Share price drop??, page-18

Notwithstanding the drop in profit, WDS is in a very different situation to recent contractor-deaths such as HST and FGE. The fact that they have no debt means that they are not at the mercy of their banks and don't need to undertake a capital raising to repay the banks (or reduce debt).

However, the market they operate in is getting really tough, so the likelihood of a bounce back to 80 cents over the next 6 - 12 months is probably too aggressive unless the oil/coal industry is on a bungee cord that we can't see at the moment.

Most importantly, if you write off their intangibles to zero, and take a conservative view of the value of their plant and equipment, they are still trading below their "adjusted tangible" NTA.

Page 56 of their annual report has net assets of $156 million. Reduce their property, plant and equipment value by $30 million (50% reduction), and write off their $80 million of goodwill and net assets falls by $110 million to $46 million. With 144 million shares on issue, you get an NTA of 32 cents.

If they deliver on their profits, and keep paying divs, you can start increasing the value of their assets and intangibles, so the NTA (And share price) starts rising.

However, like so many of these mining contractors, they need to keep delivering. After-tax margins are very skinny, so the quality of management in bidding and running contracts is vital.

Gook luck to all, and only invest what you can afford to lose.