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Costain (COST) under priced gem or a dog?

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Alaric
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Re: Costain (COST) under priced gem or a dog?

#269011

Postby Alaric » December 4th, 2019, 11:27 am

ReallyVeryFoolish wrote: Is it a rare rough diamond or a potential dividend cutting dog in a gem's clothing?


http://tools.morningstar.co.uk/uk/stock ... E%24%24ALL

Its price almost halved in June and has stayed around the same level since.

This stemmed from a profit warning, it would seem

https://www.proactiveinvestors.co.uk/co ... 23029.html
https://www.theguardian.com/business/20 ... t-forecast

If they maintain the dividend, but do not have the profitability to justify it, the share price is likely to suffer anyway. They've had contracts cancelled and postponed. If the Company is being manage prudently, they would reflect those losses in the dividend.

They've cut the interim already from 5.15p to 3.80p. In previous years they had always increased it.
https://www.hl.co.uk/shares/shares-sear ... /dividends

Crazbe7
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Re: Costain (COST) under priced gem or a dog?

#269295

Postby Crazbe7 » December 5th, 2019, 1:09 pm

A bet on the “Leading Edge” strategy being a success as Costain try to move away from just construction towards higher-margin services such as consultancy, asset optimisation and digital technology solutions. They have bought a number of small design/technology consultancies and have secured a number of asset optimisation contracts.

Others have tried this route before, looking to go further up the "food chain" buying larger engineering consultants - AMEC buying Agra- that didn't go well. Now part of Morgan Sindall and Wood Group, Kier purchasing and then selling most of Mouchel - again that didn't go well and Balfour Beatty buying and selling Parson Brickerhoff. Saved the company when sold off when Carillion came calling but never really integrated, so synergies not realised.

Construction is not a sector I would be investing in with any enthusiasm apart from my company share save scheme! - I'll take the tax benefit while they last.

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Dod101
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Re: Costain (COST) under priced gem or a dog?

#269299

Postby Dod101 » December 5th, 2019, 1:27 pm

ReallyVeryFoolish wrote:Fairly binary question this one. A dirt cheap civil engineer with a strong future work pipeline. Great prospects if the government boosts infrastructure spend. Well covered crazy high dividend. Is it a rare rough diamond or a potential dividend cutting dog in a gem's clothing? My jury is out on this one but I'm fascinated to hear what the more experienced and rather savvy folks here have to say. Thanks.

From HL's page - https://www.hl.co.uk/shares/shares-search-results/c/costain-group-plc-ordinary-50p


There is more than one unsubstantiated comment in the above comment. 'A dirt cheap' civil engineer. What makes you think it is dirt cheap? The yield, PE or what? A high yield and/or a low PE does not in themselves make any share dirt cheap. Could just as well be a sign that the market expects not very good trading, or a dividend cut.

'Great prospects if the government boosts infrastructure spend.' Not necessarily. Plenty of other contractors around and all with very sharp pencils and most seem to have the attitude that getting the business is what matters. profitability seems to come second. The sector in general is very unattractive. Just look at the number of contractors in some distress.

Costain. like several others, has not got a good track record. I simply would not touch any of them.

Fundamentally any share which yields more than say 50% higher than the FTSE100 is suspect. On the whole, the market knows more than you or me and needs to be treated with respect.

Dod

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Re: Costain (COST) under priced gem or a dog?

#269335

Postby Crazbe7 » December 5th, 2019, 4:48 pm

Plenty of other contractors around and all with very sharp pencils and most seem to have the attitude that getting the business is what matters. profitability seems to come second

Yawn - same old comments - no knowledge.

Crazbe7

monabri
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Re: Costain (COST) under priced gem or a dog?

#269359

Postby monabri » December 5th, 2019, 6:44 pm

I'd be concerned about the increasing debt and their ability to service the debt.

Operating margins sub 3% leave little wriggle room to pay off debt, increase dividends , tide the business over if a major job goes wrong.

http://financials.morningstar.com/ratio ... =xlon:cost


The yield is high...due to the share price halving at the end of june 19.

The CEO is new (half a year in post)....he might take a new view on dividends.

I think one should look at Carillion & Kier . Why is COST different?

Personally, I would steer well clear.

( and it's not dirt cheap....its about right on cash flow).

Edit..I see Alaric is coming at the question from a similar angle

Dod101
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Re: Costain (COST) under priced gem or a dog?

#269371

Postby Dod101 » December 5th, 2019, 7:18 pm

Crazbe7 wrote:Plenty of other contractors around and all with very sharp pencils and most seem to have the attitude that getting the business is what matters. profitability seems to come second

Yawn - same old comments - no knowledge.

Crazbe7


Crazbe7 must work for one of those contractors and sits in meetings solemnly discussing pricing and so on. Good for him. He is no doubt being well paid for doing so. As an investor I see things differently. All I am interested in is whether the contractor can produce realistic and sustainable profits. If he can investors like me will be happy to put our money into the business, but as is so often the case with contractors, they can talk the talk ( contract wins etc) but they cannot walk the walk (exposed to the judgement of the market about real and sustainable profits)

My comments and the beliefs behind them have saved me from Carillion and the like so although I do not of course know what goes on in the contractor meetings, I do not need to nor am I interested. The results speak for themselves.

Dod

Crazbe7
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Re: Costain (COST) under priced gem or a dog?

#269539

Postby Crazbe7 » December 6th, 2019, 11:21 am

Crazbe7 must work for one of those contractors

Brilliant deduction as I said I have a share save scheme in the construction industry.

sits in meetings solemnly discussing pricing and so on.

You really haven't got a clue on how tendering works for major construction projects do you.

He is no doubt being well paid for doing so

Possibly, but I don't know what you define as being 'well paid'.

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monabri
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Re: Costain (COST) under priced gem or a dog?

#270592

Postby monabri » December 12th, 2019, 2:07 pm

ReallyVeryFoolish wrote:Thanks for thoughts, much appreciated as usual here. Now that the rush of blood to the cranium has subsided, I have decided to top up on RDSB and HSBA instead.

Cheers

RVF


Well,that seems to have been the better bet. COST down 18% today.

Dod101
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Re: Costain (COST) under priced gem or a dog?

#270599

Postby Dod101 » December 12th, 2019, 2:27 pm

Crazbe7 wrote:[sits in meetings solemnly discussing pricing and so on.

You really haven't got a clue on how tendering works for major construction projects do you.


Spot on! I do not have a clue about how tendering works, except that it often does not work in a profitable sense anyway. What is it about contractors and their staff? They are so defensive. Maybe professionalism or something but the fact is that contractors in general make for a hopeless investment.

Dod

Crazbe7
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Re: Costain (COST) under priced gem or a dog?

#270741

Postby Crazbe7 » December 13th, 2019, 5:17 am

Construction is not a sector I would be investing in with any enthusiasm apart from my company share save scheme! - I'll take the tax benefit while they last.

Crazbe7


Why do some posters not read!!


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