LEI going out backwards - conversion rate (tenders versus projects) now the lowest point in several years, despite infrastructure spending (last I heard the conversion rate was around 13% - compared to peers [and indeed, normality] of around 25%). Middle East a mess. Voyer was posted there to clean it up; but the truth is that the contracts are obviously not worth the paper they are written on. Banks tightening credit against antipodean companies makes it hard to tender when you have one hand tied behind your back.
Expecting underperformance from LEI's big three - Contractors, Theiss, and Holland. All now tendering against each other and using up valuable Holding's time in seeking financing resources (from a commitment perspective). Holding's needs to consolidate these businesses if it is to survive - and I can see Wal having the guts to do that.
I don't hold LEI cos I don't agree with their model. The internal competition model only works where external resources are plentiful. Times have changed, and LEI has failed to change with them.
As for RIO/BHP connection: the Macmahon contract (a few months ago) sealed this for them - so it is actually one of the few "ok" projects around. Perhaps this is the only positive news around for LEI at the moment.
My advice (for what it is worth) - short LEI until they restructure their three-pronged approach back into one central unit. This will take some gumption from the board and involves the recentralisation of tendering and treasury and finance functions. Lots of heads need to roll before this company can compete in the new world where credit is in short supply.
Time to wake up Wal.
Kit
LEI Price at posting:
$21.59 Sentiment: Sell Disclosure: Not Held
