so much for the recovery, page-30

While the selloff in mining services has hurt the paper value of the share account when I look at Watpac I am comforted by:

NTA of property assets (as at 28 Feb) of 64.7c.
-impairment for full year was stated as expected $8m - so c,$3m in 2H from sale of two properties for $12.7m So they received 80% of book value on these two transactions. If we assume the same for the rest that 64.7c becomes 52c - but this would have to be a worst case - if they expected the rest to be sold below book they would have to do some big impairments (again).

So say we conservatively have 52c of property value then we have NTA of c.27c for civil/mining (as per 28 Feb presentation).
-Some of mining services companies are trading at up to 50% discounts to NTA (ignoring differences in leverage for simplicity).
-Given the issues in the civil business this should be at the higher end of discounts so lets say 12c here in a sector that has been smashed (that's only $22m equity value).

So 52c + 12c = 64c of equity value so far

What's left is the contracting business( and "unallocated" NTA of 26c and cost of corporate overheads - assume these cancel out)
-Reported underlying NPAT for the 1H for the contracting business was $10.5m. So lets just say $20m underlying NPAT for the FY given the recent contract wins etc (there's some mention of unallocated overheads in presentation but will ignore for now)
-Leighton trades at a PE >10x. If we put a conservative 5x multiple on this $20m thats $100m or over $0.50 per share. (let me know if Ive missed something here)

So unless you think the property book is completely stuffed and there's limited to no value at all in the civil/mining and contracting business then IMO it's hard not to see a good long term proposition getting killed in a sea of negative sentiment.

The continual property impairments and costs of restructuring the civil business have killed the reported results and are disappointing but hopefully all the pain in civil and property impairments has been taken.

Sentiment may get worse and operating conditions get tougher but there's a pretty decent underlying proposition here at a bargain price if you are willing to take a longer term view and ride out some volatility. It could be lower in 6 months but you'd think it would take a pretty bad recession and continual stuff ups for this still to be lower in 2-3 years (but DYOR!).