the revenue line was close to $4.0bn pa, yet the company reports a mere $50m of NPAT.
And that's taking into account that they generate $250m of EBIT out of the government.
And you say TSE has "exc swag of projects across some key areas", yet that isn't borne out by the financial facts.
This company makes no money in any of its businesses other than the part for which the Australian taxpayer is footing the bill.
What happens if this critical customer - or a different one voted in by those taxpayers - wakes up one day and says, "Nah, we've changed our minds here. We are not doing this anymore", or "We've decided we are going to doing it in a different way", or "Gee, you know what? Times are tough and we have budgetary pressures. And we've noticed you are making an absolute poultice out of us, so here's what we'd like to do... we'd like to re-negotiate the contract we have with you good folk. Capice?"
When your Total EBITDA is $242m pa and more than that comes all from one sole customer and when your Total EBIT is less than $150m and this one customer represents almost $250m of EBIT (meaning the rest of the business is making more than a $100m EBIT loss), then that is not only a business that I would not rush out and buy, but it's a business I would actively avoid.
But hey, something might happen that might make the share price go up, even though I don't know what it is.
But that's what makes a market: some people are more comfortable with risk than others.
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