I should probably have started a new thread for all this peer group stuff...
But I didn’t .
... Continuing to look at Cimic ..
Here is a story from the Australian Financial Review from last year:
The story also talks about Lendlease who we know has come to serious grief and is now trying to sell it’s engineering division and Downer .( ..Poised to either things around brilliantly or run into trouble as well ? Currently keen to sell its mining arm )
CIMIC's Spanish raiders perfectly poised for infrastructure bonanza
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CIMIC chairman Marcelino Fernandez Verdes's aggressive acquisition strategy has paid off. Rob Homer
by Jenny Wiggins
When the Spanish swooped in with a hostile takeover of Leighton Holdings in early 2014, Australia's biggest construction group was mired in internal political battles and a bribery scandal and was bleeding cash.
Three years later the company – now known as CIMIC – is generating cash and working on projects worth $34 billion while eyeing what it claims is another $330 billion in opportunities. Its stock price, which has doubled since 2014, is trading at its highest levels for seven years.
CIMIC's Spanish parent, Grupo ACS, spotted the emerging infrastructure opportunities in Australia years ago, with chairman Marcelino Fernandez Verdes creating a project finance arm to invest directly in the infrastructure projects it builds (the acronym CIMIC stands for Construction, Infrastructure, Mining and Concessions).
Other European companies experienced in building toll roads, underground metro systems and light rail networks have also identified Australia as a golden opportunity due to its poor public transport networks. Spanish infrastructure group Ferrovial has snapped up services contractor Broadspectrum, while French construction group Vinci is in takeover discussions with Brisbane-based Seymour Whyte.
CIMIC has been the most aggressive of the foreign engineering companies entering Australia, also buying contractor UGL and engineering group Sedgman over the past 18 months, as well as attempting – and failing – to take over Perth-based contractor Macmahon.
Its track record on corporate governance is poor, with minority investors making protest votes against the re-election of Spanish directors (including highly-paidMr Fernandez Verdes) at its annual general meeting in April, as well as its remuneration report.
But there is no doubt that ACS' strategy has worked, with CIMIC's order book well ahead of its next biggest local competitor, property and infrastructure group Lendlease.
Ben Brownette, equities analyst at Northern Trust Capital Markets, says CIMIC is best-placed to benefit from billions of dollars of spending by federal and state governments, followed by engineering services group RCR Tomlinson. Lendlease and Downer EDI will also benefit, although they will need to team up with other companies to win big projects, Mr Brownette says.
Lendlease outlined plans in April to target $4 billion in revenues annually from engineering projects, mostly road and rail, in the medium term. The company generated $1.8 billion from its engineering and services businesses in 2015-16, about 15 per cent of overall group revenues.
However, Mr Brownette argues Lendlease's $4 billion target is "unrealistic" and that the company may end up selling its construction business and focusing on its core property business.
A consortium led by Lendlease is one of three groups shortlisted for a $6 billion contract to dig tunnels for Melbourne's new metro rail system. The competing consortiums are led by CIMIC and another Spanish company, Acciona, which acquired Victorian engineering group Geotech in March.
Australian investors were initially shocked by Downer's plan to pay a 59 per cent premium for Spotless, given its poor earnings performance since re-listing on the Australian Securities Exchange in mid-2014.
Allan Gray managing director Simon Mawhinney, who owns Downer shares, said in March that the contractor's $1.15 per share offer for Spotless "vastly exceed[ed] the true value of the company" and told AFR Weekend that he hadn't changed his views.
"Downer's share price appreciation and the recently announced infrastructure spending are unlikely to benefit Spotless," Mr Mawhinney said. "We hope the takeover fails."
People familiar with Downer have acknowledged that the company underestimated investors' concerns over Spotless' performance following a 21 per cent drop in its share price after it launched a $1 billion equity raising to pay for the proposed takeover.
But analysts are becoming more comfortable with Downer chief executive Grant Fenn's plan to transform the company into a broad-based infrastructure services provider, reducing its reliance on earnings from the cyclical mining sector.
NWH Price at posting:
$2.00 Sentiment: Buy Disclosure: Held
(20min delay)
