thoughts

Hi all,
I’ve been a shareholder in Watpac for a while now and am trying to get a handle on the company.

Currently the case for investing relies on an undemanding PE ratio (c8) if earnings come in as forecast (say 12cps) and a pretty good dividend yield (7% to 8% fully franked at current prices). This is backed up with a pretty substantial pipeline of projects. In theory earnings targets should be fairly easy to hit due to last year’s flood affected numbers. Debt has been substantially reduced due to the sale of much of the property portfolio.

However, the case against has a number of points too. The strategic review of the property portfolio and apparent suspension of the buyback may be related. Margins are very fine, leaving little room for error. While the expansion into mining operations appears to be going well to date and shifts the company away from the fragile property sector, it is an area where Watpac doesn’t appear to have an obvious strategic advantage in. The consistently falling share price isn’t terribly encouraging either, although in small caps this isn’t always a good guide to value.

The impact of the change in management, new chairman and CEO retiring, is still open I guess.
Thoughts?