Huninni
I have LEI trading on the following FY12 metrics at today's close.
PE 15
EV/EBITDA 8
DY 4.9%
FCF MC 5.7%
FCF EV 5.2%
To quantify this a little my model has LEI 2012 FY NPAT of a little over $515m compared to managements guidance of 600-650m.
My $515m includes a further 50m impairment of HLG, in the interests of conservativeness.
I do tend to feel managements guidance is a little optimistic, or at least based around significant growth in the revenue line, and the key profitability drivers normalising to historically lower levels. My model allows for 5-6% sequential revenue growth over the next 3 HY periods and key P&L drivers returning to recent levels or slightly higher in the case of Subcontractors/Revenue and Personnel/Revenue. Though I have certainly not been overly negative or conservative in my assumptions.
As to where I see value in LEI, well i think it becomes tempting at around $20 per share, which would place it on the following FY12 valuation metrics.
PE 13.2
EV/EBITDA 7.2
DY 5.5%
FCF EV 6.4%
FCF MC 5.9%
It is in essence a business that has quite lumpy FCF, also very capital intensive with CAPEX around 6% of revenue, so I feel a forward PE of 13 is the outer limit of what I would pay.
Not sure whether it will get that low - Mr Market is mighty unpredictable, but I will continue to watch with interest.
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