whats the bottom of this stock?, page-6

MarkieMills

The way i see it is the market is looking at managements 2012 guidance with a healthy dose of skeptisim in view of the following;

-at least 10 billion of the work in hand is on fixed price fixed time contracts that were tendered for under the same internal processess that have proven substandard for the Brisbane ALP and VDP.
- LEI have allowed for 300m of claims in their assessment of the 430m loss on the ALP(assuming a completion of September 2012). Risk remains in the pursuit of these entitlements and compensation claims.
- Managements guidance does not allow for a further potential impairment of HLG.
- The contested ownership structure of LEI may impede changes or distract senior management from correcting the tender policies that have lead to the recent downgrade.

I still see LEI trading lower as the market correctly factors in these risks.

I have LEI trading on the following FY12 metrics. It is being downgraded to a more balanced valuation based on the above risk. I don't see any impetus for this to change until that market has a clearer understanding on the likely final loss of the ALP project which won't be given until at least Q2 2012.

PE 12.9
EV/EBITDA 7.0
FCF/MC 6.6%
FCF/EV 6%
DY 5.7%