WOR, well managed with a strong professional reputation, has...

WOR, well managed with a strong professional reputation, has expanded growth options following the Parsons E&C acquisition. The group is strongly cash generative with limited capex requirements and little gearing, allowing a growing dividend stream over time. Risks centre around the potential for disappointments through project delays or complications exacerbated by instability in some of the regions they operate in). Risks also lie in the difficulty in assessing the order book and exposure to any further strengthening of the A$.

Result Description
The share price has dipped to $16.80 from $18.70 at the time of our Hold recommendation on 30/08/2006.

Due to share price movements our recommendation has changed from Hold to Accumulate.

Impact
Conditions are set to remain supportive for some time yet. The oil price remains at historically high levels, encouraging activity in oil & gas, petrochemicals, oil sands and refining. In addition, investment in coal, gas and nuclear power facilities is increasing to meet growing energy consumption. Mining activity is robust though some projects may be delayed through competition for scarce equipment and skilled labour. Substantial infrastructure projects are underway.


WOR is a diverse global business with wide geographic coverage and skills across all project phases from feasibility to design, execution, operation and maintenance. The strong balance sheet enables further acquisitions to extend the presence. However, investors require extra caution because earnings transparency is low even though many contracts are of a longer term nature.

Strong earnings growth should continue for at least the next few years though not at the rate seen in the recent past. There is value in the stock price which is now trading on a FY08 PE of 16 times. Our intrinsic value assumes a multiple above 18 times.

Recommendation Impact (Last Updated: 15/09/2006)
Recommendation changed from Hold to Accumulate.

Source: Huntleys